Anyone who has read Calvin and Hobbes knows that Calvin is not really lying—what he is doing with his flame thrower is managing perceptions. Lawyers and law firms, much like Calvin, are adept at managing perceptions and expectations and recognizing those circumstances where it is important to do so. Lateral recruitment is one such area where these skills are important. It thus came as no surprise that the interviews conducted with lawyers, managing partners and indeed even legal recruiters for this article were resplendent with flame throwers.
Nonetheless, the purpose of this article is not to flush out monsters (real or perceived) from underneath law firm beds. The purpose is to help readers better understand the professional dynamics and dollars of lateral moves and, given the reality that such moves are here to stay, provide some concrete advice about how best to manage the process. In the end those we interviewed, trusting that our intent was constructive, provided valuable insight about what is happening around lateral movement and how firms and lawyers can best respond.
There Are Monsters Under the Bed
“Lateral moves are here to stay,” declares Adam Lepofsky of RainMaker Group; the first individual interviewed for this article. Lepofsky’s emphatic declaration was echoed over and over by each person, search professionals, managing partners and laterals, subsequently interviewed. “We may just be past the pioneering days of it here in Canada,” says Christopher Sweeney of ZSA Legal Recruitment, “but it is a well-established part of doing business in the U.S. and U.K.” It may still be early days in Canada (eight to ten years according to Sweeney and others), but it is already driving law firm growth strategy. It is a viable alternative to organic growth. Indeed, in a number of important emerging practice areas, client demands do not permit the luxury of organic growth. “In a merger, the acquiring firm has to take everyone” says Lepofsky. “In lateral recruitment you can be more selective.”
There is also no question that lateral recruitment is a market practice strongly influenced by economic considerations. In a strong bull market, more people are recruited to fill sudden growth needs—niche specialists and young corporate talent at the associate level are particularly in demand. Also, as the recruitment wars of the late 1990s through to 2001 illustrated, the moves are not just cross-firm, but cross-border as well. Top U.S., particularly New York and California law firms, and U.K. law firms appeared to have an insatiable appetite for young legal talent from this country. Demographic and economic cycles being what they are, this threat will certainly return. Given Canada’s demographic profile of low birth rates and high boomer retirement, it is likely to return with considerably more bite.
In the current market, however, associate recruitment has nosedived. While there always appears to be, among some of the top-tier firms at least, a market for razor-sharp, entry-level legal talent, there is significant over capacity at most of the major firms. On the other hand, senior or mid-level laterals, and in particular high-performing laterals, are another matter. Firms are looking for and cherry picking laterals who can add immediate value.
Why? In two words—change and client needs. “Clients want and need multijurisdictional services,” says Larry Pringle of Baker & McKenzie in Toronto. “And as the law firm model for success moves ever closer to the business model, so too the emphasis on performance. People who can add value will continue to be sought out.” Pringle is a corporate lawyer with significant international experience who Baker recently poached from U.S.-based Dorsey & Whitney LLP. “Clients today are looking for seamless legal services,” says Jim Christie, chairman of Blake, Cassels & Graydon LLP. “Whether they are already established in Canada or bringing business into the country that requires a variety of legal services, that adds up to platform.”
On a more specific issue, Carol Fitzwilliam of Shore & Fitzwilliam, legal recruitment consultants, points out that firms are now confronted by the consequences of short-sighted recruitment decisions made during the recession of the early 1990s. “There are some significant talent gaps,” she says, “because firms chose in previous slow economic times not to hire. Now 10 to 13 years later there is a real need within firms for lawyers of that generation/vintage to assume key leadership roles. This is not a gap that’s about age, but more fundamentally about experience.”
Aside from major changes within the economy and firms themselves (becoming more business- and market-focused), it is also apparent that culture is becoming a significant factor. “Women will be attracted by female role models or colleagues,” notes Lorene Nagata of Marsden Nagata Legal Search Ltd.; as was Cathy Singer, who recently left Fasken Martineau DuMoulin LLP to join Ogilvy Renault in Toronto. “I have a good friend at Ogilvy,” she said, “Ava Yaskiel. She was the first woman lawyer here and told me a lot about the place.”
Platform and Culture
They come for platform and leave because of culture. So says Gary Luftspring, managing partner of Goodman and Carr LLP, and Jim Christie at Blakes. While individual reasons for moves varied, these two factors, i.e., platform and culture, surfaced most frequently.
Duncan Card is an excellent example, he left Lang Michener in 1997 to go to Davies Ward Phillips & Vineberg LLP, and then moved from Davies Ward to Ogilvy Renault in 2002. “When I left Lang Michener to go to Davies,” he says, “my area of practice [technology related business transactions] had outgrown the firm. I wanted to be in a tier-one firm with a strategic forum.”
Card adds that he made one of the classic mistakes of laterals who act for themselves. His due diligence of Davies as a “fit” for his practice was insufficient. “And so the difficulty I encountered at Davies,” he explains, “was its lack of a full commercial knowledge-based platform. I found that it had a small litigation group, no intellectual property and no employment, all essential in supporting the kind of work I do. When Ogilvy Renault approached me and talked about their strategy and platform, it felt literally as if I was looking at myself in a mirror. The extent of the fit was unnerving, right down to my first visit to the Montreal office where three separate partners said ‘welcome home.’”
