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Associates are often rewarded for originating new clients. Many firms consider business development when making partnership determinations, and some shops also provide associates origination bonuses for signing new clients to a firm. Originating business may be an unfamiliar process for many associates, and associates often may not think about the long-term implications of signing new clients to a firm. However, associates need to be careful when originating business to ensure that partners do not steal their clients or make it impossible for associates to bring their clients to subsequent law firms.
Partners often jump at the opportunity to take credit for signing new clients. Many law firms require partners to accumulate a certain number of equity points before they can be considered for equity partnership, and those points are usually obtained by originating new business. In addition, partners also have financial rewards for being responsible for clients, and may be entitled to a percentage of the revenue generated from clients to which the partner is attached. As a result of such incentives, partners may be motivated to take responsibility for matters originated by associates, and even lock associates out of working with a client so that a partner can be more connected to a new client.
Earlier in my career, I worked at a firm that did not provide origination bonuses or any other tangible reward to associates who signed new clients. Despite the lack of explicit rewards, one associate signed a lucrative new client to our firm. This associate did not have a written understanding with the firm about origination rewards the associate would receive, and the associate just trusted that firm management would treat this attorney right with respect to the associate’s new client.
However, the partners never rewarded this associate for signing a new client. Over time, the partners also involved this associate less and less on the matter that the associate originated, despite the fact that the associate was connected to the client socially and had valuable perspectives about the client and the issues involved in the representation. Furthermore, the partner involved in the matter did not provide information about the case to the associate who originated the client. This all seemed like a concerted effort to lock the associate out from being involved with the client and avoid a situation in which the associate would demand an origination bonus. Eventually, due to this bad faith and friction between the associate and firm management, the associate departed for a new position. The associate never received any type of reward for originating that business and did not take the client to the next firm at which the associate worked.
As the story demonstrates, associates should take measures to ensure that partners do not steal their clients or lock them out from developing connections with clients they originate. With some forethought, associates can protect themselves and minimize the likelihood of friction when they originate new business.
Earlier in my career, I had the opportunity to pitch a huge client that could generate six figures of revenue a year for our firm. I previously originated some business for that shop, and a dispute arose over how much money I was entitled to as an origination bonus. In order to protect myself and ensure that there were no misunderstandings between me and the firm regarding my business development, I asked the managing partner to sign an agreement about my origination efforts.
Asking my boss to sign a contract guaranteeing me an origination bonus and involvement with clients I signed was the hardest thing I had to do as a “baby lawyer.” I remember sitting in my boss’ office with flushed cheeks explaining that I had the chance to pitch this massive client, but I wanted the firm to agree to some stipulations first. I handed a one-page contract to my boss and asked that he sign it before we pitched the client. To my surprise, my boss agreed to sign the contract with very few changes, and we eventually signed that client to our firm.
Because we had a contract in place, there were never any questions about how much money I was entitled to. After the firm got paid by my client, the firm put my origination bonus in my next paycheck. In addition, our contract stated that I would be responsible for oversight of all the matters involving the client I signed, and the firm ensured that this part of the contract was followed as well.
While working at that firm, I was included on all emails related to my client, and participated in all conference calls as well. I was also invited to all meetings with the client, and I was able to be as involved as I wished with every matter involving my client. My boss kept me in the loop so much that, sometimes, it was inefficient! One time, we were tasked with reviewing the files of a former attorney of my client, and my boss invited me to join him in reviewing the files, since he didn’t want to leave me out of anything. I eventually told my boss that he should do whatever made us the most money, and he did not need to involve me in matters if it would be inefficient to do so. From then on, I was still involved with my client’s matters, but we struck a better balance between oversight and conducting work more efficiently.
All told, associates need to be careful to prevent partners from stealing clients they originate or locking them out of working on matters related to clients they sign to a firm. Partners may be motivated to steal clients for financial reasons or because they do not want clients to leave when the associate departs a firm. In any case, associates should not be afraid to ask partners to agree to origination bonuses in writing and stipulate that associates shall have oversight over matters they originate.
Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.