Competition among law firms, for clients as well as for attorneys, remains fierce. Origination credits have long been a way of incentivizing business development, as well as providing a form of compensation that works as a strong recruiting tool.
But the historical methods for distributing origination credits may no longer be compatible with the current cultures and priorities of many firms. Moreover, they can create issues that undermine their intent. If any of these problems plague your firm, you may want to retool your policy for origination credits.
THE ORIGINATION CREDIT CONUNDRUM
Law firms have long given an origination credit to the partner who brings in a new client. That attorney often continues to receive credit for all work flowing from that client, even if he or she is not involved in it. Such an approach is replete with problems. Most obviously, it discourages collaboration.
It also can lead to frustrated younger attorneys. If some senior attorneys share their credits but others do not, the associates assigned to the latter — even though perhaps performing the same as the former — earn less. Further, associates might plead to work with the former, leaving the clients of non-sharers underserved. The traditional approach does not nurture business development relationship building in associates early on and it may push them to seek competitors who award associates for such efforts.
In addition, it does not serve clients well. The originating partner may hoard work that a colleague is better qualified to do, or can more efficiently perform. Partners might not assemble the strongest proposal team for a certain opportunity because they do not want to share the credit. This could also affect who is selected to work on a client team.
Finally, the traditional approach undermines succession planning. A partner approaching retirement may want to hold on to a credit as long as possible. This can result in inadequate time and exposure to successfully transition clients to younger attorneys.
A BETTER APPROACH
No firm should be locked into its current origination credit system. Firms can and should refine systems to be more equitable, prioritize teamwork and apply attorneys to their highest and best uses. When doing so, firms should keep several considerations in mind beyond just basing the credit amount on fees collected, which is the simplest and most straightforward formula.
Consider awarding credit to attorneys who bring value to a client's ongoing relationship with the firm, especially in retaining the client through various challenges that may have been encountered or expanding the client services into additional, unrelated areas, regardless of whether they originally brought the client on board. That means making other partners, associates and possibly even paralegals eligible for credit sharing. For example, your firm might opt to award origination sharing to partners who develop new business with existing clients.
Firms should develop a specific policy for credit-sharing, with clear metrics for what will be measured and compensated. The policy should also address how a credit will be distributed when the originating attorney departs.
It is wise to allocate origination credits by matter, not by client. Such allocation also encourages other attorneys to expand the client relationship, growing revenues for the firm.
Firms should provide a mechanism to incentivize senior attorneys to transition relationships in a timely manner before retirement. For example, you might double the credit in the years before retirement so both the senior lawyer and the lawyer taking over get credit.
ONE SIZE DOES NOT FIT ALL
There is no universal origination credit policy that will work equally well for all law firms. Take the time to develop a policy that reflects your firm's specific culture, goals and values.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.