What All Lawyers Need to Know about Origination Credit

If you are a lawyer just beginning your career, you probably don’t spend a lot of time worrying about origination credit.  In fact, maybe you never heard of the concept.  That makes sense.  You have a lot of other things to worry about that affect you on a daily basis in pursuit of improving your skills and becoming the best lawyer you can be.

But there is a difference between “worrying about” and “being informed about.”  As far as I am concerned, every private practice lawyer, regardless of experience, needs to at least be familiar with the concept of origination credits.  To be uninformed about them is to be unfamiliar with one of the things rocking the legal world at this point in time.

Origination credit is a lot what it sounds like.  For past generations, the lawyer, who brings the client to the firm, gets some credit for future work done for the client even if he or she never spends another hour toiling away on work for that client.

So, a lawyer can “originate” the client but never work on the client’s matters again and still lay claim to a part of the proceeds generated by the client work.  And on a permanent basis.

The result is that the lawyers currently working on a client matter are not getting credit for all of the time billed because the originating lawyer, who is not working on the matter at all, is skimming off the top based on the origination event and may even be receiving the bulk of the compensation.

If that sounds unfair to you, you are in the company of many others who believe this is an antiquated concept and needs revisiting.  In fact, this alleged unfairness is at the heart of some of the very visible gender and diversity discrimination law suits pending against Big Law today.

To learn more about this concept and from the perspective of an in-house lawyer, see https://www.law.com/corpcounsel/2019/09/02/change-at-the-start/.

In that article, you will read about efforts by in-house lawyers to assure that the relationship partners, who actually work on their matters, receive the compensation credit they deserve.  You will read about the frustration of in-house lawyers, who discover that lawyers they never have met or dealt with, are receiving part of the fees paid — fees that otherwise would go to the relationship partners that these in-house lawyers deal with on a daily basis.

You will also read comments from seasoned partners, who have benefited from origination credits throughout their careers but who also see the unfairness of the system.  Like this comment from Patricia Gillette, who I know and admire:

“[The system of origination credits} ensconces lawyers in a position and rewards them over and over again, and it creates silos rather than teams.  You can get credit for the rest of your life; it doesn’t give room for others.”

This is not to say that origination credit is not important or that the concept should be thrown out as with the proverbial baby with the bath water.  But a compromise where the relationship partner shares in some of the origination credit may be in order.  That would seem fair.

And fundamental fairness should underlie everything we do in the law.  Former Supreme Court Justice Felix Frankfurter said it best so many years ago, and I agree!

 

 

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The Future of Billable Hours — What All Young Lawyers Love to Hate

Billable hours.  Ugh.  The end all and be all in most law firms today.  Together with client origination, billable hours have been the measure of success for law professionals for generations.

2200 annually.  2000.  1950.  It really doesn’t matter.  The ounce of flesh that is exacted to reach those numbers is considerable and should be of primary concern. Wellness of professionals, wholesome law firm values, training young lawyers to become law firm leaders, and client service should matter most — not billable hours.

Despite these countervailing considerations, we keep concentrating on leveraging and law firm profits, all of which derive directly from billable hours.  Although there have been many commenters over recent years exposing the weaknesses of such a high concentration on billable hours, the profession has not seen a major move in another direction.

But recently, a top UK law firm represents that new direction.  Clifford Chance announced an innovative pilot program in May 2019, which delves into the merits of a concentration on billable hours as a measure of success.  Here is how a law firm executive describes the need for the study and how it will work:

While utilization is widely used as a core metric across the industry, it has a number of broadly acknowledged limitations, most notably that it does not directly incentivize efficiency or contributions to non-billable work that may be invaluable to the firm’s overall strategy and to the continued development of exceptional client service.

By running a pilot on this scale, with a large number of data points, associate input and partner and management feedback, we expect to be in a position to draw informed conclusions on the way ahead for the firm.

The year-long pilot program will consider lawyer performance based on other factors, including demonstration of knowledge, thought leadership, innovation, pro bono work, and business development.  Although lawyers will continue to record billable hours during the pilot, those numbers will be used to compare results at the end of the program and to maintain client records.

Read more here about the Clifford Chance program.  This kind of initiative is long overdue, and many of us, who care about the future of law practice and development of young lawyers into future leaders, will be very interested in the study results.

Stay tuned because you can be sure I will report them.

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Law Firms Should Follow Corporations in Looking Beyond Self-Interest

Law firm greed. 

