These days we are working with a number of clients on redefining the way in which the performance of partners is measured. As outlined in one of the previous blogs, typically origination and personal revenue are today still high on the list.
Over the last year or so we have had many fundamental discussions on ‘who owns the client’: the partner or the firm?
Given the frequency with which this topic arises, I feel it is time for a more fundamental approach. From an historic perspective the relation between a client and a lawyer is a personal one. The lawyer traditionally is a ‘consigliere’ to the client. Over the last decades, when lawyers started to form larger law firms, this has shifted towards a relationship with the firm rather than the individual.
For the purpose of this article I will look at the relationship from three different perspectives:
The partner perspective
From a partner’s perspective it is the partner who ‘owns’ the relationship. This is not only due to the fact that it is the partner who represents the client. There are also strong economic interests at play. Due to the way in which profit is distributed – this could be anything between pure lockstep and extreme ‘eat-what-you-kill’– the partner will want the revenue from the client to be put in his/her name. More revenue will mean more personal income and more status within the firm.
As new clients are vital to any firm, origination is typically rewarded. A partner who brings in a new client might be entitled to having all future revenue put on his/her name. Even if other partners are effectively carrying out the work, the original partner will still remain the ‘billing partner’. Alternatively I know of some law firms where partners are entitled to a lifelong percentage of the revenue from a client they once originated.
And then there is ‘partner mobility’. If a partner at some point wants to make a lateral move to an other law firm, he/she will need his/her book of business. Without clients following, few if any, law firms will be interested in taking the partner on board in full equity.
So from a partner’s perspective it is the partner who owns the client.
The law firm perspective
Looking at the client relationship from the firm’s perspective, typically the firm would prefer that every client is a client of the firm. Clients are always presented as firm’s clients during pitches and for the purpose of submissions to legal directories. It will be the firms terms & conditions and the firm’s rate card that will apply to the relationship. For every new matter there will be a conflict check within the whole firm. And if a clients demands exclusivity, that will prevent all other partners from taking on matters from the client’s competitors.
From the law firm perspective it would also be desirable to encourage ‘cross selling’ by extending the relationship with the client to other partners and other practice areas. Leveraging a good relationship with an existing client is typically much more efficient than hunting for new clients. Introducing new partners and practice areas into the relationship will also help mitigate the risks of succession. With multiple working relations within the firm, the client will be more likely to stay when a partner decides to leave. Vice versa, the firm will be less vulnerable to job rotations at the client.
From the law firm perspective every client should be a firm client.
The client perspective
Interestingly we see most ambiguity at the client side. On paper clients tend to engage with the law firm. During pitches and panel formation the emphasis is on the firm. When reported in the legal business press, it is always the firm who has the mandate. A firm will be appointed to a panel and the client will sign an engagement letter with the firm. Typically a firm-wide fee arrangement will be agreed, binding to all partners in all offices. So on the face of it the client hires the firm.
Digging a little deeper things are not so obvious anymore. In some instances the client wants to engage a specific partner and not a specific firm. When the partner switches firm, despite all the administrative discomfort, the client will follow. This will typically apply to partners who handle matters that may have a strategic impact on the client’s business. Oddly enough this will also happen if the client knows only one partner at the firm, despite the type of matters being just commodity.
Clients should take control and stipulate what they want...
Ultimately I think it should be the client who decides on the nature of the relationship. If the client intends to have access to the knowledge and experience of the firm, both client and firm should spend time and energy to build and maintain that broader relationship. Based on our experience there is much room for improvement, we see all kind of issues arising from poor relationship management.
On the other hand, if a client just wants to engage one particular partner for the job, then it might be better to have this explicitly stipulated in the engagement letter and maybe even make provisions for the event that this partner switches halfway to another firm. Given the fact that we are talking lawyers dealing with lawyers, it is actually amazing that this is not yet standard practice.