The moves of Richard Orzy and Kevin Zych touch on other important aspects of platform and culture. “McCarthys was so large and present in so many places,” they said, “that we found ourselves conflicted out of 65 per cent of work we knew we could have had. We were systematically being excluded from the biggest and most interesting files.” In terms of culture the expansion of McCarthy Tétrault LLP’s national platform made them feel that it was no longer the firm they joined. Importantly, both Orzy and Zych felt that their area of practice was viewed as less mainstream. “Corporate is too often viewed as the darling of large firms,” they say. Bennett Jones LLP assured them that their risk of conflicts would be significantly reduced. Also, both found the smaller size of their new firm, largely comprised of other laterals, to be refreshingly flexible and open. “When everyone comes from a variety of other leading firms,” notes Orzy, “there are no preconceived notions. It forces everyone to consider new best ways of doing things. That generates real synergy.”
“People usually leave for a cluster of reasons that combine personal and professional,” says Anita Lerek of Advocate Placement Legal Recruitment. “They see a firm with more challenging files or their mentor, a rainmaker, has gone over to another firm,” says Nagata.
The “fit” of one’s practice along with personal goals and values were cited by many laterals, including John Tobin who left Borden Ladner Gervais LLP in Toronto to join Torys LLP. “After many hours of meeting with senior lawyers in my area of practice and others,” says Tobin, “I was left with eight significant points that I was looking for. I worked through them with Les Viner and other partners. For example, I naturally wondered about the experience of other laterals at Torys. So they sat me down with another lateral, Jamie Scarlett from McMillan Binch. The real turning point for me, when I felt the fit, was when Les Viner and others acknowledged my entrepreneurial style and made me feel that it would be an asset at Torys.”
Les Viner, managing partner of Torys, provides the following explanation of “fit”. “Unlike 10 years ago, firms today have clearly articulated strategies. Consequently, firms today choose different paths. At Torys our focus, as it is at many firms, is building long-term, loyal client relationships. But our niche is the expertise we bring in all of our areas of practice where there is an interplay of U.S. and Canadian law. Lawyers whose practice interests and client needs “fit” this strategy are attracted to us and we to them.”
Chris Grasset, who left and then returned to Goodman and Carr, raises another important consideration. “In 1992, when I left Goodman and Carr, technology law was new and very much a sideshow. I simply was not in the centre of things, which made it difficult to build my reputation. Even within the firm, it was a hard sell to get other partners to cross-sell and refer me to clients. One of the key reasons I left was to establish myself in the centre of technology law.” By the time Grasset returned to Goodman and Carr, technology law had moved closer to centre stage in the firm’s strategic focus and client needs.
Serial Monogamists?
More likely, the threat of multiple moves is just one more flame thrower. The U.S. and U.K. legal press are full of stories with such titles as “Itchy Feet” or “The New Disloyalty”. “Loyalty is dead” is the new mantra and, as law merges with business in a fast-paced market (down or up), there are more and more lawyers out there, we are told, who have no compunction about successive moves to rapidly advance their career.
It is unlikely that multiple law firm moves, in the sense of three or four plus, will become the norm in Canada. Aside from the shock value of titles from articles in the U.S. and U.K. legal press, and perhaps the moves of some celebrity-type personalities, it is unclear how frequent multiple law firm moves are in the U.S. and the U.K. None of the interviews conducted for this article pointed to any inevitability about multiple moves. And this makes sense.
The principal legal markets in Canada, i.e., Toronto, Montreal, Calgary and Vancouver, are relatively small ponds. There are a limited number of places to go. More importantly, lawyers know many (often most) of the players in their field. Combine this fact with what we know about the personality and motivational make-up of top performing lawyers (see “Canada’s Top 25 Corporate Litigators,” “The Top 40 Under 40,” and “Canada’s Top 30 Corporate Dealmakers,” in the July/August, September and November/December issues of Lexpert, respectively). The almost one hundred lawyers interviewed for these previous articles are fiercely independent but they are also, according to our research, extremely interconnected. They are motivated by intellectual stimulation from/with people they respect and admire. Professional colleagues are at the top of their list for people they like to interact with. They are also highly motivated by respect from their peers. Finally, as a group, they are not big risk takers. On a personal level many seek (crave) to balance the dynamic pace of their work with stability and comfort in their professional and personal relationships. Many, for example, have had the same secretary and spouse for 20 plus years. This is not the group profile of a profession about to embark upon serial monogamy.
Regrets, We’ve Had A Few
Loyalty is not dead. The point made repeatedly in the interviews is that “blind loyalty is dead.” “It’s not about loyalty,” was a point emphatically made again and again. The bottom line is that talented, hardworking professionals want to situate themselves so that they can do the best for themselves, their clients, and their firms—that’s what loyalty is about today. A firm culture and strategic focus that values what they do and facilitates accomplishment of these objectives will have no problem with loyalty.
While none of the lawyers we spoke to regretted their decision to leave their previous firm, most did have regrets about the goodbyes they had to say. “It was like leaving family,” was a frequent comment. “Telling Sean Weir and my other partners was one of the hardest things I have ever had to do,” said Tobin. Asked about the most significant thing they gave up (prices paid) for their move, this was clearly it, in spades. These people are not disloyal, they move in spite of strong loyalty ties. The average decision-making period, (even when the decision to leave had clearly been made) was anywhere from five months to two years. Many people leave spouses with less thought.
Larry Pringle and others interviewed for this article, view professional loyalty in a similar light as family and marriage loyalty. “The concept of loyalty has changed,” Pringle says. “Blind loyalty is gone. Loyalty in this profession is the same as in a marriage. It is built on give and take. It’s a two-way street.”
