Don’t fear the rainmaker

If you’ve spent much time in a law firm, especially in any kind of managerial capacity, you’ve probably run into the steel barrier to change known as “The partners don’t want to do it.”

Sometimes, it’s as simple as “One partner doesn’t want to do it.” And the more powerful the partner, the more successful will be the resistance to any given initiative, especially one that seeks to change anything important about how the firm operates. Our standard response to this resistance tends to be a fatalistic shrug: the partners own the business, so they have the power to do what they want with it.

I’ve had a number of conversations of this type recently with law firm leaders and managers, and it’s led me to reflect on a subject we don’t talk much about: Power in law firms. Who really holds it, and who doesn’t? How is it actually used, and why? And is it time to re-examine some of our assumptions about how power is deployed within law firms? This post tries to consider these questions and suggests that we should answer the last one in the affirmative.

1. The Source Of Law Firm Power

Where does power reside in a law firm? And what is the source of that power?

Power, of course, resides within every company and organization — the power to shape the organization’s external strategic decisions and direct its internal tactical maneuvers. In most organizations, that power is explicitly defined and formally arranged in ways that make its effective exercise possible. The company CEO can do certain things; the board of directors can do certain things; the majority shareholders can do certain things. Not only can they do these things — they are expected to do these things. Part of the deal with having power is fulfilling the responsibility to use it.

I never fully bought this. What, if you have no power, then it’s hakuna matata?

In this respect, as in many others, law firms are odd beasts. Power in law firms is more diffused and informal than in other organizations. Almost all firms have a managing partner, but this person is normally considered first among equals, and nobody (including the managing partner) imagines that he or she wields actual authority over other partners. In some law firms, the managing partner, far from being chosen for his or her authority and decisiveness, seems to have been selected for his or her geniality and disinclination to interfere with the affairs of others.

Within the firm’s practice or industry groups, much the same applies. Leadership often falls to the lawyer with either the largest book of business or the strongest reputation — but the actual position of Practice Group Leader doesn’t normally confer much real power on a partner who didn’t already possess it. I wouldn’t go so far as to call formal leadership roles in law firms “ceremonial,” but I don’t think they’re that far from it.

Now as noted above, in pretty much every law firm I’ve encountered, it’s assumed that power resides with the partners based on their “ownership” of the firm, the equity stake they hold in it.

But something doesn’t quite add up here. Every equity “stake” in a law firm is, strictly speaking, equal. In a law firm of 100 partners, each partner technically has a 1% equity share in the firm. No shareholder possessing a 1% stake in a company would try to exercise veto power over the company’s strategic direction or tactical decisions. And if he or she tried to exercise such a power, the company would laugh off the effort.

Yet most law firm partnerships contain a handful of lawyers who can and do launch, or halt, any initiative they like, and everyone else acquiesces to their desires. Let’s suppose a law firm in which Partner A receives ten times as much money in compensation as Partner B in a given year, and is unquestionably more powerful than Partner B within the firm. This is not because Partner A holds 10 “shares” in the law firm to Partner B’s single share: they each “bought into” the firm with a roughly equal investment of capital when they were admitted to the partnership. So the simple fact of equity ownership itself can’t fully explain where real power is located.

Alright, so does real power reside in the ability of a partner to generate revenue? This seems to reflect conventional wisdom: the more money you bring into the firm, the more power you exercise. But here too, there are gaps in the reasoning. A senior associate or non-equity partner might bill as much revenue, if not more, than your average partner. So if the generation of cold, hard cash was the key to power, then the leveraged labourers deep inside the pyramid would be the ones running the place. As we know, they are not.

So maybe power really resides in the ability to bring to the firm clients with paying work. This is closest to the reality in most law firms: the people who “control” the firm’s relationships with its biggest or most important clients are the real power brokers. If a partner who controls key client relationships wants something, that partner will get it. If he or she doesn’t want something to happen, it doesn’t happen. There are only a small handful of such people inside each firm, and these are the people who possess real power.

We call these partners “rainmakers,” which is a lovely word, about as close to poetry as most lawyers get. But you know what rainmakers are called in the rest of the world? “Salespeople.” That’s really the essential nature of who they are and what they do. And law firms are the only business I can think of where the salespeople effectively run the company.

2. The Exercise of Law Firm Power

So we’ve established, as a proposition at least, that top salespeople possess and wield most of the power in law firms. If that’s the case, then here’s a follow-up question that interests me: How is that power exercised in practical terms? I mean, how is a salesperson going to wield power over you: sell less? That would be at least as harmful to the salesperson as it would be to you. Sell more? “Do what I say I or I’ll make more money for you” isn’t much of a threat.

