If you are an associate law firm, there are many reasons why you might consider changing firms. A competitor may offer a better platform and a stronger test bed, allowing you to serve your customers more effectively and ultimately generate more business. Another firm may have a different geographic footprint that might better align with your practice or business development goals. Perhaps you are looking to reduce the frequency of conflict after having had to dismiss too many potential problems. Or maybe you’re interested in taking on a leadership role, but your current company has been slow to open up opportunities.
Although each of these factors is distinct, they have one thing in common: they all ultimately affect your compensation. At Lateral Link, this is our peak season for partner compensation issues. The question is on the minds of many as they prepare their pay notes and learn what they will take home this year. Some partners mull over their desire for equity promotion. Others have a nagging feeling that their current compensation does not fairly value their contributions. And some may have broader concerns about the stability of their company’s finances in an uncertain economy and the resulting risks to their earnings trajectory. Could another place offer a better package?
Reasons to Consider Testing the Market
There are a myriad of ways companies can financially disappoint their partners. Here are some examples :
- The partner expected to receive more Ownership Units (i.e. an increase) but was disappointed to receive a smaller increase than expected. Management says this is one of the company’s biggest increases this year and it can’t go any higher.
- The partner eventually created enough business for a capital promotion, only to learn that the target required to become a capital partner had increased. The new higher origination requirement keeps equity out of reach.
- The partner is appalled at the amount of his net worth tied to a capital injection and wonders if other companies might have different, more lenient requirements. (The answer is yes! There are companies with no or low capital requirements.)
- The partner regularly turns down cases due to legal disputes with the firm’s other clients, which significantly undermines its practice development efforts and sometimes results in the partner referring millions of cases to other firms. The inability to assume this work reduces the origins and, consequently, the remuneration.
If you find yourself in a situation similar to the one above, this could be the perfect time to test the market. The possibility of obtaining a higher offer will depend on a variety of factors, including the level of demand for your area of practice, your reputation in the wider legal community, and your current volume of origins. But either way, the process should be informative. At worst, you’ll have peace of mind that you’re actually being compensated fairly.
How to test the market
The most effective way to test the market is to work with a trusted recruiter. An experienced recruiter who understands your area of practice and your region will know exactly which companies are open to lateral hires and which offer the best compensation. First, the recruiter will ask you to create a company profile and pitch, highlighting the value you could bring to a potential new business. Even if you’re not moving, you may find this to be a valuable exercise that allows you to negotiate with more confidence within your current company’s compensation structure.
Of course, you can also try testing the market yourself, but you’ll lose the benefit of having a trusted advisor who knows your market and has secured offers from various companies. This unique and valuable insight can only help you.
Consider the larger opportunity
When testing the market, candidates sometimes tend to focus too much on the compensation guarantee that a company offers. It is important to keep in mind that there are many elements to a compensation system beyond the guaranteed salary. For example, is the capital contribution exceptionally expensive? Also be sure to consider the likely extent of conflict, as this could have a big impact on your ability to grow your book.
Always place the guaranteed dollar amount in the context of a larger opportunity. For example, if you have declined class actions, joining a company with a strong class action practice is likely to significantly accelerate your compensation. Even seemingly minor factors, like having an office in a geographic area relevant to your practice, can make a real difference.
Be a smart negotiator
One of the oddities of being a legal recruiter is seeing partners who are excellent negotiators for their clients make serious mistakes when negotiating for themselves.
Sometimes a lawyer receives a call directly from another company, assessing their interest in a move. (By the way, this type of appeal raises unique issues for senior government officials, where any answer other than “no” can lead to recusal requests.) Flattered, the lawyer only considers the company that has called. If you receive such a call, don’t let the company that contacted you stop you from exploring other options so you understand your true market value. If the calling company doesn’t want you to test the market, it may be because they want to avoid a compensation bidding war. Failing to protect your interests in this scenario could cost you millions of dollars over the course of your career.
Another common mistake is to quickly accept a counter-offer from the current company after submitting your resignation. The company’s attempt to keep you too little, too late? Ask yourself if this one-time bonus is a band-aid on larger systemic issues, including the issues that motivated you to explore other opportunities in the first place.
The decision to move is complicated and requires careful consideration. But it never hurts to check your market value, especially if you suspect your current company isn’t treating you as well as it should. If you think you could benefit from a confidential discussion about your personal situation, please contact me.
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