I have been writing about the negative impact of greed in the law profession since 2016.  It was then that I first discussed how the greed manifested by large law firms is undercutting the professionalism of the business of law.  Those comments appeared in an article I penned for Corporate Counsel in its September issue that year, and I have discussed the concepts many times since in articles and remarks to legal audiences.

In essence, I argue that it was the greed of Wall Street that brought our economy to its knees in 2008, and it will be the greed of the law profession that will bring the business of law to its knees all too soon if we do not reverse course.  Reversing course will require a renewed dedication to the values of our workforce and the wellness of our law professionals, thoughtful consideration and action on specific issues of telecommuting and work-life balance, examination of the role of billable hours in determining competence and value, and use of our resources and talents to serve communities and society.

Most recently, I discussed these concepts at a law firm partnership retreat within the larger context of a discussion about what millennial lawyers want.  By building on the reality that millennial lawyers will be 75% of legal professionals by 2030 and the research that millennial lawyers desire less greed and more caring, I found my audience to be much more attentive than some audiences of the past.  Law firm managers now recognize that the future of their firms and robust succession plans lie with millennial lawyers and their millennial clients.  Numbers do not lie.

So, I was cautiously encouraged.  And then I was even more encouraged to see a reverse course from the Business Roundtable last week.  As reported in a Wall Street Journal article, leaders of some of America’s largest companies are rethinking the notion that corporate decisions should rightfully revolve around the needs and desires of shareholders.  Meaning profit to the exclusion of everything else.  Meaning greed.

So, business leaders extraordinaire, including the likes of Jamie Dimon of JPMorgan Chase and Jeffrey Bezos of Amazon and scores of their corporate colleagues, have decided that corporate leaders should take into account all stakeholders — to include employees, customers and society at large — when making decisions about corporate direction.

The newly-formulated “Statement on the Purpose of a Corporation” begins with this sentence:

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.

The new statement goes on to identify multiple obligations to support this goal, in the following order of importance:

  • Delivering value to customers.
  • Investing in employees.
  • Dealing fairly and ethically with suppliers.
  • Supporting the communities in which they work.
  • Generating long-term value for shareholders.

Some of these directives are mirror images of the arguments leveled against greed in the legal profession.  This is not surprising because law is a business, and, like other businesses, it must survive in a changing world.  Rules that worked yesterday may not work today.

Hopefully, this new view of corporate responsibility will rub off on law firm leaders who know that the clock is ticking and that the law firm leaders of tomorrow have different values and different world views.  And that those different values and world views need to be taken seriously and respected.

So much at stake.  So many watching.

 

 

 

 

 
 
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Family Planning for Women Lawyers

Last week’s blog addressed the realities of non-equity partnership.  As pointed out in that blog, there is a lot of difference between equity partnership and the increasing non-equity partnership cohort.  If you have to refresh your memory, this might be a good time to do it because family planning for women lawyers builds on some of the themes of that blog.

For example, even though non-equity partnership may not include all that women lawyers are seeking, it could be a fine landing place for them while they are trying to make motherhood and lawyering work.

When making that decision for yourself, the first thing that you have to understand is that reconciling those two roles is not just a matter of who takes on the responsibilities of childcare.  Typically that is a decision for you and your partner, but that decision is too often made on an uneven playing field.

That is because some of the important considerations going into that decision start long before you and your partner share parenting roles.  Specifically nine months before.

Once a woman becomes pregnant and is carrying a child, a strong bond develops that is not easily broken.  By the time that bond has developed over the period of gestation, the bond between mother and child is so strong that giving birth is like feeling the earth move.  It is the ultimate defining moment, and the responsibilities of that bond are not easily handed over to another — not even a partner.

At least, that is the way it worked for me and for so many women I know — Boomer Moms, Gen X Moms and, now, Millennial Moms.  Age does not seem to make a difference when it comes to the strength of the bond between mother and newborn.

As a result, often new mothers feel like they are the only ones to properly care for their babies and toddlers, especially.  Call it instinct.  Call it the bond.  Whatever you call it, the feelings are almost uncontrollable.

And these feelings do not always lend themselves to an equal division of childcare.  Although domestic partners, who both work outside the home, are sharing much more of home and childcare responsibilities today, the issues of childbearing are not shared.  They are personal to a woman — and not any less so for a woman lawyer.

So, I encourage you to read this article from Law.com addressing how women approach family planning in the legal profession.  It will give you critical information to help you make the best decisions about motherhood and your career when the time comes.