Money is Funny (Part 1)
As a key variable that influences whether a person will leave or stay, it is not what it looks like on the surface, probably because money is representational of and tied to deeper factors. For example, most lawyers have a highly-tuned sense (and value) of fair play. They may be working away contentedly in their firm until/unless one day they discover that their firm’s profitability and compensation structures are out of whack. God forbid they should simultaneously find out that their colleagues (some of whom they feel are less skilled, etc.) in other firms are earning significantly more.
All the laterals interviewed stated categorically that money was not a primary reason for their move. “Money had nothing to do with my decision,” “It was not important.” “I’ve had better financial offers from lower-tier firms.” These flame throwers keep cropping up. (See “The Last Word,” page 114 in this issue of Lexpert.)
Christopher Sweeney smiles as he listens to this. “Money is seldom mentioned in the beginning. But when it gets right down to the offer, suddenly it becomes paramount. I can’t think of anyone who has moved who hasn’t demanded/gotten more,” he says. “Money is never the reason people will take my call,” concurs Carol Fitzwilliam. “But it’s usually the last issue standing.”
What such anecdotes illustrate is a widely-accepted principle of motivation, Frederick Hertzberg’s motivator hygiene theory. Hertzberg found that people are primarily motivated by characteristics of work itself such as recognition, achievement, personal challenge/growth, etc. These are true motivators because they lead to long-term satisfaction and meaning; and people want to achieve them. Money, on the other hand, is more extrinsic to the job, its presence does not generate long-term satisfaction (recent research by Martin Seligman reconfirms that money leads to short-term satisfaction and little meaning). The right or wrong perceived absence of money, however, can and does generate strong feelings of dissatisfaction, which do cause people to move. This is why managing the flame thrower of perception, as described below, is so important.
Money is Funny (Part 2)
While laterals and managing partners may try to manage perceptions by minimizing the role that money plays, there is little question that how one massages the numbers is one of the biggest flame throwers. One practically requires a degree in neo-boolean logic to make sense of the different splits. In terms of understanding how it works with laterals, the following hypothetical situation is instructive.
You’ve just heard that Joe Schmo is crossing the street for $750,000. Now, you know you’re a much better lawyer than Schmo, and you’re sure you’re a better biller. But you get maybe $600,000. You’re underpaid! You’re for sale, and you might just bite at the first $750,000 dangled in front of you. Don’t.
Because that $750,000 might actually be $500,000—or even less. It all depends on how the firm calculates its partner compensation. Virtually every law firm’s system of partner compensation is a little different, and the salary surveys unintentionally mislead because there is no indication of how the respondents calculate their income. If you really want to know how you compare to Schmo, ask him one question, ‘Is that on a cash, partial accrual or full accrual basis?’
If Schmo is making $750,000 on a cash basis, it means he’s made $750,000 in cold hard cash during a given calendar year. If his salary is calculated on a partial accrual basis, that includes cash paid out and his share of the firm’s accounts receivable (AR) (that, by the way, is what he’s paying income tax on). If the number he’s throwing in your face is based on full accrual, then that $750,000 comprises cash, his share of AR and his share of the firm’s work in progress (WIP). None of those $750,000s equals the others. A lawyer who makes $750,000 on a cash basis makes more than one whose $750,000 is calculated with partial accrual, and they both out-earn anyone who is making $750,000 on a full accrual basis.
Effectively, firms that use the full accrual number with which to lure laterals are publicizing the highest possible end of the income range. If you are told you’ll be making $750,000, but that number is a full accrual number, you might end up with a lot less cash in your pocket than you expect. Some of that WIP you may never see.
Most firms use the partial accrual calculation, just like the tax man. A few, generally the most profitable ones who aren’t particularly anxious to publicize how handsomely their partners are compensated, use cash basis numbers. But even those firms are starting to work with two or three sets of numbers when courting potential laterals. If you’re offering Schmo $750,000 on a cash basis, but he wants $950,000 because he already thinks he’s making $750,000 at his old firm, which calculates his compensation on a partial accrual basis, you’ve got to show him what share of AR and WIP he can expect on top of that cash. (That WIP should eventually become AR and then cash…but in a different calendar year. So the WIP that was used to augment your 2001 income will become part of your 2002 income, which will be augmented by WIP that will—you hope—turn into 2003 cash….)
To recap: full accrual numbers overstate, and cash basis numbers understate, the total income. Partial accrual numbers lie somewhere in the middle. But your due diligence isn’t over yet. Your real income is also effectively constrained by how a firm pays out your cash and how it handles holdbacks.
You get the most value out of your money if the firm takes what you ought to be paid in a year, and gives it to you in 12 equal monthly payments. If you’re not particularly good at managing your cash, you might prefer to get the money four times a year, when your tax payments are due. But what many firms will do is hold back a portion of your income—up to 50 per cent—and dole out the remaining 50 per cent 12, six or four times a year. The rest will eventually be paid out to you…maybe. While in theory, most firms will give you your holdback within six months of the calendar year end, some of that holdback may be on a “never never plan.” Depending on the provisions of the firm’s partnership agreement, it’s money you may never see, especially if you leave the firm.
So, before you start feeling dissatisfied and underpaid when you hear colleagues throw numbers around, find out how they’re calculated. Cash is king. Partial accrual is realistic. Full accrual’s good for Peter Pan. You might be making just as much, maybe even more. Besides, people always inflate their numbers, especially if they’re on the market. Hence, how you massage the numbers is one of the best flame throwers.