No, the nature of a law firm salesperson’s power is entirely one-dimensional, and it is this: the power to leave. “Do what I say or I’ll take away all the client business I’ve been giving you and give it to another firm instead.” That is the threat, sometimes explicit but mostly implicit, hovering behind the law firm salesperson’s power.

At many firms, this threat is considered to be quasi-existential: a salesperson who controls a significant amount of business generation for the firm could badly damage or even kill the firm if he ever left, so we’d better let him do whatever he wants. That is the source of power in a law firm: the threat to leave the law firm and take away its lifeblood.

Now, you know what’s interesting about this power? It can only be exercised once.

A salesperson’s threat to leave a law firm is a nuclear option, and once it’s deployed, then there’s no turning back: either he goes, and the power is used up, and everyone else is left to carry on as best they can — or he stays, and the threat is forever extinguished, because it turns out he was bluffing, and his power dissipates. Everyone else in the firm fears the salesperson’s power to leave — but what they don’t fully appreciate is that this is a non-renewable power source.

If you’re a top salesperson in a law firm, the nature of your power is not “Use it or lose it.” It’s “Use it and lose it.” Once you exercise this power inside the firm, then it’s gone — because whether you stay or whether you go, everyone in the firm knows you no longer have any power over them.

What if the other members of a law firm no longer feared the rainmaker? What if, instead of folding when the salesperson raises high, they called and demanded to see what was in his hand?

One of two things is going to happen. The first is that the salesperson will leave. Or at least, he’ll try to leave: he’ll put the word out among rival firms (if he hasn’t already), see whether any landing spots are amenable to him, try to negotiate the best free-agent deal he can get, and walk out the door, along with any other personnel he can coax and as much business as he can stuff into his briefcase.

And how much business will he actually walk out with? Acritas recently surveyed a wide range of partners who had laterally moved from one firm to another. Those partners had expected that about 70% of their client business would move with them to their new firm. You know what percentage of business actually moved? Exactly 27%.

When a salesperson leaves a law firm, according to Acritas, what typically happens is that almost three-quarters of the client business that they supposedly “controlled” decides to stay with the original firm. And what I’ve seen and heard is that in firms where a major salesperson has left, the firm’s junior partners frequently move up into the departed partner’s space, and the firm no longer feels like it’s being held hostage by one of its partners. I’m not saying, to be clear, that this will be the happy result every time. But more often than not, the threat of a departing salesperson turns out not to be existential after all.

And that’s what happens if the salesperson goes. If he or she stays, then the bluff has been called, and this person won’t be able to exercise that power again to the same degree.

3. The Reality of Law Firm Power

Here’s what I think: the conventional wisdom about power in law firms is wrong. The people who everyone believes have all the power can’t afford to use it — because once they do, either they’re gone, or it’s gone — and in both cases, they no longer wield power within that firm.

This shouldn’t actually be surprising to us. Real power in a business or organization has never been the power to threaten or take away or destroy — it’s the power to act, to build, to accomplish. Rainmakers’ power, salespeople’s power, is of the first type — the power of the bully, the bluffer, the threatener.

It’s getting kinda hectic.

You, right now, in your law firm, have it in you to assert power of the second type. I think that real power in a law firm is basically lying around waiting for someone to use it. Like the sword in the stone, it belongs to anyone who’s willing to grasp it and try to wield it. Real power in a law firm belongs to those individuals who assert that the interests of the firm outweigh the interest of one or two salespeople — and who are willing to stand up to these salespeople and challenge them to use their singular power, and thereby lose it.

Again, I’m not saying there are no risks to challenging a top salesperson and daring them to leave; it would be foolhardy to make this your standard management practice. But the fear of losing a top salesperson keeps most firm leaders and managers from even trying to assert institutional power. You can’t run a business in fear of your own salespeople.

I think power in the average law firm resides with its top salespeople only because everyone else in the firm believes that it does. Once you stop believing that — once you decide that positive power is greater than negative power, and that you can exercise power of the second type through the courageous assertion of the best interests of the firm — then everything about your firm can change.



5 Comments

  1. Betsy Munnell

    Jordan–what is your take, however, on all the lateral movement we see in large firms. It strikes me that many of the people jumping are in fact in the rainmaker category, walking away with both business and human capital. Once they get to the next firm they may or may not be properly onboarded–usually not, then they sit tight with arms clutched tight around the clients, junior partners, associates and assistants they brought with them, waiting to see if they need to move again. They’ve used the power once, and remain poised to use it again–perhaps ineffectively. Not again. Thoughts on how this fits with the no-bullying approach that would for most partnerships–you are right–make for a better firm and better culture.

  2. Jordan Furlong

    Betsy, thanks for your comment and question! I think the lateral movement we see in law firms is explained principally by two factors:

    1. Law firm strategy is driven by an appetite for more clients and more revenue, and lateral hires promise to deliver both. Most partners give the subject no more thought than that — they sign off on the lateral hire and go back to billing hours.