Here are some topics that are addressed there:

  • The legal profession is based upon a rewards system that values the attorney who is always at work and has few outside obligations — AND that does not describe women with family responsibilities;
  • The best time to start a family on the road to partnership;
  • The impact on a woman’s physical being during pregnancy while practicing law;
  • Whether having children effects opportunities to make partner;
  • Whether being able to work remotely “without judgment” has a bearing on making maternity/motherhood and law practice work;
  • The importance of a generous maternity leave; and
  • The importance of knowing yourself well enough to set realistic goals and make good career decisions.

Many sacrifices have been made in the careers of women lawyers for the sake of families.  In the day, I gave up my partnership for the privilege of  practicing part-time after my baby was born.  Yes, it impacted my career, but it also enriched my life.  And I never have regretted waiting longer for partnership.  It was a choice I was willing to make.

And you will have to make similar choices.  Know yourself, know the facts, and be prepared.

 

 

 

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The Reality of Non-Equity Partnership

Lawyers at all levels of practice can be valuable members of the profession and can find satisfaction in their work.  That is a given, and the decision where you want to fall along the gamut is up to you.  But, before you put that decision in motion, be sure that you understand the terms.  For law firms, that includes being familiar with the ins and outs of non-equity partnership.

Non-equity partnership sounds good to many young lawyers who think they understand the demands of equity partnership and want something less. The thinking goes something like this:  I will still have an interesting practice.  I will have a great title.  I will make a lot of money.  And I won’t have to deal with as much client development, business promotion, and other firm management stuff that I really don’t like anyway.  So, what’s the downside????

Exactly, what’s the downside?  Although that line of reasoning may be good in theory, reality is a much better playing position when you are dealing with your career and your future.

So, it is a good idea to understand what non-equity partnership is, what it is not, how it came to be as popular as it is today, and who benefits most from it.

Those issues and others are covered in a recent article on Above The Law.  And the truth about non-equity partnership may not be all that you thought it would be.

As explained in that piece, the currently-popular two-tiered partnerships are made up of a junior class of  non-equity “partners,” who are paid set salaries, and the traditional inner circle of equity partners, who split the firm’s profits.  The rationale behind the creation of the non-equity group is to reward ambitious lawyers before they tire of the entry-level title of “associate” or other equally unsatisfactory monikers and look elsewhere.

Sounds good, right?  The firm is looking out for the junior talent. 

Maybe.  But, what is not so obvious is that the promotion to non-equity partner also allows the firm a justification to significantly raise hourly rates for this new class of “partners,” and the profits from that bump up goes to — you guessed it — the equity partners.

In fact, as further pointed out, the name change from “senior associate” or  “of counsel” or “counsel” or “special counsel” to “equity partner” is really a misnomer.  There is nothing in terms of traditional partnership about non-equity positions.  Sharing profits has always defined partnership, and there is no trace of that in the non-equity experience.  Clients don’t seem to notice and, as long as young lawyers do not care who profits off of a name change, it will continue.

But, there is more to think about.  The title also may negatively affect the futures of young lawyers in terms of mobility.  Titles can be misleading when it comes to market opportunities, and that can impact careers.  Be sure not to miss that part of the discussion.

And to educate yourself even more on the issues surrounding non-equity partnership, do not miss this article in the American Lawyer, which helps to sharpen the focus on conversations that are becoming necessary to eliminate the confusion and address the important issues about talent, opportunities and the futures of young lawyers.

Check out these articles and do not get blindsided when it comes to the subject of non-equity partnership.

 

 

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Young Lawyers of the Sandwich Generation

I know a little bit about the Sandwich Generation. 

I was 30 years younger than my mom, and, at the same time that she was becoming aged, my own two children were teenagers.  It seemed like everyone needed help — or tending — and I knew that I had to find a way to be there for my mom.

So it goes.  If you ever have found yourself in that situation, you know that you are caught between two devotions just like a big ole piece of bologna is caught between two delicious pieces of bread with no way out.  Not enough time to do right by anyone — or it seems — and, to boot, you have a job.  A responsible and serious job that you need to pay the bills and provide what you want for your kids, but you still want to care for mom, who cared for you so long ago.

The Sandwich Generation, which is more a feeling than a single generation identity, affects more women than men.  This is not surprising because women have proven themselves to be such grand caretakers.  We are naturals, and we are not always very forgiving of those who do things differently than we do.  Especially when it comes to caring for loved our ones.

This is an important subject because the challenges are a function of time — time that we often feel we do not have.  And now that the elderly are living longer, many young lawyers can expect to care for their elders a lot longer.  Welcome to the Sandwich Generation.