Typology of Laterals
According to Christopher Sweeney at ZSA, there are basically five types of people in high demand:
Doing it Right—seven Steps
“There are definitely winners and losers in the game of lateral moves,” says Lorene Nagata. No one talks about the moves that didn’t work. There’s that flame thrower and perception management again. It isn’t for nothing, however, that firms and laterals spend as much time as they do in courtship. Mistakes are costly, embarrassing and career threatening. Here are seven steps that anyone contemplating a move should review:
The Firm Perspective
There is a general agreement, among laterals and legal recruiters, that some firms are much better at integrating laterals than others. Here are the practices that set them apart:
The Real Monsters Under the Bed
“The relationship between corporate Canada and law firms is coming of age,” says Larry Pringle. “The U.S. has greater mobility because the market is larger, but also people are crossing more freely between firms and in-house. The threat in the future will come from corporations and law firms south of the border where the platform and opportunities are larger.”
One has only to recall the flight of young legal talent (to the U.S. and the U.K.) and the associate salary wars of 1998-2001 to know that Pringle is right. That’s the real monster under the bed. For now, he’s asleep.
Irene Taylor is a Lexpert staff writer and a leadership consultant with more than 25 years of experience in coaching and advising senior and top talent leaders, in Canada and internationally. Marzena Czarnecka is a Lexpert staff writer.
Nonetheless, the purpose of this article is not to flush out monsters (real or perceived) from underneath law firm beds. The purpose is to help readers better understand the professional dynamics and dollars of lateral moves and, given the reality that such moves are here to stay, provide some concrete advice about how best to manage the process. In the end those we interviewed, trusting that our intent was constructive, provided valuable insight about what is happening around lateral movement and how firms and lawyers can best respond.
There Are Monsters Under the Bed
“Lateral moves are here to stay,” declares Adam Lepofsky of RainMaker Group; the first individual interviewed for this article. Lepofsky’s emphatic declaration was echoed over and over by each person, search professionals, managing partners and laterals, subsequently interviewed. “We may just be past the pioneering days of it here in Canada,” says Christopher Sweeney of ZSA Legal Recruitment, “but it is a well-established part of doing business in the U.S. and U.K.” It may still be early days in Canada (eight to ten years according to Sweeney and others), but it is already driving law firm growth strategy. It is a viable alternative to organic growth. Indeed, in a number of important emerging practice areas, client demands do not permit the luxury of organic growth. “In a merger, the acquiring firm has to take everyone” says Lepofsky. “In lateral recruitment you can be more selective.”
There is also no question that lateral recruitment is a market practice strongly influenced by economic considerations. In a strong bull market, more people are recruited to fill sudden growth needs—niche specialists and young corporate talent at the associate level are particularly in demand. Also, as the recruitment wars of the late 1990s through to 2001 illustrated, the moves are not just cross-firm, but cross-border as well. Top U.S., particularly New York and California law firms, and U.K. law firms appeared to have an insatiable appetite for young legal talent from this country. Demographic and economic cycles being what they are, this threat will certainly return. Given Canada’s demographic profile of low birth rates and high boomer retirement, it is likely to return with considerably more bite.
In the current market, however, associate recruitment has nosedived. While there always appears to be, among some of the top-tier firms at least, a market for razor-sharp, entry-level legal talent, there is significant over capacity at most of the major firms. On the other hand, senior or mid-level laterals, and in particular high-performing laterals, are another matter. Firms are looking for and cherry picking laterals who can add immediate value.
Why? In two words—change and client needs. “Clients want and need multijurisdictional services,” says Larry Pringle of Baker & McKenzie in Toronto. “And as the law firm model for success moves ever closer to the business model, so too the emphasis on performance. People who can add value will continue to be sought out.” Pringle is a corporate lawyer with significant international experience who Baker recently poached from U.S.-based Dorsey & Whitney LLP. “Clients today are looking for seamless legal services,” says Jim Christie, chairman of Blake, Cassels & Graydon LLP. “Whether they are already established in Canada or bringing business into the country that requires a variety of legal services, that adds up to platform.”
On a more specific issue, Carol Fitzwilliam of Shore & Fitzwilliam, legal recruitment consultants, points out that firms are now confronted by the consequences of short-sighted recruitment decisions made during the recession of the early 1990s. “There are some significant talent gaps,” she says, “because firms chose in previous slow economic times not to hire. Now 10 to 13 years later there is a real need within firms for lawyers of that generation/vintage to assume key leadership roles. This is not a gap that’s about age, but more fundamentally about experience.”
Aside from major changes within the economy and firms themselves (becoming more business- and market-focused), it is also apparent that culture is becoming a significant factor. “Women will be attracted by female role models or colleagues,” notes Lorene Nagata of Marsden Nagata Legal Search Ltd.; as was Cathy Singer, who recently left Fasken Martineau DuMoulin LLP to join Ogilvy Renault in Toronto. “I have a good friend at Ogilvy,” she said, “Ava Yaskiel. She was the first woman lawyer here and told me a lot about the place.”
Platform and Culture
They come for platform and leave because of culture. So says Gary Luftspring, managing partner of Goodman and Carr LLP, and Jim Christie at Blakes. While individual reasons for moves varied, these two factors, i.e., platform and culture, surfaced most frequently.
