1. Lateral candidates tend to promise more then they can deliver in terms of how much and how quickly their practice will move.  This is not an intentional overstatement as their firm is equally off at the other end on how much lost business will occur.  The clients have the final word on this matter and their response may not be what either the candidate or the firm anticipated.  Another factor (hopefully) is that candidates are inexperienced at picking up a practice and moving it.  If the partner is experienced at moving their practice that should tell you something as well!

2. Candidates may be making the change for reasons they do not fully understand (which could lead to post change remorse once it is all sorted out).

3. Firm’s due diligence is often lacking with little or no credentialing, insufficient analysis of candidate’s practice (see number 1 above) and insufficient evaluation of how good a fit this person is with group, office and firm overall (see partially number 2 above).

4. Each firm needs to have a really good handle on what it is paying its equivalently performing partners.  It is very bad for morale if current partners are paid less than the incoming laterals.  But how many times do we hear partners lament about this very situation?  And if this situation is a symptom of some problems with a current program, they are exacerbated when laterals are kept whole.

5. My personal observation is that firms will often pay very high in the market range, even above range, to seal the deal with a lateral partner.  But it is important to note that there is always someone who can and will outbid you.  Further, money does not buy loyalty — it can only arrange a short term rental.  Finally, once you set the initial compensation so high, where do you go from there and how do you recreate internal equity when the time comes to fully integrate the lateral into the firm’s program?

6. Smart candidates avoid having a target painted on their backs with a high signing bonus, high draw, high guarantee — they will look for assurance of “X” if they deliver “Y”, which is reasonable because they don’t have relationships in the firm or experience with the new firm’s particular politics.  They will be willing to share in risk and reward with the the rest of the partners to some extent and will look for a fair draw.  There is a real need to strike the right balance between comfort for the new person and full integration into the firm’s program.  Some may consider this next comment a bit unusual, but I recommend laterals have an active mentor — maybe the partner who sponsored their candidacy — to improve the integration and to catch/head off the difficulties that will invariably arise.

7. The above comment leads me to this next thought that there is really very little effort to integrate partners into the group, office or firm overall once they arrive (or at least after the initial honeymoon period).  Moreover, since they are not well plugged in they find themselves having to market internally nearly as hard as they have to externally.

1.  The duty to the Court shall prevail over all other duties. 

2.  The duty to the client shall prevail over the duty to shareholders.’

This will be an interesting bill to follow.

This is a situation that illustrates the care required when firms venture into new fee areas.  It also suggests the importance of knowing your client before agreeing to representation.

The last decade was largely about limiting entry to equity and growing the non-equity ranks (which by the way has its own set of perils).  And the recession put many highly skilled lawyers (technically and as advisors) at risk because they did not control enough business, or profitable business, or the right business in terms of strategic focus. 

The rising balloon issue is probably one of the most troublesome issues for non-equities.  They just don’t know what its going to take to make it into the equity ranks.  And many think they are performing better then some of the lesser performers already in those  ranks.  That suggests it’s harder to get in than to stay in (sort of like you need to defeat the champ to claim the title — ties allow the champ to retain the title).  Some of that is true, yet some is also explainable by periodic underperformance of an equity partner due to an extreme external factor or in the case of a retiring partner winding down.

The primary distinguishing characteristic of equity partnership is having a client following that aligns with the firm’s desired client segment in a quantity sufficient to at least sustain ones own production.  It’s even better to have good prospects of building that client following to sustain the firm’s leverage model.  Next is a willingness and ability to incur income and capital risk, including possible claims from personal guarantees on loans and office leases.  And finally the drive to become a marquee player in the market.  This last characteristic is what really makes the first one possible.

Given that some associates have self-selected out of equity consideration because of the time required to reach marquee level, it is not hard to understand how much more difficult it is if you approach this as a part-time practitioner.  Some mitigation can be achieved through effectiveness and efficiency, but generally the investment of time and effort is simply a prerequisite.  There are a few exceptions, but those involve unique situations that should not be counted on as a means to the end.

I believe the same could be said for earning potential.  Compensation closely tracks the volume of legal fees and profitability of your book of business.  Grow one and you grow the other.  There is movement to reward for other factors and those other factors are extremely important.  AFAs and Legal Project Management will alter this dynamic somewhat.  Leading diverse teams efficiently will take on greater significance.  And those diverse teams may include outsourced resources.  But the underlying driver of compensation is still a large, profitable client following.

Can someone become or sustain equity partnership as a part/flex time partner?  Yes, but it takes a significant commitment - by the individual, the firm and the clients - to flexibility, cooperation and collaboration to make it work.  Technology is a great facilitator of this,  and it is likely to do so even more in the future.  So anyone considering this path better be technology proficient and receptive to rapid change.

1. Consider regular communications that update alumni about professional topics, events at the firm and the like.

2. Including alumni in firm activities where they have an opportunity to associate with former colleagues and clients.

3. Firm support for charitable and community events that alumni are leading.

4. Participation in continuing education sponsored by the firm.

Retirees may want to stop working, but many still want to continue associations and relationships.