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To Leave or Not to Leave your Law Firm

By Edward Poll, November 2008
 
LeavingTo achieve a successful law firm, its members need a fundamental reason for working together. Lawyers who physically share the same office environment should share common goals and agreement on how to achieve them. Lack of such an outlook, sooner or later, means the dissolution of the firm in its current form when one or more lawyers decide, “I no longer want to work here.” And in recent times, we’ve seen many very public departures.

Alienation

Sometimes the source of the disagreement is financial. People will accept less than the top compensation they could attain if they like the colleagues with whom they work. While money must be competitive, other factors can come into play, such as the exchange of ideas and the education of one lawyer by another. Lawyers who are together physically in an office environment share a camaraderie that shapes the development of a firm’s culture.

However, in many of today’s geographically diverse megafirms, partners are that in name only. The governance of these large firms has fallen to a very few in the organization (“the management committee”). The remaining partners often have little interaction outside their own practice areas. Other parts of the law firm business model – such as outsized compensation for rainmakers, and the “eat ’em up and spit ’em out” mode of using associates – can contribute to a sense of alienation.

But such alienation can come in small firms too. One of my clients was just such an example. She was not a partner in her firm and was driven to distraction by a partner who was both arrogant and a bully. The other partners, however, were nice enough; my client was not certain she disliked the “bad” partner enough to leave the firm and go through the expense and hassle of starting her own practice or to look for a new firm. The “nice” partners had created a problematic environment. They continued to tolerate the abusive partner, and they made no effort to involve others in the life or management of the firm.

The economics of the firm so far as billing and client development went were such that, even if my client were to become a partner, she likely would still be able to make more money at another firm. With no shared value system at all at this firm, there was ultimately no valid reason to stay. During our coaching sessions, we developed an analysis to help her decide her future course of conduct.

Assessment

This example illustrates the framework for making a decision to leave. It involves analysis of three threshold levels, in ascending order, as a way to decide whether to leave a firm:

  • Threshold One – Personality: Do you like the people you work with?
  • Threshold Two – Economics: Are you earning enough money to make staying worthwhile?
  • Threshold Three – Values: Does the firm take a shared approach to compensation and clients, or is it every lawyer for him- or herself? And is the firm culture inclusive and friendly?

Even if, after such an analysis, the decision to leave seems clearcut, that’s not to say it would be easy. Leaving a law firm is an emotional process. You must want to do so, and believe you have no other alternative. Even if you are going to another firm, a successful transition will require all the traits of an entrepreneur: motivation, acceptance of risk, resiliency, commitment and persistence.

A good approach to finding out if you have what it takes is to do a SWOT analysis (strengths, weaknesses, opportunities, threats) of yourself and your practice to make certain that you’re ready and have the capability to move on. Any such analysis will, to some extent, be subjective, but it does create a structured framework for planning. You must decide what you want to be, what you want to do, and where you want to do it. 

Anticipation

There are other things to consider when leaving. For example, lawyers often expect to continue client relationships when leaving for a new firm or to practise on their own. Although clients can request copies of their own files, the departing lawyer cannot do so with the explicit intent to use them for taking clients from the firm. But what if the intent is more innocent, such as wanting to have a body of reference, and convenient forms from which to commence new work for new clients in a new law firm?

The answers are mixed. In some instances, even if the work product was personally created by the lawyer, the copyright protection may attach to the documents and reside with the law firm. The law firm may own the copyright to work product in the case where employees (associates) are creating content as part of their job; it may not in the case of partners; as part owners, they may have a “piece of the action” as an asset of the firm, unless the partnership agreement provides otherwise.  Another concept to review is whether the copyright belongs to the client. Here, one could use the “work for hire” concept in which the person for whom the work is created is the owner of the copyright. But, also, see Rules VIII and XII of the Canadian  Bar Association’s Rules of Professional Conduct. Files and their contents always belong to the client, not the firm or a departing lawyer. Client permission is needed to move a file and it is ethical to suggest that a client make that request if the client’s intent is that the relationship with the departing lawyer will continue.

As for ownership of the copyright or the rights to the content of the work product, planning ahead both in terms of the initial engagement agreement and the partnership agreement would alleviate most questions on this subject. If you know you will be leaving, prepare your own personal files to identify non-firm work product. Develop the list of clients you know will be following you so that you can identify their related files. Plan your file transfer well in advance, because when you announce your intention to leave your current firm, the relationship changes immediately, and that which was readily available may no longer be. You will need to plan for the transfer of files and for their storage (active versus closed).

Bear in mind that the client and matter files you would like to take, even for clients who will be following you, and the ones you ultimately do take may not be the same. Prepare the list and the rationale for what you think reasonable to have. Being up front and seeking agreement is better and always the safest bet, especially if there is any possibility of getting future referral work from your old firm.

Adaptation

Even with this kind of planning, if you do make the decision to strike out on your own, be prepared. It can take five years to get enough new business to be stable enough to continue. These are issues that any lawyer looking to start a new firm should keep in mind.
 
Finances

Managing money is your number-one consideration for success in a new firm. Practice needs should always be met first, and personal needs should be the minimum expense necessary to maintain a standard of living.

It’s essential that your new law firm should not be a bank for clients. When you bill clients, you are extending them credit. Lax collections mean you need more cash to stay in business while waiting for clients to pay. The new firm that stays on top of receivables will have the cash to survive and grow.

Infrastructure

Bricks and mortar, computers and software are essential to the new firm, but choices should reflect practical analysis and decision.

Office space, for example, will tell clients and lawyers about the kind of firm you are. Lower real estate costs exemplify a firm sensitive to client needs (since lower overhead could well translate into a lower fee structure). Yet the office must portray the image your clients will expect of you.

The same applies to technology. New solo practices should avoid substantial spending on new computer hardware and software. A beginning practice can start with a refurbished laptop or PC, or skip Microsoft Office and Outlook and go with open source software and a free email management program. Any such tactics can give the benefits of technology to a lawyer newly in practice, without the big initial expense.

Marketing

A marketing plan doesn’t have to be complicated. Identify the people most likely to hire you for the work you want to do, communicate with them to let them know who you are, and then build close relationships with these people to help them achieve their goals.

Develop a profile of your ideal client and craft a marketing strategy that focuses on this target, not everyone. You can increase your revenue dramatically by focusing on clients who will give you the work that you want.

New law firms build loyalty by communicating frequently, offering something that competitor firms don’t or can’t, and creating something new that clients need or want. Providing solutions gets attention – and gets rewarded.

If this analysis of leaving a firm and starting anew has one theme, it’s that the lawyer taking this step must make a commitment to success. Expressing “success” in relative terms such as “more revenue” or “greater satisfaction” sets a subjective standard that is difficult to achieve.

The truly successful person wants and needs a target to aim at. To successfully leave a firm, know what you want to do, who you want to be, and how you will provide your clients with value. Doing that increases the odds that you are leaving the past for a better future.

Edward Poll (edpoll@lawbiz.com) is a certified management consultant and coach in Los Angeles who coaches attorneys and law firms on how to deliver their services more profitably. He is the author of Attorney and Law Firm Guide to the Business of Law: Planning and Operating for Survival and Growth, 2nd ed. (ABA, 2002), Collecting Your Fee: Getting Paid from Intake to Invoice (ABA, 2003) and, most recently, Selling Your Law Practice: The Profitable Exit Strategy (LawBiz, 2005).

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