Duncan Card is an excellent example, he left Lang Michener in 1997 to go to Davies Ward Phillips & Vineberg LLP, and then moved from Davies Ward to Ogilvy Renault in 2002. “When I left Lang Michener to go to Davies,” he says, “my area of practice [technology related business transactions] had outgrown the firm. I wanted to be in a tier-one firm with a strategic forum.”
Card adds that he made one of the classic mistakes of laterals who act for themselves. His due diligence of Davies as a “fit” for his practice was insufficient. “And so the difficulty I encountered at Davies,” he explains, “was its lack of a full commercial knowledge-based platform. I found that it had a small litigation group, no intellectual property and no employment, all essential in supporting the kind of work I do. When Ogilvy Renault approached me and talked about their strategy and platform, it felt literally as if I was looking at myself in a mirror. The extent of the fit was unnerving, right down to my first visit to the Montreal office where three separate partners said ‘welcome home.’”
The moves of Richard Orzy and Kevin Zych touch on other important aspects of platform and culture. “McCarthys was so large and present in so many places,” they said, “that we found ourselves conflicted out of 65 per cent of work we knew we could have had. We were systematically being excluded from the biggest and most interesting files.” In terms of culture the expansion of McCarthy Tétrault LLP’s national platform made them feel that it was no longer the firm they joined. Importantly, both Orzy and Zych felt that their area of practice was viewed as less mainstream. “Corporate is too often viewed as the darling of large firms,” they say. Bennett Jones LLP assured them that their risk of conflicts would be significantly reduced. Also, both found the smaller size of their new firm, largely comprised of other laterals, to be refreshingly flexible and open. “When everyone comes from a variety of other leading firms,” notes Orzy, “there are no preconceived notions. It forces everyone to consider new best ways of doing things. That generates real synergy.”
“People usually leave for a cluster of reasons that combine personal and professional,” says Anita Lerek of Advocate Placement Legal Recruitment. “They see a firm with more challenging files or their mentor, a rainmaker, has gone over to another firm,” says Nagata.
The “fit” of one’s practice along with personal goals and values were cited by many laterals, including John Tobin who left Borden Ladner Gervais LLP in Toronto to join Torys LLP. “After many hours of meeting with senior lawyers in my area of practice and others,” says Tobin, “I was left with eight significant points that I was looking for. I worked through them with Les Viner and other partners. For example, I naturally wondered about the experience of other laterals at Torys. So they sat me down with another lateral, Jamie Scarlett from McMillan Binch. The real turning point for me, when I felt the fit, was when Les Viner and others acknowledged my entrepreneurial style and made me feel that it would be an asset at Torys.”
Les Viner, managing partner of Torys, provides the following explanation of “fit”. “Unlike 10 years ago, firms today have clearly articulated strategies. Consequently, firms today choose different paths. At Torys our focus, as it is at many firms, is building long-term, loyal client relationships. But our niche is the expertise we bring in all of our areas of practice where there is an interplay of U.S. and Canadian law. Lawyers whose practice interests and client needs “fit” this strategy are attracted to us and we to them.”
Chris Grasset, who left and then returned to Goodman and Carr, raises another important consideration. “In 1992, when I left Goodman and Carr, technology law was new and very much a sideshow. I simply was not in the centre of things, which made it difficult to build my reputation. Even within the firm, it was a hard sell to get other partners to cross-sell and refer me to clients. One of the key reasons I left was to establish myself in the centre of technology law.” By the time Grasset returned to Goodman and Carr, technology law had moved closer to centre stage in the firm’s strategic focus and client needs.
Serial Monogamists?
More likely, the threat of multiple moves is just one more flame thrower. The U.S. and U.K. legal press are full of stories with such titles as “Itchy Feet” or “The New Disloyalty”. “Loyalty is dead” is the new mantra and, as law merges with business in a fast-paced market (down or up), there are more and more lawyers out there, we are told, who have no compunction about successive moves to rapidly advance their career.
It is unlikely that multiple law firm moves, in the sense of three or four plus, will become the norm in Canada. Aside from the shock value of titles from articles in the U.S. and U.K. legal press, and perhaps the moves of some celebrity-type personalities, it is unclear how frequent multiple law firm moves are in the U.S. and the U.K. None of the interviews conducted for this article pointed to any inevitability about multiple moves. And this makes sense.
The principal legal markets in Canada, i.e., Toronto, Montreal, Calgary and Vancouver, are relatively small ponds. There are a limited number of places to go. More importantly, lawyers know many (often most) of the players in their field. Combine this fact with what we know about the personality and motivational make-up of top performing lawyers (see “Canada’s Top 25 Corporate Litigators,” “The Top 40 Under 40,” and “Canada’s Top 30 Corporate Dealmakers,” in the July/August, September and November/December issues of Lexpert, respectively). The almost one hundred lawyers interviewed for these previous articles are fiercely independent but they are also, according to our research, extremely interconnected. They are motivated by intellectual stimulation from/with people they respect and admire. Professional colleagues are at the top of their list for people they like to interact with. They are also highly motivated by respect from their peers. Finally, as a group, they are not big risk takers. On a personal level many seek (crave) to balance the dynamic pace of their work with stability and comfort in their professional and personal relationships. Many, for example, have had the same secretary and spouse for 20 plus years. This is not the group profile of a profession about to embark upon serial monogamy.