As pointed out to me recently, we talk a lot today about Millennials and Baby Boomers.  But when do we start paying attention to the needs of the Sandwich Generation?

Here’s a link to a slide show you need to see.  Watch it and pass it on to your colleagues, your partners, and your employers.  At some time or another, you all will need help figuring out the challenges of the Sandwich Generation.

And, in case you are wondering, law school did not cover this!

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Women Lawyers Could Use Golf “Fore” Business

This is where I tell you to do what I say and not what I do.  I am not a good example of what I am about to tell you.

I was raised in a family of golfers.  My grandfather was a par golfer plus and designed a few courses.  He taught my mom to play golf when she was a teenager — long before there were many women on the links.  My mom was a good golfer, better than my dad, if truth be told.  She loved the game and played at least three days a week during the summer.

I learned to golf when I was in grade school, and I got pretty good at it during high school.  I played a little after I went to college and then less after I got married (to someone who did not appreciate golf) and even less during law school and after I started to practice law.  After all, golf takes time.

That was my rationale for belonging to a golf club but never playing the game.  Stupid.  Even more stupid was not playing in the annual law firm/client golf tournament because my game was a little rusty by then.

So, when I read the article by Vivia Chen in The American Lawyer about why women lawyers should play golf to improve business opportunities, all I could do was sigh.  For all the bad golf decisions of my past.

In my defense, however, I do recall having at least one lucid moment on the subject of women and golf.  In Best Friends at the Bar:  What Women Need To Know about a Career in the Law, I included information about playing golf as a good business development tool in the chapter titled “Find a Comfort Zone for Promoting Work.” 

However, I took heat from some of my readers for embracing a “male-oriented” makeover for women that does not capitalize on typical “women’s strengths.”  That book was published in 2009, and it is now 2019.  What I tolerated as justifiable criticism then, has little relevance now.  I think we have moved on from “typical” gender stereotypes in the last decade.

So, consider golf.  Or, better yet, take up the game.   A lot of business is done on the golf course.  And, presumably, you want a piece of that action.

And, according to the article, this is why you should:

  • Because so few golfers are women (24%), any woman who plays gets special attention;
  • Golfing is a great place to network for business;
  • Men don’t worry about how well they play so why should women; and
  • It is not about whether you enjoy it.  It is all about doing what’s effective to enhance business opportunities.

So, as stated at the end of the article, “Are we dumb?”  I was.  But you can be smarter.

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What Happens When Women Rule?

I never have met Swanee Hunt or, more accurately and respectfully, Ambassador  Swanee Hunt.  She is the former US ambassador to Austria, the founder of the Women and Public Policy Program at the Harvard Kennedy School of Government and the founder of Seismic Shift, an initiative dedicated to increasing the number of women in high political office.

We share a mutual very good friend, but I keep missing Ambassador Hunt at events.  I hope that changes one day soon because we both are dedicated to advancing women in positions of leadership.  And I would like to thank her for her work.

In a recent piece for CNN News, Ambassador Hunt discussed the advances that women are making in increasing their collective representations in Congress and state legislatures in this country and in national representations in countries across the globe — countries like Iceland and Rwanda and New Zealand, where the female Prime Minister is shaking things up Down Under.

The message is that female leadership matters and not just for issues affecting women.  New organizations are springing up all over the US to encourage women candidates and to build on the momentum.  Women demonstrate remarkably effective leadership skills, and they work hard and relentlessly for positive change.  Women, especially those with children, are incredibly efficient and productive on the job.  They have the assembly line down pat.  They multitask with perfection, and they are unflappable under fire.  You can’t show them emotions they have not addressed and overcome.

However, before we get too comfortable with the rise of women leaders, we need to understand that, according to research by Bright Horizons, more than forty percent of employed Americans (a combination of men and women) consider working moms to be less devoted to their work.  And the unfortunate reality is that women fall behind in earned wages once they have children, and they never catch up.  The Motherhood Penalty is still very much an impediment to the advancement of women in the workplace, and the law profession is no exception.

Many more of you than ever before will become law firm partners, but many of you will remain non-equity partners because of your family choices.  You will watch your male colleagues overtake you in salary and opportunity — in many cases not because of your lack of skills but because of perceptions.

This is the way it is — but not the way it needs to be.  Hopefully the trends in the leadership of women that Swanee Hunt writes about and has witnessed all over the world will make a difference.

Let’s hope so.  And soon.

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