Having a significant book of portable business is understandably highly appealing to law firms. At the same time, a particularly large book of business (i.e., $15M and above) can increase scrutiny on certain factors that are not as relevant with books of business not quite that large.
On a regular basis, law firms decide to not move forward with lateral partners who have significant portable practices, and the reason can often stem from one of these hidden risks. As such, it’s beneficial to be aware of them.
Significant Amount of Business is Concentrated in a Few Clients
This risk is present with all lateral partners who have a less diversified range of clients. That said, the higher your compensation, the higher the commensurate risk if the business is concentrated within specific clients. Of course, if one of your main clients does not accompany you, the impact is more significant if you have received a high guarantee for the first few years. The scale of this risk is not as present with a smaller practice.
Fear that Incoming Partner Will Create Management Challenges
Numerous firms have been burned in the past by partners with very large books of business. These prior laterals had the expectation that the new firm would comply with all of their wishes and requests, even if the result meant favorable treatment that ruffled the feathers of other longstanding partners. And if the firm did not comply, there was an implicit – and sometimes overt – threat that the lateral would simply leave. As you can understand, the large book of business can result in management difficulties that are not present with partners who have smaller practices (and smaller expectations).
Additionally, certain firms take a certain pride in politely passing on partners with large books who don’t fully fit, as it can symbolically demonstrate to the existing partnership that the firm values culture (i.e., “no A-holes”) over revenue. We have visited with many firms who proudly declare, “We have passed on partners with $20+ million practices who did not fit into our culture.”
Fear that Incoming Partner Will Pose a Threat to Client Relationships
It’s not unusual for existing partners to feel threatened that a high profile partner will overshadow them, interfere with existing client relationships (especially from a power-dynamic in conflicts determinations), or create more internal competition for new clients. From an emotional perspective, some partners would rather pass on a lateral threat — despite the economic upside for the firm — to protect the norm.
These situations do not present themselves as much if the new partner is starting a new practice at the firm, but tend to arise when there is substantial overlap in practice area or clientele.
Determining whether these hidden risks may present larger issues is more art than science, and the purpose of this post is to raise your awareness to some of these underlying dynamics. Of course, each situation needs to be assessed on a case-by-case basis depending on the particular law firm, the nuanced dynamics within the particular practice group, and the business proposition supporting the potential hire. But if you fall into the $15M+ category, being aware of these concerns on the firm side can help you proactively address them if they do arise.