Regrets, We’ve Had A Few
Loyalty is not dead. The point made repeatedly in the interviews is that “blind loyalty is dead.” “It’s not about loyalty,” was a point emphatically made again and again. The bottom line is that talented, hardworking professionals want to situate themselves so that they can do the best for themselves, their clients, and their firms—that’s what loyalty is about today. A firm culture and strategic focus that values what they do and facilitates accomplishment of these objectives will have no problem with loyalty.
While none of the lawyers we spoke to regretted their decision to leave their previous firm, most did have regrets about the goodbyes they had to say. “It was like leaving family,” was a frequent comment. “Telling Sean Weir and my other partners was one of the hardest things I have ever had to do,” said Tobin. Asked about the most significant thing they gave up (prices paid) for their move, this was clearly it, in spades. These people are not disloyal, they move in spite of strong loyalty ties. The average decision-making period, (even when the decision to leave had clearly been made) was anywhere from five months to two years. Many people leave spouses with less thought.
Larry Pringle and others interviewed for this article, view professional loyalty in a similar light as family and marriage loyalty. “The concept of loyalty has changed,” Pringle says. “Blind loyalty is gone. Loyalty in this profession is the same as in a marriage. It is built on give and take. It’s a two-way street.”
Money is Funny (Part 1)
As a key variable that influences whether a person will leave or stay, it is not what it looks like on the surface, probably because money is representational of and tied to deeper factors. For example, most lawyers have a highly-tuned sense (and value) of fair play. They may be working away contentedly in their firm until/unless one day they discover that their firm’s profitability and compensation structures are out of whack. God forbid they should simultaneously find out that their colleagues (some of whom they feel are less skilled, etc.) in other firms are earning significantly more.
All the laterals interviewed stated categorically that money was not a primary reason for their move. “Money had nothing to do with my decision,” “It was not important.” “I’ve had better financial offers from lower-tier firms.” These flame throwers keep cropping up. (See “The Last Word,” page 114 in this issue of Lexpert.)
Christopher Sweeney smiles as he listens to this. “Money is seldom mentioned in the beginning. But when it gets right down to the offer, suddenly it becomes paramount. I can’t think of anyone who has moved who hasn’t demanded/gotten more,” he says. “Money is never the reason people will take my call,” concurs Carol Fitzwilliam. “But it’s usually the last issue standing.”
What such anecdotes illustrate is a widely-accepted principle of motivation, Frederick Hertzberg’s motivator hygiene theory. Hertzberg found that people are primarily motivated by characteristics of work itself such as recognition, achievement, personal challenge/growth, etc. These are true motivators because they lead to long-term satisfaction and meaning; and people want to achieve them. Money, on the other hand, is more extrinsic to the job, its presence does not generate long-term satisfaction (recent research by Martin Seligman reconfirms that money leads to short-term satisfaction and little meaning). The right or wrong perceived absence of money, however, can and does generate strong feelings of dissatisfaction, which do cause people to move. This is why managing the flame thrower of perception, as described below, is so important.
Money is Funny (Part 2)
While laterals and managing partners may try to manage perceptions by minimizing the role that money plays, there is little question that how one massages the numbers is one of the biggest flame throwers. One practically requires a degree in neo-boolean logic to make sense of the different splits. In terms of understanding how it works with laterals, the following hypothetical situation is instructive.
You’ve just heard that Joe Schmo is crossing the street for $750,000. Now, you know you’re a much better lawyer than Schmo, and you’re sure you’re a better biller. But you get maybe $600,000. You’re underpaid! You’re for sale, and you might just bite at the first $750,000 dangled in front of you. Don’t.
Because that $750,000 might actually be $500,000—or even less. It all depends on how the firm calculates its partner compensation. Virtually every law firm’s system of partner compensation is a little different, and the salary surveys unintentionally mislead because there is no indication of how the respondents calculate their income. If you really want to know how you compare to Schmo, ask him one question, ‘Is that on a cash, partial accrual or full accrual basis?’
If Schmo is making $750,000 on a cash basis, it means he’s made $750,000 in cold hard cash during a given calendar year. If his salary is calculated on a partial accrual basis, that includes cash paid out and his share of the firm’s accounts receivable (AR) (that, by the way, is what he’s paying income tax on). If the number he’s throwing in your face is based on full accrual, then that $750,000 comprises cash, his share of AR and his share of the firm’s work in progress (WIP). None of those $750,000s equals the others. A lawyer who makes $750,000 on a cash basis makes more than one whose $750,000 is calculated with partial accrual, and they both out-earn anyone who is making $750,000 on a full accrual basis.
Effectively, firms that use the full accrual number with which to lure laterals are publicizing the highest possible end of the income range. If you are told you’ll be making $750,000, but that number is a full accrual number, you might end up with a lot less cash in your pocket than you expect. Some of that WIP you may never see.
Most firms use the partial accrual calculation, just like the tax man. A few, generally the most profitable ones who aren’t particularly anxious to publicize how handsomely their partners are compensated, use cash basis numbers. But even those firms are starting to work with two or three sets of numbers when courting potential laterals. If you’re offering Schmo $750,000 on a cash basis, but he wants $950,000 because he already thinks he’s making $750,000 at his old firm, which calculates his compensation on a partial accrual basis, you’ve got to show him what share of AR and WIP he can expect on top of that cash. (That WIP should eventually become AR and then cash…but in a different calendar year. So the WIP that was used to augment your 2001 income will become part of your 2002 income, which will be augmented by WIP that will—you hope—turn into 2003 cash….)
