TRP 239: Law Firm Partner Compensation with Chuck Curtis

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high stakes headhunter, author, and professional speaker, Scott Love. You're listening to The Rainmaking Podcast, and my name is Scott Love. Thanks for joining me on the show. This podcast is all about client development and rainmaking and related topics, specifically for those who are in professional services.

[00:00:37] You're a practitioner, but you're also responsible for getting work. How do you do that? We also talk about other variations of topics, such as compensation. And we're getting pretty narrowly focused today in our conversation with Chuck Curtis about law firm partner compensation. So if you're not in the legal industry, this may not be as interesting to you as some of the other shows that we have, because most of the topics that we have are malleable for all different types of professional services.

[00:01:04] But Chuck brings specialized expertise in the area of law firm partner compensation. Chuck is a coach and a consultant to the legal industry. Prior to that, he worked for 16 years in Pillsbury as their director of lateral partner hiring. He's also worked in law firms such as Latham & Watkins and accounting firms, including PricewaterhouseCoopers and BDO. I hope you get some great ideas from my conversation with Chuck today.

[00:01:32] As always, this show is sponsored by Leopard Solutions, legal intelligence suite of products, Firmscape and Leopard BI. Push ahead of the pack with the power of Leopard. And now here's my conversation with my good friend, Chuck Curtis. Thanks for listening. Hey, this is Scott Love with the Rainmaking Podcast. And our guest today is my good friend, Chuck Curtis. And Chuck, thanks for being back on the show again. Scott, my pleasure.

[00:01:59] Yeah, and I like the topic that we're going to talk about, negotiating partner compensation for law firms. And tell me about this. What have you seen is the best way to work it for a law firm to deal with that topic of partner compensation? Kind of what's what are some of the high points of that topic that's on your mind? Sure.

[00:02:19] I think that, you know, is as we talk about placing partners, you know, there's all kinds of studies that are out that talk about the factors that partners are looking for new firms, you know, firm culture and practice fit and all those different things. And so many of them say that compensation is not the driving factor. And I think, as you and I know, haven't been in the business for a year or two. It may not be top factor, but it always comes down to the money. You know, they say it's not about the money, but it's about the money.

[00:02:48] And so I thought today we could maybe talk about some ways that somebody at the law firm, a law firm key contact, a law firm recruiter or somebody that's been in that position can collaborate with the legal recruiter who's representing the client to kind of negotiate some of the craziness in that and figure out a way to get it across the finish line.

[00:03:09] And the starting point for that is kind of, you know, after you go through the preliminaries and got a fit, you've got a couple of nice interviews and, you know, you presented the candidates, you kind of have a sense of what the practice is. But I think it's important to clarify early in that process between the recruiter and that contact at the search firm or the legal group of the firm and the person at the search firm to make sure you're in the same ballpark on comp, right? So that you don't waste a lot of time spinning your wheels.

[00:03:37] If you've got a candidate, let's use an example of a $3 million practice. And it turns out that they want a $1.75 million base. And that's just not going to be realistic in your world. Then then let's not waste time. If that's what you want, you go get it. You find a firm that's going to pay you that. But my firm might not be able to do that. So I think the recruiter, legal recruiter and the person at the firm needs to have that honest conversation. It's not a negotiation. We're not locking ourselves into anything.

[00:04:05] It's just, look, let's make sure we're in a range that should we get closer to the finish line that we can then negotiate a deal. So I think that's a really important first step. That's right. And let me ask you this. One thing I've started doing in recent years where I'm talking with a candidate. And, of course, as you know, the first time I talk with them, I might not get very deep in their motive to move. Other very important details. It might be kind of personal. As I get to know that person, let's talk about the book. Let's talk about your rate. Tell me about the makeup of your clients.

[00:04:35] And I found this is helpful. I always ask. I can't say how much do you make. But I'll say, tell me about your comp expectations. Exactly. What do you think about that part of that process, Chuck? What do you think about that? Yeah, I completely agree. I think that's the exact right way to frame it in that, you know, when you're making, when a partner makes a move, he or she, you know, has some idea of what they would like. And it's not, again, it's not the negotiation. We're not trying to negotiate a deal.

[00:05:03] But you've got a number in your mind of what you'd like to have. And it's important to the trust relationship between you and your client as the legal recruiter to have a sense of what does my client want? So how can you meet that expectation? And on the firm side, it's the same thing. It's really helpful to me to have a sense of, you know, where we're going to be when it comes down to it. Because it's going to take, you know how it is, it takes a lot to get it done.

