How Lateral Partners Should Negotiate Compensation When Working With a Recruiter

Today’s post covers a very specific scenario. We’ve talked before about filling out Lateral Partner Questionnaires (LPQs) as a non-equity partner and how to present your portable book of business when that information will have direct bearing on the compensation offered to you. The very specific scenario we’re touching on today is a lateral move to a non-equity partner position when a recruiter is involved.

The presence of a recruiter changes certain elements of the negotiation at each stage of the interaction between the law firm and the potential lateral partner.

The Beginning 

In the very first steps of the process, a recruiter can serve as a bridge to make sure that the firm and the person being recruited are in the same universe. They can easily identify a floor for the candidate and set expectations for both parties.

At this juncture, candidates should not be too specific. Keep your options open by expressing that all elements of compensation will come into play, including how the firm calculates equity partner compensation and any requirements to buy into the partnership. Too often, lawyers provide a single number to a recruiter to signify their base salary, only to find out later that a more flexible approach would have served them better.

In salary negotiations, it’s easy to accept less than you asked for but very hard to get more than you initially requested. So, as a starting point, quote a range that goes above what you are willing to accept. Accompanying those numbers should be a message that communicates your openness to negotiating. For example, if the lowest base salary you would like to receive is $300k, at the beginning of the process, tell the recruiter something along the following lines: “I am looking for something in the range of $350k, subject to other elements of comp of course.” This response will help the recruiter help you by setting an initial bar, while also signaling flexibility on your part.

The best time to convey this information is prior to filling out the LPQ. This can be instrumental in setting a salary you’re happy with even if the details of your portable book of business don’t justify quite as high of a number.

The Middle

If the interview process is proceeding well, salary may come up again before the firm provides an offer. At this stage of the process, the recruiter again acts as a conduit, delivering information between parties. The candidate will continue to disclose more as the process continues, and the recruiter can help to frame those details in a way that will assist the firm in determining an appropriate level of compensation. The recruiter can sometimes convey candidates’ sensitivity to reductions in proposed pay better than the candidates can themselves. To some extent, a recruiter can act as an advocate for you.

The End 

Toward the end of the process, either after or just before the firm provides an offer, you will reach a point where your interests as a candidate and the interests of the recruiter diverge. As consultants to lawyers, we have seen first-hand that recruiters will generally want to wrap up these deals, while you might have more questions or see an opportunity to leverage your bargaining power.

At this step in the process, it is often most effective for the candidate to speak directly with decision makers at the firm about compensation, marketing resources the firm will provide, what is required to become an equity partner, and other elements of present and future compensation. This is good preparation for negotiating compensation in future years when the recruiter won’t be in the picture. In the case of a regional or national firm, it may be necessary to talk to someone at the firm’s headquarters, not just at the branch office you’ll be working with.

Recruiters play an important and useful part in some lateral moves. And if you do work with a recruiter, it is important to keep them in the loop. Unless something has seriously broken down in your relationship with your recruiter, you should let the recruiter know that you will be talking directly to decision makers at the firm.

But don’t make the all-too-common mistake of relying on the recruiter to get you the best possible compensation package or the answers to your most difficult or sensitive questions.

When you understand how your relationship with a recruiter can progress, you will be in the best position to negotiate the compensation you want and, most importantly, make a career move that serves you, your clients, and your life.

Common Mistakes for Lateral Partner Questionnaires

Most lawyers are understandably inexperienced in filling out LPQs. Many attorneys looking to make a lateral move from one firm to another haven’t interviewed in years or even decades, so they either have missed the move to LPQs entirely or have filled them out so infrequently that they make significant tactical and strategic errors.

The most common mistake is to treat the LPQ as a test for which the person who provides the most complete and thorough answer wins. This approach misses the strategic aspects of a job search. Specifically, the job search process is iterative. Both sides share more information as the process unfolds. It’s like peeling back the layers of an onion. Thus, the best strategy from the applicant’s point of view is to share the most relevant information accurately without feeling compelled to answer every question in full detail right away.

If you are asked to submit three years of data about your book of business, consider providing just one year’s worth at the beginning of the process. This covers hourly rates, billable hours, origination credits, and any difficulties in collections. If you are going to provide two or three years of general data, you don’t have to provide detailed information about who your clients are until the negotiations enter their final stage. By then, it is very likely that you will have identified clients, but you have to be careful about revealing the names of specific contacts. And it is almost never necessary to share contact information, such as the email addresses of in-house attorneys or other client contacts. Most LPQs do not lead to job offers, let alone offers you decide to accept, so don’t spread your best client’s contact information to potential competitors.