To recap: full accrual numbers overstate, and cash basis numbers understate, the total income. Partial accrual numbers lie somewhere in the middle. But your due diligence isn’t over yet. Your real income is also effectively constrained by how a firm pays out your cash and how it handles holdbacks.
You get the most value out of your money if the firm takes what you ought to be paid in a year, and gives it to you in 12 equal monthly payments. If you’re not particularly good at managing your cash, you might prefer to get the money four times a year, when your tax payments are due. But what many firms will do is hold back a portion of your income—up to 50 per cent—and dole out the remaining 50 per cent 12, six or four times a year. The rest will eventually be paid out to you…maybe. While in theory, most firms will give you your holdback within six months of the calendar year end, some of that holdback may be on a “never never plan.” Depending on the provisions of the firm’s partnership agreement, it’s money you may never see, especially if you leave the firm.
So, before you start feeling dissatisfied and underpaid when you hear colleagues throw numbers around, find out how they’re calculated. Cash is king. Partial accrual is realistic. Full accrual’s good for Peter Pan. You might be making just as much, maybe even more. Besides, people always inflate their numbers, especially if they’re on the market. Hence, how you massage the numbers is one of the best flame throwers.
Typology of Laterals
According to Christopher Sweeney at ZSA, there are basically five types of people in high demand:
- Marquee names: e.g., Pierre Trudeau (Heenan Blaikie LLP), Brian Mulroney (Ogilvy Renault) or Purdy Crawford (Osler, Hoskin & Harcourt LLP). Most recently, marquee players, such as Mike Harris (Goodmans LLP), might not even be lawyers. Marquee players bring network connection power to a firm’s platform.
- Rainmakers: The rainmaker is a heavy hitter who has actually built his or her own platform (top-tier clients, work, protégé talent). They can and do provide an immediate infusion of strength. Often, they are sought out in tough economic times, although they are constantly attractive in good or bad times.
- Franchise builder: e.g., Jim Riley (Ogilvy Renault), Brian Levitt (Oslers). These are individuals with strong leadership qualities who also want to be part of building something larger than themselves. They are people around whom you can build a practice group and/or a firm.
- Niche specialists: e.g., Al Meghji (tax litigator, Oslers), or Scott Wilkie (corporate tax, Oslers). These are solid, highly-skilled specialists. They may also be at a junior associate level (developing) or senior partner. They are attractive to firms who are developing/growing new areas of practice, planning for succession, or who want to strengthen an area of practice.
- Rising star: Look at anyone in Lexpert’s “Top 40 Under 40.” These are future generation platform builders, franchise builders, rainmakers, etc. They tend to be individuals who show great promise and are on the cusp. They are extremely valuable additions to firm platform and succession planning.
Doing it Right—seven Steps
“There are definitely winners and losers in the game of lateral moves,” says Lorene Nagata. No one talks about the moves that didn’t work. There’s that flame thrower and perception management again. It isn’t for nothing, however, that firms and laterals spend as much time as they do in courtship. Mistakes are costly, embarrassing and career threatening. Here are seven steps that anyone contemplating a move should review:
- Have a plan Stan: “We need to do a much better job of career planning,” says Adam Lepofsky of RainMaker. What Lepofsky is referring to is actually a fairly disciplined, proactive process in the corporate world. It is integrated with other key processes such as talent and succession planning and is an integral part of performance management and professional development. In brief, it is designed to keep the ever important issue of “fit” on the front burner. “Also,” says Lepofsky, “people often don’t really think about what they want. They have blindspots. Many need a good quarterback.”
- Stay on high ground: In other words, don’t make it personal and don’t burn your bridges. Badmouthing your former partners/ firm is not just bad form, it might come back at you in a closely-knit professional community. Not only will your former partners be sitting across the table from you on the next deal, it is surprising the amount of referal work that can take place.
- Do complete due diligence, including:
- What is the firm’s strategy for growth?
- Firm platform—including practice groups that are essential to the success of yours.
- Firm culture and philosophy—talk to as many people as possible.
- Firm’s financials.
- Partner’s rights and responsibilities.
- Compensation structure.
- Successful exits: Keep it short and, if not sweet, at least professional. Do not underestimate the feelings of bitterness a departure can generate. Anticipate that the nature of relationships/friendships will likely change in the short term. Keep in mind that others have not had the benefit of your thinking/discussion time and may well require a cooling-off period. Be realistic, sensitive and patient.
- Integration: Get immersed in the work and culture of the new firm as quickly and completely as possible. “The best thing that happened to me,” says Martha Milczynski who left Gowling Lafleur Henderson LLP in Toronto, “was that I had only been here at Blakes for two weeks when our practice group and others were retained in the Algoma Steel restructuring. The work was intense, and it required a cross-functional team, which meant I got to know people very fast. The support was amazing and the project accelerated my integration in the best possible way.”
- Keep talking: Frank Delfino, president, Canadian and International markets, Teknion, was initially shocked to read the figures on lateral failure rates in the corporate world, until he began understanding the human dynamics behind the newcomer and their new family. As a result, Delfino put together his own checklist that he reviewed and acted upon on a weekly basis throughout his first year at Teknion. “Senior people generally do a good job of discussing goals, expectations, etc., before they join an organization,” says Delfino. “But then they get inside and that spirit of open candid sharing starts to dissipate and suspicion starts to settle in.” One of Delfino’s most successful integration techniques was to schedule regular dinners with key people who he supported and whose support he needed. He made himself ask the delicate questions such as, ‘How am I doing? What would you like me to stop doing? Do differently?’ etc.
