Navigating the Challenges of Partner-Level Law Firm Transitions: Tips for a Smooth Transition

 

Summary

When partners in law firms decide to switch firms, they face a range of issues. These issues can include organizational, personnel, legal, and financial considerations. It’s important for partners to understand how these issues can impact their professional future.

Organizational issues include the impact of a partner's decision on their current firm, including the potential for disruption in client relationships, and how the switch will be perceived by other partners in the exiting firm. Personnel considerations include the potential impact on associates, who may be asked to move with the partner or be forced to switch firms due to the partner’s departure. Additionally, partners must consider how their move will affect their compensation package, as well as their partner role in the new firm.


Legal issues come into play when switching firms, as the partner's departure and entrance into a new firm may have tax implications. Additionally, the partner needs to research the ethical considerations in switching firms, as well as the implications of their non-compete and non-solicitation agreements.

Finally, financial considerations must be taken into account when a partner moves from one firm to another. It’s important for the partner to understand the financial impact of their move, as the decision may affect their short-term and long-term income.

Switching firms can be a complicated decision for partners. There are many organizational, personnel, legal, and financial issues to consider before making the move. Partners should thoroughly research all potential issues to ensure they are prepared for the transition and to make the most of their new firm.
 

Switching Firms

In today's challenging legal market, many attorneys are considering or have considered a switch from their current law firm to another. It is necessary to be aware of the potential issues that may arise when making this type of decision. These can include the financial and reputational aspects associated with the move, as well as the potential for disruption of the practice.
 

Financial Issues

When a partner of a law firm moves to another firm, their financial stakes are also affected. The partner's payout from the old firm may be delayed until the new firm's fiscal year, which may result in a substantial financial burden due to the late payment. This is most likely if the partner is making the switch during the middle of the fiscal year. It is important to weigh this factor when deciding whether or not to move.
 

Reputational Risks

Making a move from one firm to another can have a direct impact on the reputation of the attorney. Moving to a smaller and less established firm, or to one with a reputation for being less than professional, could damage the lawyer's reputation. It is important for the attorney to take into account the reputational risks when considering a move.
 

Disruption to Practice

When a partner moves from one firm to another, it can cause disruption to their practice, as clients may have to be moved to the new firm. Additionally, the partner may have to invest time and energy into re-building their practice. It is important for the attorney to consider the amount of disruption the move will cause when deciding whether or not to make such a decision.

Minimal Book and No Time to Build It. This is a common problem for service partners, who spend the majority of their billable hours servicing other partners' matters. A prime example of this is the partner, often highly regarded, who is practicing directly under the heavy thumb of a practice group leader. He/She is so highly regarded that the practice group leader, as well as other rainmakers in his group, look to him/her to service their books while they continue to market to their prospective clients. Unfortunately, sometimes this service partner wakes up 10 years later with excellent client-servicing skills, but little or no book of business to speak of.

Partners who find themselves in this situation should not be discouraged, however. If the service partner is not satisfied simply servicing someone else's book, then he/she has only one option: to move to a firm that will allow him/her the opportunity to build a book. Assuming a partner is coming from a prestigious firm, has the business contacts to effectively build his book, has a well-defined and creative business plan, and has excellent client-development skills, he/she is an excellent prospect for a firm that is seeking out highly motivated partners interested in starting and/or growing a practice group. This move may require partners to make some adjustments in compensation, benefits, etc., in the short term; but partners who find themselves in this situation must be willing to exchange the short-term loss for the long-term benefit of gaining a higher level of autonomy and security in their practices.

Mergers and Firm Dissolutions. Mergers are business transactions that can bring about enormous profitability, but can also sometimes create great cultural stresses. In this marketplace of constant change through spin-offs, acquisitions, and dissolutions, partners need to be ready and able to immediately transition their clients. Some partners may find themselves faced with the prospect of having their practices excluded from a merger transaction altogether because of conflicts. Others may be faced with the dissolution of their firms and the resulting need to aggressively pursue firms that make sense for their clients long term.

Although both of these circumstances can seem somewhat disconcerting for partners, particularly for those who have been with their firms for many years, we have found that these partners are often the most successful in transitioning their business to new firms. In particular, partners servicing attractive clients, some of which may be institutional, have much to offer a prospective firm. These partners are often pleasantly surprised by opportunities to start and/or build practices for other firms with strategic plans for growth. Some of these partners have even been afforded the unique opportunity to start new offices for firms. Partners faced with this potential obstacle should be greatly encouraged by this marketplace of opportunities and may find themselves pleasantly surprised by the alternative options available to them.

