Let’s say that you are a moderately successful lawyer and have spent a few decades toiling in the trenches and building up a respectable client base.
You get paid 40% of your billings and 10% of your client origination credits. You bill $600,000 which nets you $240,000 (40% of $600,000) and your client origination credits are $2,000,000 which earns you another $200,000 (10% of $2,000,000). Your total earnings are $440,000 ($240,000 + $200,000).
One reason that your client origination credits are so high is that you have been a team player, cross-sold wherever possible, delegated effectively, and introduced many of your clients to other lawyers in the firm.
Since you are getting long in the tooth, you decide to reduce your workload, so your personal billings drop to $350,000, but since others in your firm are still working away on the clients who you have assembled over 40 years or so, they stay up at $1,800,000. Now you are earning $320,000 (40% x $350,000 = $140,000 + 10% x $1,800,000 = $180,000).
Your remuneration has taken a serious hit, but you have worked hard for many years, you will soon have enough investments to retire, and you enjoy working a bit more than half the hours that you used to put in. Life is good.
Meanwhile, firm management has noticed that although your hours are down, you are still earning quite a bit of money, primarily because of your origination credits. It bothers them, so they do some math and run through the likely scenarios if they boot you out of the firm.
They figure that the most likely scenario is that you will retire and they will hold onto the lion’s share of your clients (since much of the work is already being done by others) without having to pay you anything for them. The firm will come out ahead.
Of course, the other possibility is that you will go out on your own or join another firm and take as many clients as possible and possibly scoop a lawyer and a law clerk or two on your way out. That would not work out quite as well for the firm.
The partners meet and conclude that you are getting old, you are already slowing down, and you are unlikely to want to ramp back up to start a firm or prove yourself elsewhere. They do not feel a whole bunch of loyalty to you for all of the work that you did to build that client base (and the firm) over many years. Why should they if it will cost them money? So, they boot your ass out of there.
They are right. You retire. They win.
This story has a moral. If you find yourself in this situation, in a firm where people think like that, get out early, take the clients, the associates, and the law clerks. Do it while you still have the energy and desire, and before they see it coming. Strike a deal with some nice people to buy you out and pay you for your client base.
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.