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About the Author
Michael Downey is a legal ethics lawyer and litigation partner in the St. Louis office of Armstrong Teasdale LLP. Author of Introduction to Law Firm Practice (ABA, 2010), Mike teaches legal ethics and law firm practice at Washington University School of Law and professional responsibility at Saint Louis University School of Law.
WHAT SHOULD FIRMS DO with profitable but problematic rainmakers?
In my book Introduction to Law Firm Practice, I include an exercise in which several fictional equity partners are evaluated for de-equitization. One candidate is sarcastic and demeaning, a terror whose tantrums have chased off numerous associates and assistants. This exercise forces the reader—generally a new or future lawyer—to appreciate a dilemma many real law firm managers face. How should a firm handle an attorney who generates good revenues and profits but also lots of headaches and problems?
Most real law firm leaders tell me the answer depends upon how profitable the rainmaker is, and then how problematic. Apparently many newer lawyers agree. Of the perhaps 600 law students who have completed the exercise in my class at Washington University in St. Louis, only a few groups push vigorously to have this monster demoted. Most student groups instead keep the problem rainmaker because he has a large, profitable book of business.
Most firms recognize that problem rainmakers can increase employee turnover, malpractice and other claims, public relations harm and other ills. Yet, particularly in these tough economic times, firms are more willing to accommodate productive partners, no matter how difficult. Sometimes top rainmakers are paid 15 or 20 times more than other so-called partners at the firm. And major rainmakers often exercise extraordinary power within firms.
Accommodating problem partners can critically undermine a firm’s culture and infrastructure. ABA Model Rule of Professional Conduct 5.6, as adopted by the states, severely limits the ability of law firms to limit lawyer mobility with noncompetition agreements. The absence of noncompete restrictions virtually guarantees that problem rainmakers can engage in wrongful conduct or make oppressive demands upon firms, and use the threat of leaving with substantial business if the demands are not met. A malevolent rainmaker may mistreat colleagues and subordinates, hoard origination credits or engage in lots of other actions that—while punished on a typical grade school playground—may escape sanction at a law firm struggling to reach short-term profitability goals.
This tolerance of problems, however, often harms law firms in the long term. Pleasant lawyers—dismissed as weak by problem rainmakers—may leave the firm or lose interest in firm management or business development. After all, what is the point when a powerful jerk will steal all the credit and glory? This further strengthens the problem rainmaker and weakens the firm. And, when things really get tough, the problem rainmaker will probably depart, leaving the struggling firm in the lurch.
Recent developments suggest that firms’ willingness to kowtow to problem rainmakers may be waning. The demise of firms like Dewey & LeBoeuf LLP is a warning to firms that some price is too high to pay, even for major rainmakers.
Firms have also become more sensitive to considering partners’ entire practice and contributions, even including bad behavior in their assessment, when evaluating profitability. A problem rainmaker’s profitability may suffer because he or she drives off associates and staff, irritates major clients or causes other trouble.
Many firms are also broadening factors they consider when making equity partner compensation decisions. Formulas may include subjective factors that effectively reflect whether a partner is a good team member, collaborates regularly and plays well with others.
Finally, many clients are beginning to use requests for proposals and other procurement tools to select legal counsel for large matters or portfolios of matters. If firms are willing to recognize that strong teams, not demanding individuals, normally win such procurement reviews, this may help decrease the responsibility for originating client work. The result will not be the end of rainmaking or a purge of problem rainmakers. But it may help firms better manage the risks and headaches that problem rainmakers generate.