[00:05:29] And I'm going to need to use my political capital inside the firm, which I'll get to later, to make sure that we're trying to meet the market. So I think it's really important for you to have a sense of where your client's at. And that question of what's your expectation is a perfect way to phrase it. Yeah, I think so. So then I get an idea. And one thing I've even started doing, I don't call it lateral partner recruiting anymore because the word lateral means it's going to be the same thing. And I want them to know it's going to be an increase.

[00:05:59] It might be the same title. You might actually go down on your initial guarantee base comp, but you want to have an increase in the total opportunity. Yeah. So let me ask you this. Let's say we're at that process where the partner has had the first, second rounds. Maybe we're starting to fill out the lateral partner questionnaire or the due diligence questionnaire. At what point do you think is the ideal time to really talk about how this law firm could pay that person? What do you think about that?

[00:06:55] Yeah. Shortly after that stage, right? Where there's maybe a final round of interviews, but you've got the LPQ. And the firm is in the process of making their assessment of the partner's book, right? And various firms have different ways of doing that, as you know. So it would be great if we're in a world where the partner just say, take my word for it. This is what I got. And firms just said, okay, we'll sign on the dotted line. But we both know that's not realistic. So in different firms have different ways of betting.

[00:07:24] At Pillsbury, we had designated partners that went through a very detailed outline of talking about the practice, client contacts. And we came up with our own assessment of what we thought the practice would be. And somehow, you know, we end up, you know, the way that we figured the comp out is to kind of marry those assessments, ours versus the candidates. And then that, then we enter into that negotiation. Different firms do it different ways. Sometimes it's not an independent assessment. Sometimes it might be just a sponsor of partners.

[00:07:55] But that's the point where you really, you know, at that point, you know, you finish the interviews and say, yeah, we're going to make this guy an offer. However, that's when the rubber meets the road in terms of starting to negotiate comp, at least from my perspective. I don't, you know, maybe you've seen it differently. I've seen it all different ways. And what do you think the general comp is for law firms? If somebody has a $3 million book where they're originating that, their work, their working dollars might be maybe a third of that in terms of what they're actually sending out receipts for.

[00:08:24] But what do you think that partner's comp range should be? How do you think most law firms would look at a compensation package for that kind of partner? Yeah. I mean, I think, I think most firms are going to look, you know, somewhere in a base in the one and $1.2 million range and then have incentives beyond that. Lots of different ways. Firms structure things in all kinds of different ways. It also gets down to compensation and credit sharing and all those types of things.

[00:08:49] But I think, I think probably to incentivize, you're going to probably end up somewhere in that $1.25, $1.2 range if you want to get somebody into your firm. Yeah, absolutely right. What have you seen in recent years in terms of guarantees? I think we were a stub plus one firm and that has expanded again, right? It's like everything, there's pendulums, right? In the business, there was a period of time when there were all kinds of three-year guarantees. And then do we balance out and out of business?

[00:09:19] And that wasn't as popular and it came back to limited guarantees. But I've seen firms extend in the last couple of years again to sometimes three-year guarantees. And there's pluses to that and there's danger in that. Absolutely right. Right. And so what do you think are other areas that a law firm, recruiting department, law firm leaders, and the legal recruiters working with the candidates? What are some of the other main concern points that they should keep top of mind as they go through this process? Yeah.

[00:09:47] I think when it gets down to formulating an offer, right? So you've had the conversations, you got them, the firm has decided on wants to make an offer. One of the perspectives that maybe is not unique but could be unique to some of your listeners is that I think that law firms are inherently a little bit biased towards their existing partners. When going to make an offer, they are trying to protect their own compensation system and they're protecting the comp of their own partners.

[00:10:16] And it's not meant to be punitive. It's just a natural thing. You're a partnership and you're trying to take care of your fellow partners. And that rubs against the fact the market is the market. And the market is saying, look, the market for this person is X. What you pay your partners is not necessarily relevant to what the market is. And so that's a push within a law firm.

[00:10:37] So a lot of times, you know, as a recruiter, I'm sure you've had situations where things take a long time to get to a point of getting numbers out to your candidate. And part of the reason might be because your internal person at the law firm is fighting with practice action leaders and firm management to get a market offer, right? The right kind of offer out there.

[00:10:58] So I think that's something that keeps in the back of your mind, that there's just an inherent give and take between what the market is demanding and what law firms are trying to do in terms of protecting their own partners. So that is a reason why sometimes it takes a little bit longer and it's hard to get offers out. That was from an internal perspective in the role that I was in. And that was always one of my challenges was being able to get market offers to candidates. We're not positive.

