Top 5 Reasons to Why Partners Move Law Firms and What to Consider When Moving

We hear from John Hayes, who has offered thought-provoking insights to Lawyer Monthly before, on why partners move law firms and how they can improve their working lives.

As an employment lawyer, I am fascinated by working culture and, in particular, why partners decide to move firms. More and more partners are deciding to change firms and I list below the main reasons for doing so. At Constantine Law, www.constantinelaw.co.uk we advise both law firms and partners on the opportunities and risks involved in leaving law firms. We begin by considering the risks of leaving a current firm before describing how innovative law firms are creating new opportunities for partners.

1. Leaving isn’t easy

It is no easy process for a partner to decide to leave their current firm: at the very least, it requires doing two jobs at once (the day-job and the search); explaining to clients the rationale for leaving; and negotiating one’s way out of the current firm, to the new firm. This involves consideration of restrictive covenants and, frequently, complicated pay variables such as repayment or retention of bonuses and delayed equity release.

A wise partner once told me “everyone is their own worst counsel”, and I promptly engaged his services! This maxim is correct: we may be lawyers but even we are blinded by complicated notions of self-worth and self-interest. Further, some situations are complex and require external advice: what do you do, for example, if your firm instructs you not to communicate to a client that you have resigned, but where (as in my client’s case) there was an important High Court deadline which indicated that it was in the client’s interests to be so informed? How is one to reconcile the potential conflict between the overriding duty of good faith to the firm against the professional obligation to act in the best interests of the client, at all times?

The answer is to seek appropriate advice and we explain the benefits of this, including potentially a “privilege wrapper” below.

My other strong view is this: frequently the worst does not happen. Partners do leave firms and every firm is, from time to time, both a poacher and a gamekeeper. Partners need to be mindful of their professional obligations, but they are rarely injuncted. I say this because frequently the best advice is tactical and strategic. I know of one potentially legitimate team move which was torpedoed because the partners concerned went straight to a leading QC, who gave them a very conservative interpretation of the LLP Agreement such that they were scared witless to proceed. One of the partners sat in their car, after that meeting, in tears. Another backed out of the proposed plan entirely. My advice is that smart advice, taken early, can result in a more practical way forward.

2. Main Reasons for leaving

At Constantine Law, we frequently see partners leaving law firms. We are advocates of change, provided that a partner is leaving a firm which is not properly supporting their practice and moving to a firm which is better aligned to it. In our experience, here are the Top 5 reasons for wanting to leave a law firm.

(a) Pay

Who is affected? Typically, high performing “fixed share” partners and well-established partners carrying underperforming practice areas.

Partners should earn the majority of what they generate in billings. I have written previously that the traditional 1/3rd, 1/3rd, 1/3rd model is broken because, at the very least, the middle 1/3rd is accounted for in overheads which cannot be justified in the truly modern firm. Law firms need to take advantage of the current IT revolution, improved outsourced service providers and new management techniques, to drive down costs and improve pay.

High performing fixed-share partners are treated particularly egregiously because they are relied upon as the “worker bees” to generate fees for their firms on the promise of “jam tomorrow”. In the main, the promised nirvana is just that: a far-off land forever glimpsed just over the horizon.

In such circumstances, a partner should seize control of his/her destiny and work in a structure which allows them to take-home at least 66% of the fees generated. This is what we do at Constantine Law.

(b) Merger

Who is affected? Experienced partners in the smaller firm who, typically are “cannibalised” by the partners in the bigger firm. Frequently, new ‘super departments’ are created which are top heavy and which create casualties. More often than not, the culture of the old firm dies, and experienced partners are less willing to put up with a new management culture.

If this happens, partners are encouraged to ‘seize control’ and to have faith in their followings rather than make the unworkable, work. Again, new firms can be better aligned to a given partner’s client followings.

(c) Boredom

Who is affected? Typically the experienced partner who, having worked as a lawyer for 20+ years, and who has made some money, seeks a new challenge. My strong advice is that “we are only here once” and too many partners in large and medium sized firms are simply batting out time. The ‘bored’ partner will be a poor manager of people and an even worse work-generator because both aspects of the role require huge elements of self-motivation and commitment.
The solution is to seek a new challenge so that a partner is motivated to do work and win work in a new environment. The consequences of not seizing the initiative will be damaging both professionally and probably, personally.

(d) De-focus

Who is affected? Any partner who finds themselves in a firm where there is no longer sufficient focus on their practice area. Where this happens, it will be very difficult to achieve senior equity partner ‘buy-in’ to invest in the practice area. This will limit the practice area to hire new staff and action marketing initiatives. Where this happens, partners should leave because the alternative is a “slow-death” of their practice area. I have witnessed this in a number of national employment law departments over recent years.
The solution is either: (a) to move to a bigger firm where there will be more money to invest in the practice area; or (b) to move to a high performing boutique which only focusses on the practice area in question. This is more possible for some practice areas (e.g. employment and family) which are less reliant on support from other departments.

(e) “Playing Up”

Who is affected? The ambitious partner at the mid stage in their career who believes that their current firm has become too “small” for them. They perhaps seek more cross-departmental support and, certainly, more pay.
This move will have to be handled carefully and advice taken because the outgoing firm will often be sore about being told that they are not good enough for the partner concerned and restrictive covenants will be engaged.

3. The Bottom Line

Ultimately, partners need to work in a firm which supports their personal brand and that of their clients. I have seen a very difficult team move of a leading corporate real estate practice join a leading PI firm with all sorts of day-to-day challenges in terms of aligning that practice with a non-aligned national firm. Ultimately, it did not work, and all those partners have now left.

Against this, at Constantine Law we have hired four leading employer-focussed partners during the past two years because they want to be supported by an entrepreneurial platform which their clients understand. The result is that each of these partners has won new work and created new opportunities because they are now working with a firm (note, not “for” a firm) which allows them to prosper.

4. Seeking Advice

For the reasons set out above, there is far more churn in partners leaving law firms, particularly in London. More often than not, partners are more inclined to seek external legal advice and they should do so, for three very good reasons: (1) everyone is their own ‘worst’ counsel (see above); (2) the benefit of legal professional privilege and the creation of joint interest privilege (a “privileged wrapper”) between the lawyer and their new firm (with their new firm frequently being prepared to contribute towards legal fees). This ‘privilege wrapper’ can, potentially extend to the recruitment agency assisting the departing partner; and (3) the value of a ‘following’. Would you advise a client who faced a high six figure/low seven figure risk (often more if billings are averaged over 3-5 years), not to take independent advice?
For all these reasons, partners should take appropriate advice early and be prepared to move with confidence.