Lawyers also fail to take into account that recruiters influence this process. If you are working with a recruiter, you may have even greater latitude to provide more general (but accurate) information on your book of business up front. That’s because the recruiter acts as a buffer, and if the potential employer is unhappy about the amount of information you provided, the recruiter is in a position to find that out.

Finally, most attorneys don’t take into consideration the history of how LPQs evolved. The short version is that many law firms got burned relying on inflated estimates of how portable a book of business would be. This led to firms reducing the period of negotiated compensation. For most laterals now, it is hard to negotiate more than one year of compensation before they will be treated like any other partner at the firm. Because of this history, firms scrutinize each book of business and are wary of overly optimistic projections. This is another reason why providing last year’s numbers and/or an annualized version of this year’s numbers may be a better strategy than trying to provide three full years of data from the outset.

The best policy is to be accurate but not extraordinarily conservative. LPQs are negotiating documents and call for estimates. No one can know for sure exactly which clients will agree to move. And in our experiences consulting lateral partners, we have seen that women often omit revenues from their projections more readily than men do.

If you treat the LPQ as the strategic document that it is, you are more likely to weed out pretenders and identify those firms that are the best potential fits and the most worthy of your time and efforts.

How to Disclose the Existence of a Malpractice Law Suit to A Potential Lateral Partner

With the rapid increase in the number of law firms that are considering adding lateral partners, many aspects of the negotiating process between firms and laterals have become routine.  Most notably, almost every large firm sends out a Lateral Partner Questionnaire or LPQ.  The LPQ helps firms assess how attractive a potential lateral partner might be by collecting two or three years of information about the lateral’s portable book of business and hourly rates.  If the firm is sufficiently interested in the partner and partner’s feelings of mutual, the lateral partner will be asked to disclose information about potential client conflicts.  The exact timing of the disclosures regarding conflicts vary, but they are routinely made before a partnership decision is finalized.

In general disclosures made by the firm to the prospective lateral partner are handled on a more ad hoc basis than disclosures made by the lateral.  Too often the firm only discloses information about compensation and related policies in response to a specific inquiry by the lateral partner.  The one-sided disclosure of information can have unfortunate consequences down the road.  For example, a firm failed to disclose to a lateral partner that partners are expected to make sizable contributions to certain charitable causes.  The lateral partner was ticked off when she found out about this expectation, and this was one factor she cited for her reason to leave the firm two years later.

In my experience as a consultant to lawyers and law firms, many lateral partners don’t ask about the existence of malpractice actions facing the firm, and many firms don’t have an established procedure for making disclosures about malpractice actions.  All lateral partner candidates should find out if the firm is facing malpractice claims and what their exposure might be should they join the firm.  This is particularly important to laterals who are seeking to join a firm as an equity partner.

Lateral partners should at a minimum ask to review any public filings regarding malpractice claims filed against the firm.  And if the nature of the claims are particularly series or create substantial exposure for the firm, it is generally appropriate for the lateral partner to ask to speak to the lawyer who is representing the firm in the action.  If that lawyer works for the firm, then the lateral partner is probably best off discussing the case with a lawyer who specializes in handling legal malpractice actions.  While it is theoretically possible that the firm will be willing to share in the costs of having the lateral partner obtain a second opinion, the better practice is for the lateral partner to pay for the second opinion out of their own pocket.

The above scenario presupposed that the lateral partner asks the firm about the existence of malpractice actions as part of the partner’s due diligence process.  If the partner doesn’t raise the issue, the firm should make appropriate disclosures that are increasingly detailed.

The firm’s disclosures should generally mirror the details provided by the lateral partner.  Thus, for example, if the firm concludes after reviewing the LPQ that this candidate isn’t worth pursuing, the firm need not make any disclosures regarding actual or threatened malpractice actions.  When the firm concludes that there is a good probability that they will make an offer, they can disclose the existence of the malpractice action(s) in general terms.  This initial disclosure might not include the names of the parties to the malpractice actions or details about the underlying allegations.  If it appears that partner is seriously considering agreeing to terms, the firm should offer to disclose more detailed information about the underlying malpractice claims and their merits.

Firms may resist making such detailed disclosures for fear that the lateral partner may back off or that they will need to address the issue of whether and under what circumstances to indemnify the new partner.  A firm can of course offer to defend incoming lateral partners should they be named to existing malpractice actions.  Such agreements don’t, however, bind the plaintiffs in the malpractice actions.  Thus, lateral partners can’t eliminate the risk that they will be added as a party to the malpractice actions.

If discussing the scope of indemnification causes sounds like it could be stressful and tedious, it can be.  But if the firm and lateral partner aren’t willing to discuss malpractice actions openly, this may be a sign that they aren’t destined to be successful business partners.