[00:11:26] That's true to other firms, but I suspect it is. And what are some other main areas that we need to think about related to partner comp? Because I'm going to come back to this in a second. But what are some other points that we should keep in mind? Yeah, I think that it's important for firms, for the recruiters, the in-house people that are trying to bring candidates in, that you remember if you want to compete, if you want to be a player, you need to be the person who represents the market.

[00:11:54] So that means that you have to have connections at your firm to be able to get to the upper reaches of management. So the firms that are law firms that are successful in the recruiting game are people that have trusted in-house people that can speak truth to power of their partners and push that from a market side. So that gets back to that relationship we talked about earlier, right? That trust relationship between the law firm and the recruiter.

[00:12:21] So you as a recruiter want to make sure that the law firm person that you talk to has that pull. And it's important for firms to know that they need to trust their people and let them have that independence to get deals done. And then there's a bunch of off-the-record conversations, right, you can have with your recruiter, hey, here's where we're at, here's where we're at. And then it goes back and forth of the negotiation to get to the points you want to get to. Right. Do you see that most offers, are they basically, here it is, and that's it, and it's accepted?

[00:12:51] Or is there a real negotiation that goes back and forth? What have you seen to be normal? I think that there typically is, you know, you always leave some wiggle room, right? You know, it's not, we never made offers and said, this is it. But we tried to make a really fair offer that would be compelling. And a lot of our ability to make that right offer was based on that back and forth in the process, right?

[00:13:15] It might say, if you, if I'm, you're representing a candidate and you and I are having conversations that you have given me information, and I've been able to, to use that information in a way that makes sure that we get an offer to that candidate that is likely for them to accept. Now, maybe there's another, you know, a couple thousand dollars, $25,000 or $50,000. But we're close enough that we can negotiate from there.

[00:13:41] And I've seen, you know, the deltas go up and down depending on individual needs. But for the most part, I think deals get done relatively in the range of the original offer. You know, within maybe 10, 15%, we're not talking about things a little crazy beyond that. Right.

[00:13:59] Do you see a lot of firms, do they have mathematical formulaic incentives where if you do this in collections, we'll pay you a certain percentage of that and so forth based on tranches that go up? What did we see? We did, we would, it feels great what we offered was the base salary, as we talked about, you know, somewhere a third or above a third. And then we would specify collection bonuses for originations in the way that we took track credits.

[00:14:27] Above that, we would offer percentages for hitting different levels. So you could see yourself, you know, go up. The base offer is only $1.25 million. You could get up to $3 million if you hit those incentive goals. And I think lots of firms do that, provide a lot of upside in that regard, yes. And I've also seen some firms, not a lot anymore, but where they had a closed compensation system, meaning nobody knows what anybody else is making.

[00:14:54] The managing partner and you are the only two people that will know what your comp is. There's pros and cons on that. What's your thought about the closed compensation system? That's such a good question. You know, there were days when I was active in the business, when I was like, God, I wish we had a closed compensation system so we could just, you know, give anybody anything and nobody knew about it. So I think that there's advantages to that because, you know, you can do whatever you want. It's not public knowledge.

[00:15:21] It takes away a little of that inherent risk that I talked about where folks are trying to protect the compensation system because, in essence, nobody knows. So I think there's certainly advantages to it. But on the other hand, I think that there's, you know, there can be disadvantages too, right? That we're dealing with a population of educated, super smart people and they like being involved in their businesses and knowing what's going on. And so that transparency creates a lot of real positive culture.

[00:15:50] So I think there's pluses and there's minuses. But I certainly think in terms of formulating offers, you know, some of the black box firms have a little bit of an advantage because they can do whatever they want. Yeah, they can take a shot. Yeah. And nobody knows. Yeah. And I think you're right. But I think that because we're dealing with a large organization with, like you said, super smart people that are, I'd say they're uber sensitive to how they're being perceived in the market compared to other people. Also, the closed comp kind of solves that issue.

[00:16:20] You're absolutely right. I haven't seen that as often, though, but I've seen a few firms that still have that type of model. Yeah. And so what would you recommend to an internal legal recruiter that's with a firm that is stuck? Like, here's a candidate that has a book that has indicated interest in that firm, but also looking at two or three other firms and this internal legal recruiter really isn't getting the feedback from the leadership to make that offer. What do you think that person should do at that point? Yeah.

[00:16:50] I think for firms that, as I mentioned, that really want to compete and want to be in the game, they just have to have that open communication and they have to have a leadership group that trusts. They've entrusted that individual that you're talking about to give them the feedback on what the market is, right? That's their expertise.

[00:17:13] Maybe they're not lawyers, but they are expert in recruiting and they are expert in determining what the market is for a lot of partners. And they need to give that grace to that individual to trust them. And look, you're not going to carry the day every time. There were deals we left on the table that I thought we should have done because we couldn't get there. But to Pillsbury's credit, they were tremendous about taking and listening, all right? I always felt that I was heard.

