"Should 'origination credit' allocated to partners for generating new clients be permanent (as long as a client remains a client of the firm) or should there be a 'sunset rule' on such credit to encourage partners to generate business from new clients?"

     "To what extent should partners who originate new clients share 'origination credit' with other members of the firm for cross-selling services and bonding these clients to the firm?"

     This article will describe an alternative approach for coping with partner compensation problems which may occur in those firms that assign partners 'permanent origination credit' for generating business from new clients, and methods for recognizing the contributions of other attorneys for cross-selling the firm's services to clients originated by other partners.

"Permanent" Origination Credit:

     Origination of new business from existing and potential clients is a major criterion in setting partner compensation in most law firms. It is the practice in some firms for partners who originate business from new clients to receive "permanent" origination credit for all work performed for that client by the originating partner and others, as long as that client remains a client of the firm. In other firms, the originating partner receives origination credit for a limited time, i.e., three years, five years, seven years, etc. After the client has been a client of the firm for that period, the "originating" partner no longer receives origination credit for that client, even though that partner may be the primary communications conduit between the client and the firm.

     The author has been called upon by several firms that have incorporated the "permanent origination credit" concept into their partner compensation system to address some very serious partner related problems which, unless checked at an early stage, may tear the firm apart. The first problem relates to the permanent origination credit lose their incentive to work as hard as non-originators. They no longer "have to" generate more new business from potential clients nor do they have to produce as much personal "billable work" as "non-originators" since they are assured of a share of profits from their origination credit and the personal production of others. This problem intensifies in firms which "non-originators" may inherit origination credit from departed or other partners.

     Secondly, many non-originators complain bitterly about the dis-incentive for them to cross-sell the firm's services or attempt to expand work for a client that has been originated by another partner. They claim, "It is not worth taking the time to cross-sell another partner's client since my efforts will go unrewarded."

     Unless partners in those firms which assign permanent origination credit to originators are willing and able to address and resolve these and other compensation problems, the continued viability of their firms, as they are presently constituted, may be at risk.

An Alternative to Permanent Origination Credit:

     Origination credit should be given to those partners who clearly initiate individually or with others, new clients and firm business. Further, we endorse some sharing of origination credit with those partners who develop business by cross-selling the firm's services to clients whose account was originated by another partner. The following addresses the above two partner problems by suggesting an alternative to the allocation of permanent origination credit to partners and describes how credit may be given to the partner responsible for cross-selling services to a client that was originated by another member of the firm.

     The alternative system calls for assigning to the originating partner, origination credit for a limited period of time, i.e., three years, five years, etc., followed by the allocation of "maintenance credit" as long as that partner complies with the following ground-rules which have been especially designed to insure that the client's work is performed in a quality and cost-effective manner and that the originating partner has the incentive to continue to maintain a relationship to bond the client to the firm.

     A partner receiving origination credit will be obligated to maintain contact with the client or the attorney(s) handling that client's work (if it is someone other than the originating partner) and participate actively in implementing the following functions to reinforce the relationship between the firm and the client:

1. Bring the client in the door and make certain that the work is referred to the appropriate attorney or practice area for handling.
   
   
2. Insure the client's work is performed in a quality, timely and cost-effective manner.
   
   
3. Maintain active contact between the client, keeping in mind the opportunity to aid in the development of that client or spheres of client activity.
   
   
4. Maintain a personal/professional relationship with the client and deal with any potential or actual problems which may arise during the processing of legal work or the collection of fees.
   
   
5. Insure the timely status of other reporting to the client is accomplished according to schedules agreed upon with the client or internal schedules maintained by the partner receiving origination credit.
   
   
6. Oversee and shepherd the client matter through the firm to ensure that work is performed in a timely manner.
   
   
7. Lastly, oversee timely and appropriate billing and collection of bills for fees and costs.

     From the above, it is obvious that merely bringing in a client across the firm's threshold, without performing the other listed functions will not assure the originating partner of receiving all of the proposed client origination credit. Further, origination credit should not be "inherited." To the extent a partner(s), other than the originating partner, has been instrumental in retaining or cross-selling work to a client that was originated by another member of the firm, the former partner may receive maintenance credit.

     Origination credit which results from two or more partners' marketing activities may be divided appropriately to the circumstances, by agreement between the lawyers interested. Such credit is usually divided by mutual interest between the partners who may have claim to such credit. Questions about the allocation of origination credit should be determined early in the client representation to avoid any embarrassment or disagreement at a later date. In the event of unresolved problems about claims for origination credit, the decision may be made by the executive committee or the compensation committee subject to partnership review. Determining origination credit for a new client is oftentimes accomplished by circulating to the partners weekly, or as frequently as required, copies of every new File Intake Form which identifies the attorney(s) claiming origination credit.

     For purposes of evaluating the contributions of partners for compensation purposes, neither maintenance nor origination credit will be perceived as having more or less value. The appropriate committee will be responsible to review the origination credit relationships among partners for clients that have been clients of the firm for the agreed upon "cut-off" period to determine whether the origination credit, converted to maintenance credit, should remain with the "originating" partner, be shared by that partner with others or be entirely reallocated to other partners.

     After the initial sunset rule on origination credit has been applied, the executive committee or compensation committee may review annually or every two years, the contributions of each partner receiving maintenance credit to determine whether this credit should be retained by the partners in the same manner or re-allocated to others as changes occur in client relationships and work performance. In making their review about the allocation/re-allocation of maintenance credit, the recommendations of the executive committee or compensation committee may be subject to appeal to the partnership.

     With the exception of "Bringing the client in the door," the recommended obligations of partners receiving maintenance credit are the same as those obligations listed above for a partner to receive origination credit.

Conclusion:

     Rethinking the methods and structure for compensating partners generates a level of anxiety and tension among and between partners that members of most firms wish could be avoided. Until a half dozen or so years ago, partners in most firms had the luxury of practicing in a highly protected environment where uncomfortable discussions, especially about money and the value of partners' relative contributions to the success of the firm, and to each other, could be avoided. In light of the changes occurring in firms of all sizes and specialties as the result of the highly competitive marketplace, partners must be sensitive to the importance of the relative contributions of every member of the firm in terms of attracting business, bonding clients to the firm, producing high quality legal work at fees that clients are willing and able to pay and the need to monitor the performance of partners to develop and retain clients and to enhance the volume of business obtained from existing clients, and compensate them fairly and adequately for their overall results and efforts. Partners' performance must be assessed against criteria, agreed upon by the partners that addresses the firm's immediate and long-term needs and priorities. The extent to which partners are willing to accept and implement this concept and do a good job in determining performance criteria and administering the compensation plan, the opportunities will be enhanced for firm stability and professional and economic satisfaction among the partners.