Billing Rates Are Too Low. This is a common obstacle for partners who are seeking to transition from smaller or mid-sized firms to larger national or international practices and can often compel partners to remain at their firms, seemingly trapped by the inability to move their practices. Some partners are more fortunate and are faced with only a portion of their books involving clients that may have lower billing-rate arrangements. In these cases, partners who are willing in the short term to leave behind work that does not fit in with the prospective targeted firm's overall practice may reap the benefits of such a strategic decision long term.

Partners whose billing rates are too low should not feel there is no way out. Assuming everything else is a good fit, firms are generally receptive to working with partners to come up with creative solutions to gradually move their clients' rates over time to levels more in line with the target firm's billing-rate structure. Client loyalty and confidence is, of course, essential in this type of effort. Generally, we have found that partners who have had long-term relationships with their clients do not have a problem convincing them to gradually move to higher-rate structures. This is largely because of the excellent representation the client has received over a period of years, but may also be a result of the fact that the partner may have a better platform from which to service his/her clients once he/she has moved to the target firm. Thus, clients have been very receptive overall to making these changes, and we have seen a number of partners transition to larger, more sophisticated practices and in some cases, more than double their books because of the broader platform they realize in "upgrading" to a larger firm.

Billing Rates Are Too High-Turning Away Business at Current Firm. The converse of rates' being too low-rates' being too high-can also appear to some partners to be an issue when attempting to transition their books of business to other firms. A prime example of this type of situation is the partner practicing at a major firm with a minimal book who has served primarily as a service partner for other rainmakers in his/her current firm. This partner may have had an opportunity to build a small book, but because he/she has primarily been servicing other partners' business, his/her book is minimal, and he/she believes he/she is, as a result, precluded from making a move. Coupled with the feeling that he/she is unable to move, this partner may also find that he/she is unable to get new business from cross-selling within his/her firm because he/she is competing with many other service partners with whom he/she practices. The partner may also be forced to turn down business he/she would otherwise be able to bring in and service him/herself because the rates for these clients are too low for the rate structure at his/her current firm.

Partners in this situation will soon find that an alternative firm size and billing structure may be essential to building their books and gaining the independence and autonomy in their practices they so desire. We have found that there are firms that provide these types of partners the opportunities they are looking for. For example, there are a number of spin-off firms that are comprised of partners who have left large practice, looking for alternative environments within which to practice. These firms offer great opportunities for partners with smaller books to continue to practice at a high level of sophistication, bring in work at slightly lower billing rates than might otherwise be found at larger firms, and begin accepting the work they for so long had to turn away.

Client Conflicts Prevent Building Book. This is a serious issue that can occur for partners that lateral to firms with little knowledge about the existing client base and the primary clients or types of projects the firms most often service. A firm that might in all other respects look very attractive can become a partner's worst nightmare, precluding the partner from bringing in new business and building his/her book. We have seen partners in these types of situations be faced with turning away hundreds of thousands of dollars in new business because their current firms are involved in so many cases that present conflicts. If you are a partner transitioning to a new firm, your recruiter's thorough due diligence regarding the firm's existing client base and its effect on your ability to bring in new business and continue to build your book is absolutely key to making your transition smooth and successful.

Current Firm's Strategic Plan No Longer Supports Practice Group. With the focus on strategic planning and expansion, many firms have changed courses and have had to make tough decisions about practice groups they will no longer support over the long term. A partner may find him/herself pursuing another firm whose practice and long-term strategic plan is more fitting for his/her practice. This does not present a huge dilemma for a partner with a sizable book whose practice area could be attractive to other firms in the marketplace. However, it can present a serious dilemma for a partner whose book is marginal and whose practice area may not be one that most firms in the marketplace are expanding. Here, a partner's ability to convince a prospective firm that his/her clients and practice fit in with the firm's long-term plan for growth is essential. The partner must rely on his/her recruiter's ability to inform the partner about the prospective firm's strategic plan for growth and expansion and its current client base and practice group distribution, all essential to the partner's ability to understand how his/her practice could add value to the firm. It is this added value that will enable the partner to more effectively move his/her book.

Personal Historical Data. Though still operating as historical partnerships, many firms are moving toward more of a traditional business model, often overseen by COOs and CFOs who may or may not be attorneys, but who in most cases are numbers-driven and continually monitor firms' viability and profitability. A partner's three-year historical record-including billable hours, billing rates, and client billings-is the minimum information law firms will assess during their due diligence to determine whether a partner may be a valuable addition to their firm. This three-year history is vital to a partner's attractiveness to a prospective firm and presents a model for what the prospective firm can look forward to in terms of the partner's ability to contribute to the firm's bottom line. Partners must continually focus on and monitor their personal data and be cognizant of the effect the strength of their historical data, or lack thereof, could have on their ability to effectively transition to a new firm.