[00:17:40] And whoever is in a similar type of role at a firm needs to have that. And that gets back to your having alignment in your recruiting team and what you're trying to do. And the successful law firms that hire the people that they want are really good at that. You know, there's a bunch of firms out there that are really, really good at getting that stuff done. And if you're one of those firms who's kind of struggling and shouldn't we? And are we not going to pay? Are we not going to pay? You're going to get left in the dust. It's always been competitive.

[00:18:08] And in the last post-pandemic, I think it's gotten more competitive. And the firms that know what they want and are willing to go get it are the ones that are carrying the day right now. You're absolutely right. And I've seen another thing for firms to keep in mind is not to overestimate your brand equity in the market. I've seen some firms, they think they're a bigger deal than they really are. And they might be a big deal, but there's 30 other firms that compete at that same level that have figured some things out a little bit more than this one firm. So I think that's another important variable. Where do you stand?

[00:18:38] One thing I did earlier this year, I went through all the top 200 firms and I ranked them in different tranches. You've got the elite firms, maybe there's about 20 of them, and then you've got lower-end firms, and then you've got the middle. And in the middle, I created the upper middle, the middle middle, and the lower middle. And so think of it as five different brackets, so to speak. And it's not necessarily profits per partner. It's reputational issues. It's the quality of the work that they do, what they're known for.

[00:19:08] And I found that a partner can go up one level or down one or two levels. If a partner goes down three levels, then people are going to look at them and say, gee, I wonder what happened to Larry. I hope he's doing it. So how do you think firms should really look at where they sit compared to everybody else? What do you think about that, Chuck? I think you just have to be realistic about yourself in the marketplace.

[00:19:33] And a lot of firms are stuck in the past and have a belief in their own reputation that is outdated. And so you just have to stay current. It's Darwinism, right? You evolve or you become extinct. And a lot of firms just have to be realistic about that and trust their people that they've hired to recruit. You know, folks like me and others in the industry are really, really smart and really, really good.

[00:20:01] And trust the people, you know, take their advice. You're paying us good money. Take our advice and take it into consideration. Absolutely right. Chuck, are there any final thoughts that you have that law firms, their recruiting departments and leaders, and also the third-party legal recruiters, headhunters, should keep in mind about being able to strike a deal that works to everybody's benefit? Yeah. I think, again, it gets back to that thing that we've talked about a little bit already.

[00:20:25] But there are certain recruiters in the business that you can develop that trust relationship with and have those off-the-record conversations with, you know, what's your candidate want? And it's just between the two of you. And that is a, you know, that was a huge gift to me to have people like that, like you, like other NALSIC members who you can really have those conversations with about offers. And so developing those relationships with certain recruiting firms is great for the firm people.

[00:20:55] And I've talked to a number of legal recruiters in my coaching business, and they talked to me about, you know, should I just, you know, work with everybody, or should I limit to a certain number of firms and work with specific firms? And obviously I said, look, do what you think fits best. But I think it's a very, you know, you need to look to the folks where you have those trust relationships at law firms, right? So in your business, Scott, you've got certain firms that you know you can work with really well. You know, why not dedicate your energies to that group where you have those relationships?

[00:21:25] I think that just makes a lot of sense. And it makes sense on both ends. It makes sense for the law firms. It makes sense for the legal recruiters. So I think that's the big message is those relationships matter. You can monetize them in a positive way. And so, you know, it's worth the effort to develop those relationships. I think so too, Chuck. That's a really good thought. And before we go, why don't you tell our listeners what you do, your offerings, and we'll certainly put all of your contact information on the show notes.

[00:21:55] Sure. You know, I do. I consult with law firms about partner hiring and integration. I coach a number of law firm associates of partners on all kinds of different things, variety of areas and legal recruiters. So I also do some consulting with a company called Flow Recruit, which has been tremendous. They're up and coming in the applicant tracking systems and technology area.

[00:22:20] And so, you know, I do all kinds of different things, stuff that I like to do. And one of the beauties of this is that I get to work now with people that I really enjoy working with and like working with. So some are retired, but keep my foot in the water. That's great, Chuck. Well, I really appreciate you being here again. And thanks so much for sharing your wisdom today with our listeners. Scott, it is always a pleasure talking with you. I feel like I get smarter after each of our conversations. Likewise, I feel the same way. Thanks for being here. You got it.

[00:22:50] Thank you for listening to the Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com. To inquire about having Scott speak at your next convention, conference, sales meeting or executive retreat, visit therainmakingpodcast.com.