    2. Until recently, there has been no data to confirm that trying to grow through lateral partner acquisition is a mug’s game — even though anecdotally, most MPs recognize the pointlessness of the strategy even as they’re caught up in the herd instinct to poach wherever possible.

    That’s why the Acritas findings are so important, to my mind — we can now break the supposed automatic causal link between lateral acquisitions and business growth. Considering that many laterals are poached through the promises of higher compensation than they enjoyed at their previous firm — compensation levels that invariably outstrip the value of any new business they do manage to bring — then the counter-productive nature of most (not all) lateral acquisitions should become clearer.

    Mind you, I’m counting on law firms being willing to learn new information and change their behaviours based thereon, and that may well be too much to ask. Find me a law firm that has actually run the numbers on the degree to which their lateral partner acquisitions actually increased the firm’s profitability, and I’ll be surprised if they keep diving back into that pool.

    But the larger issue, as you point out, is that a rainmaker who leaves one firm for another gets to renew his “nuclear option” and is poised to repeat the process at the new firm. For myself, I wish this lawyer nothing but success in his game of lateral hopscotch across as many gullible firms as he can find. Considering that he’s losing (on average) three-quarters of his book of business with every hop, it’s anyone’s guess how long he can prolong the game. But if that’s what he (and it’s usually a “him” who’s pulling this stunt) wants to spend the highest-earning years of his career doing, and if he can keep finding firms to enable it, then more power to him.

    But my concern is not really with this lawyer, but with the firm he’s left behind. Because, as you say, we’ve been through almost a decade of lateral partner hopscotch across law firms. And yet, I don’t know of any firms that have been wrecked or collapsed principally because some key rainmakers resented infringements on their autonomy and jumped for better offers from elsewhere. Indeed, many of the cases of law firm collapse over the last several years occurred among firms that *hired* tons of laterals, often to unrealistic and unsustainable pay packages, with what turned out to be catastrophic results. Some firm collapses have indeed been tied to key partner departures — but many such departures were the final symptoms of a breakdown in confidence and identity within the firm, not the primary cause of it.

    If lateral partner departures were really so deadly to law firms, then two-thirds of the AmLaw 200 should have disappeared by now. The fact that they haven’t suggests, at the very least, that such departures are not fatal. And they might even be positive, if the firm opens new opportunities for younger partners and rids itself of a cancerous personality in the process.

    What I want law firms to understand is that they can and should stop ceding power to rainmakers simply because they’re afraid the rainmakers will bolt. It’s my belief that if a key client relationship partner is willing to leave because the firm wants to assert some institutional capacity and is asking him to cede some small part of his autonomy to enable that effort, then the firm should let him go. Because if he doesn’t go today, he’ll go tomorrow or next week or next year. It’s a matter of when, not if, because he’s made it perfectly clear that he cares nothing about the firm and everything about himself. People like that are littered throughout the upper echelons of major law firms, and they set the tone and shape the culture for everyone else, to everyone’s detriment. Losing someone like that is, at worst, a double-edged sword.

    I want law firms to have more confidence in themselves. I want them to believe not only that power is available to be picked up and wielded for the good of the firm, but that the firm’s long-term survival depends upon it. I don’t care how fearsome and formidable a rainmaker might be — someday he’ll be gone, and the firm will have to get along without him. Someday, the firm will need to stand on its own institutionally. That might as well be today.

  3. Norm Letalik

    Jordan,
    Great post on the important topic of power within professional services firms! Dr. Laura Epsom’s work in the UK on power within professional service firms supports much of what you are saying. Your readers may be interested in a 20 minute video of a presentation by her, which is found at: https://www.lauraempson.com/insights/leading-professionals-power-politics-and-prima-donnas
    I recall that many years ago, there was a study of professional service firms that found that if one partner left, then it was rare that the partner remained a star at his/her new firm. If a team left with that partner, then most of the work moved, and if the whole department left, then essentially all of the work moved to the new firm. In short, it is not just the rainmaker, but also the team that then successfully performs the work that must move for the work to move with them.
    Regards,
    Norm

  4. Mike O'Horo

    The question that is regularly ignored about lateral movement, by both the origin firm and the destination firm, is, “Does he or she have the skills to replace the 73% she leaves behind?” Earlier data shows that, two years after a lateral move, the lateral is likely to have left Firm#2, which suggests the answer to the replacement question is “no.” I’m guessing that the lateral left Firm#2 just ahead of an uncomfortable accounting that would have shown them short of expectations, especially in light of a heavy comp package. Getting out of Dodge before the sheriff shows up.


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