Revenues Pressed, Law Firms Boost Resume Scrutiny
By AMANDA BRONSTAD
Staff Reporter
Everyone fudges a resume, right?
A tweak here or an embellishment there may be no big deal, especially for a lawyer looking for work at a firm that expects partners to generate as much as $1 million in annual profits.
But squeezed by the economic downturn, fewer lawyers are generating the profits and client work that law firms want. As a result, more partners in the job market are fudging their numbers or, as one lawyer put it, making “legitimate representations with some optimism.”
They won’t call it lying. But law firms today increasingly scrutinize incoming partners, realizing that who the partner says he is might not be true.
“Sometimes there’s an air of unreality,” said Craig Kline, a partner at Carroll Burdick & McDonough LLP who recently left Arter & Hadden LLP in Los Angeles, where he was responsible for hiring. “If someone can sell themselves well, they often can over-sell themselves. You only discover afterwards that what they said is untrue.
This month, Los Angeles-based Latham & Watkins made headlines after it announced the hiring of a partner in its New York office from Pillsbury Winthrop LLP’s Stamford, Conn., office. Following Latham’s announcement, San Francisco-based Pillsbury issued an unusual press release detailing that the departing partner, Frode Jensen, had had a less-than-stellar book of business while at Pillsbury and was under investigation for sexual harassment. Jensen quickly dropped his plans to join Latham’s New York office.
Jensen could not be reached for comment. David Gordon, managing partner of Latham’s New York office, declined to comment about Jensen.
Latham’s case is an extreme but hardly isolated example of the risks involved in hiring partners in today’s market.
“Partners are aware of the fact that the size of their portable book of business is absolutely critical in determining compensation and whether they’ll get an entry ticket for the firm they’re moving to,” said Richard Kolodny, president of attorney placement firm Portfolio Group LLC. “Law firms, in the last five years, have been putting an increasingly strong emphasis on the amount of portable business one has. That means they only want to hire partners who are as productive as those already at the firm.”
Great expectations
In the L.A. market, major firms typically are looking for a book of business the amount of dollars one brings in through current and future client work of between $1 million to $1.5 million, depending on a partner’s age and experience, Kolodny said. Five years ago, that range was $750,000 to $1 million.
Expectations often exceed reality, Kline said because clients are not obligated and cannot be solicited to follow a partner to a new firm.
Kline said he struck firms from his list of potential job prospects because he knew his clients would never pay the higher fees. “They’re so unrealistically high that nobody could maintain that work level without having a physical or mental breakdown,” he said.
The pressure to maintain a significant book of business has become even greater as the economy forces firms to seek partners with less-risky, guaranteed books. Meanwhile, many partners’ books are falling apart, said Alan Miles, a local legal search consultant.
“You have a lot of guys whose business is falling down, and they got paid a lot of money,” Miles said. “But when they realize what the market is like and that they will have to take a steeper pay cut, it’s hard to make deals with that model.”
Pumping numbers
As a result, many partners fudge the details of their books of business. Some may claim responsibility for bringing in a client they had inherited from another attorney, some may neglect to mention write-offs or expenses that would reduce the actual dollars they brought in. Most likely, they overestimate the future business they can bring to the new firm.
“They tell the truth, strictly speaking,” Kline said. “They say, ‘I have $200,000 worth of business from ABC Corp. However and this is where the fudging comes in they say ‘I know I can get $100,000 more from this company because my best friend has just become general counsel.’ Part of what that person said is the truth. The rest of what he or she said is not exactly false. It’s probably what he believes. But how realistic it is is anybody’s guess.”
Only later do firms realize that a partner’s projections are untrue. One local example is at Akin Gump Strauss Hauer & Feld LLP, which merged with L.A.-based Troop Steuber Pasich Reddick & Tobey; LLP in January 2001. Earlier this summer, several of the former Troop Steuber partners began leaving Akin.
The Troop partners claim that Akin failed to support the L.A. office, but some question whether there were other factors.
“The most important thing to ask is did these people bring in the business they said they would bring in?” said Bobbie McMorrow of McMorrow Savarese, the strategic consulting firm that represented Troop in the Akin merger. “Were they really active full partners of Akin Gump? Did they really pony up to the bar?”
Not all the fault lies with incoming partners. Sometimes, firms hire based strictly on name recognition. “Sometimes they’re in a rush to bring on people. They start thinking they’re in a competitive market, and they’ve got to move quickly,” said one local managing partner.
Most firms have increased their due diligence on partner candidates by having them fill out lengthy questionnaires about their books of business and then talking to colleagues, references and clients.
The managing partner of a large L.A.-based firm said his firm has partners interview at each of the firm’s U.S. offices a process that can take six weeks. The managing partner said he asks mergers and acquisitions partners if they have steady clients on the “buy” side, and finance lawyers if they represent banks as well as borrowers.
Personal touch
Kline said that during his job search, he created his own business plan with details of how much he had billed, how much was collected, his rate increases and any write-offs over the last five years. He also included projections of how much business he could potentially bring during the next 12 months to two years.
But researching books of business alone won’t buy the best talent. Kline said he was once at a New York-based firm, which he declined to name, that hired a partner who had a terrible reputation in L.A. Because the firm was not local, however, nobody realized who they were hiring and relied on his impressive resume.
“He was engaging and presentable, but he was a disaster,” Kline said.
In the end, most firms take the safe bet and hire partners they already know.
“There’s no substitute for knowing the person sitting across the room from you,” said Paul Irving, chief executive and managing partner of Manatt Phelps & Phillips LLP. “Whether you’re on the same side of the desk, or the opposite, you’ve seen them in action and you’ve had experience understanding their quality.”