- Embrace your new firm: Minimize the comparisons to your old firm, except where there is a system/practice that can really add value. Look for ways to add value to the new firm and its culture, including introducing your clients and contacts, becoming involved in firm committees, having new associates to your home for dinner, etc.
The Firm Perspective
There is a general agreement, among laterals and legal recruiters, that some firms are much better at integrating laterals than others. Here are the practices that set them apart:
- “Think about retention and fit from the very outset,” advises Lepofsky. “Leading law firms use these two critical criteria as your benchmarks for success.”
- Empathetic: “Firms such as Ogilvy Renault and Bennett Jones in Toronto are largely comprised of laterals and individuals such as Jim Riley (himself a lateral) that are extremely valuable in managing the entire process with others,” states Chris Sweeney. “Helping potential candidates clarify the fit to our platform and culture is what it is all about,” says Jim Christie of Blakes. Firms who understand the process not only from the perspective of their needs and goals, but also those of laterals can pro-actively deal with concerns early. John Tobin’s entrance to Torys, for example, was scheduled during a firm retreat where he and his wife could meet others informally. During the retreat the firm converted a meeting room into his new office. While Tobin and his wife were making new acquaintances (and future friends), his office complete with his personal items (e.g., family photos) was being set up.
- Introducing the new lateral: “Randy Bauslaugh gave up his office and view so that I could be closer to my new group,” says Milczynski. Many firms have intensive orientation days to plug laterals into their Internet/e-mail and other systems quickly. They also seize advantage of any/every social event, firm lunch, meeting, etc., to facilitate what Jim Christie refers to as cross-pollination.
- Integration: “Basically,” says Gary Luftspring, “I plan to spend a lot of time with new laterals both inside and out of Goodman and Carr. They come to my place for dinner and we try to get to know one another on many different levels.” Les Viner says, “Effective integration is critical. When a lateral joins Torys, we create opportunities for him or her to learn about the firm’s culture and values, about our clients, practice areas, relationships and style. This is done through social gatherings, professional development meetings, mentoring (even at the partner level) and file staffing. Also, importantly, we show the client contacts, which our laterals bring that they will be valued clients at Torys. It’s all about spending a lot of time together—no shortcuts.”
- Leadership and culture: ‘What types of firms are at the greatest risk of losing their best talent to lateral moves?’, was a question repeatedly asked during interviews for this article. For example, is it the mid-sized or second-tier firm that just can’t offer the same quality of platform as a top-tier firm? ‘Not necessarily so,’ was the reply heard again and again. (Another flame thrower cropping up.) Mid-sized and second-tier firms are choosing platforms that are better aligned with their strategy and size. Whatever that means.
The reality is that mid-sized and second-tier firms are more vulnerable to star talent leaving than are top-tier firms. And top-tier firms have no hesitation in shopping the mid- and second-tier market. But many mid- and second-tier firms successfully hold on to their best people. How?
As noted earlier, loyalty is not dead. Blind loyalty, however, is. There are, of course, situations where an individual’s practice will outgrow a firm’s platform. There will also be occasions where an individual can earn significantly more money by moving and will do so. But more often than not, it is a question of a firm’s culture, strategic focus and leadership not sufficiently valuing an individual’s practice and facilitation that practice moving forward. As Christie and Luftspring noted, laterals come for platform and leave because of culture.
The Real Monsters Under the Bed
“The relationship between corporate Canada and law firms is coming of age,” says Larry Pringle. “The U.S. has greater mobility because the market is larger, but also people are crossing more freely between firms and in-house. The threat in the future will come from corporations and law firms south of the border where the platform and opportunities are larger.”
One has only to recall the flight of young legal talent (to the U.S. and the U.K.) and the associate salary wars of 1998-2001 to know that Pringle is right. That’s the real monster under the bed. For now, he’s asleep.
Irene Taylor is a Lexpert staff writer and a leadership consultant with more than 25 years of experience in coaching and advising senior and top talent leaders, in Canada and internationally. Marzena Czarnecka is a Lexpert staff writer.
Lawyer(s)
Adam Lepofsky
Christopher Sweeney
Carol A. Fitzwilliam
Lorene Nagata
Cathy Singer
Gary H. Luftspring
Duncan C. Card
James R. Christie
S. Richard Orzy
Kevin J. Zych
Anita Lerek
John J. Tobin
Les M. Viner
James D. Scarlett
Sean Weir
Martin Seligman
M. Brian Mulroney
Michael D. Harris
Al Meghji
J. Scott Wilkie
Frank Delfino
Randy V. Bauslaugh
Firm(s)
RainMaker Group
ZSA Legal Recruitment
Shore & Associates
NagataConnex Executive Legal Search Ltd.
Fasken Martineau DuMoulin LLP
Norton Rose Fulbright Canada LLP
Davies Ward Phillips & Vineberg LLP
Baker & McKenzie LLP
Dorsey & Whitney LLP
Blake, Cassels & Graydon LLP
McCarthy Tétrault LLP
Bennett Jones LLP
Advocate Placement Ltd.
Borden Ladner Gervais LLP (BLG)
Torys LLP
McMillan LLP
Norton Rose Fulbright Canada LLP
Osler, Hoskin & Harcourt LLP
Goodmans LLP
Gowling WLG
Essar Steel Algoma Inc.
Teknion Corporation