Retirement Plans, Capital Contributions, Benefits, Tax Considerations. Many law firms provide fairly sophisticated Defined Benefit Plans for their partners, which require significant contributions over a period of time and offer large long-term payoffs. These plans often motivate partners to remain on board at firms they would have otherwise departed many years prior. Partners should not feel trapped because of benefit plans at their current firms. Many firms are open to working with partners to create compensation plans that take into account a partner's Defined Benefit Plan structure at his/her current firm. Likewise, partners who have the option of joining firms as equity partners are often faced with large capital contributions and potential significant changes to their benefit packages or serious tax consequences in the year in which they move. These are all factors partners must weigh in their overall assessment of whether a particular firm is a good fit, but partners must be flexible and open to discussing creative solutions to these factors.

These are but a few of a vast array of issues partners may encounter when making a lateral move to a new law firm. At BCG, we have the privilege to work with partners nationwide in every conceivable practice group, all of whom have important objectives and face a variety of issues relating to moving their practices to new firms. It is our pleasure to work with these partners in successfully transitioning them to new firms, where they can realize their long-term career objectives.

About Harrison Barnes

Harrison Barnes is a prominent figure in the legal placement industry, known for his expertise in attorney placements and his extensive knowledge of the legal profession.

With over 25 years of experience, he has established himself as a leading voice in the field and has helped thousands of lawyers and law students find their ideal career paths.

Barnes is a former federal law clerk and associate at Quinn Emanuel and a graduate of the University of Chicago College and the University of Virginia Law School. He was a Rhodes Scholar Finalist at the University of Chicago and a member of the University of Virginia Law Review. Early in his legal career, he enrolled in Stanford Business School but dropped out because he missed legal recruiting too much.

Barnes' approach to the legal industry is rooted in his commitment to helping lawyers achieve their full potential. He believes that the key to success in the legal profession is to be proactive, persistent, and disciplined in one's approach to work and life. He encourages lawyers to take ownership of their careers and to focus on developing their skills and expertise in a way that aligns with their passions and interests.

One of how Barnes provides support to lawyers is through his writing. On his blog, HarrisonBarnes.com, and BCGSearch.com, he regularly shares his insights and advice on a range of topics related to the legal profession. Through his writing, he aims to empower lawyers to control their careers and make informed decisions about their professional development.

One of Barnes's fundamental philosophies in his writing is the importance of networking. He believes that networking is a critical component of career success and that it is essential for lawyers to establish relationships with others in their field. He encourages lawyers to attend events, join organizations, and connect with others in the legal community to build their professional networks.

Another central theme in Barnes' writing is the importance of personal and professional development. He believes that lawyers should continuously strive to improve themselves and develop their skills to succeed in their careers. He encourages lawyers to pursue ongoing education and training actively, read widely, and seek new opportunities for growth and development.

In addition to his work in the legal industry, Barnes is also a fitness and lifestyle enthusiast. He sees fitness and wellness as integral to his personal and professional development and encourages others to adopt a similar mindset. He starts his day at 4:00 am and dedicates several daily hours to running, weightlifting, and pursuing spiritual disciplines.

Finally, Barnes is a strong advocate for community service and giving back. He volunteers for the University of Chicago, where he is the former area chair of Los Angeles for the University of Chicago Admissions Office. He also serves as the President of the Young Presidents Organization's Century City Los Angeles Chapter, where he works to support and connect young business leaders.

In conclusion, Harrison Barnes is a visionary legal industry leader committed to helping lawyers achieve their full potential. Through his work at BCG Attorney Search, writing, and community involvement, he empowers lawyers to take control of their careers, develop their skills continuously, and lead fulfilling and successful lives. His philosophy of being proactive, persistent, and disciplined, combined with his focus on personal and professional development, makes him a valuable resource for anyone looking to succeed in the legal profession.

About BCG Attorney Search

BCG Attorney Search matches attorneys and law firms with unparalleled expertise and drive, while achieving results. Known globally for its success in locating and placing attorneys in law firms of all sizes, BCG Attorney Search has placed thousands of attorneys in law firms in thousands of different law firms around the country. Unlike other legal placement firms, BCG Attorney Search brings massive resources of over 150 employees to its placement efforts locating positions and opportunities its competitors simply cannot. Every legal recruiter at BCG Attorney Search is a former successful attorney who attended a top law school, worked in top law firms and brought massive drive and commitment to their work. BCG Attorney Search legal recruiters take your legal career seriously and understand attorneys. For more information, please visit www.BCGSearch.com.