Biglaw, Small Law Firms

More Firms Should Offer Origination Bonuses To Associates

The extra revenue and professional development opportunities are usually well worth the expense.

By  
on

(Image via Getty)

As many people within the legal profession already know, numerous law firms offer associates a bonus for work that they bring into a firm.  Indeed, many shops award associates a percentage of any revenue from clients they originate, and this amount is usually 10 to 20 percent of all collections received from an associate’s clients.  However, a number of law firms do not provide associates with any reward if they bring in business, or merely assure attorneys that any business development will affect end-of-year bonus determinations.  Nevertheless, more law firms should offer origination bonuses to associates, since firms can increase their revenue through such initiatives and associates will be more motivated to grow professionally.

I first became aware of origination bonuses when I worked at my second job after graduating from law school.  During the interview process, the partners told me that the firm had an origination bonus program, and this really appealed to me.  In order to increase my income, I made sure to attend as many networking events as possible and cultivate my contacts so that I could originate business at the firm.

It took a while to bring in business, but over time, I originated a handful of clients that eventually accounted for six figures of revenue.  This was a decent amount of money to the small firm I worked at, and the business I originated helped keep people busy at the firm.  In addition, I stayed at that firm longer than most attorneys did, so that I could develop the business that I helped originate.  Furthermore, origination bonuses helped me develop skills and step outside my comfort zone in ways that I had not done earlier in my career. I am not sure if I would have felt confident starting my own firm if I did not have experiences with origination bonuses while working at this shop.

I later worked at a few different firms that did not have origination bonus programs.  Because the firms did not award additional compensation based on the work associates originated, I did not feel as compelled to bring in business.  In fact, none of the associates at those firms really originated business.  As a result, the firm was largely reliant on a handful of clients that were originated years ago by a few senior partners.

At one of my year-end reviews, I brought up the issue of origination bonuses when the partners opened the floor up to suggestions that could improve the firm.  The partners seemed hostile about implementing origination bonuses, and seemed peeved that I would bring up the topic.  The senior partner gave two reasons why the firm did not want to institute origination bonuses.  First, the senior partner said that origination bonuses could increase the firm’s malpractice liability, since matters originated by associates are usually outside of the firm’s wheelhouse.  Second, the senior partner said that origination bonuses could open the firm up to additional conflict-of-interest issues with our major clients.

I never found either of these arguments convincing.  Clients originated by associates would be vetted just like clients originated by partners, and simply instituting an origination bonus program does not mean that the firm needs to take every matter that comes our way.  In fact, if an associate bagged a juicy corporate client, neither of these reasons would likely be implicated.  The senior partner was honing in on a few past issues that had no bearing on origination bonus programs as a whole.

Sponsored

It seems like there are a few major reasons why firms do not institute origination bonuses.  Not to mince words, but the main reason is greed.  Partners sometimes do not want to share more of the firm’s revenues with associates than is absolutely necessary.  Indeed, one time earlier in my career, I was at a firm that did not have an established origination bonus program, and rather told associates any business would be considered during year-end bonus determinations.  One associate originated an extremely lucrative personal injury matter that eventually netted the firm a substantial amount of money.  That associate received absolutely nothing for the origination, and this example shows that some firms are simply unwilling to share extra revenue with associates.

Another major reason why firms do not have origination bonuses is because firms want to be in control of all of the money that is shared in a firm.  By instituting origination bonus programs, firms are less able to control how revenue is distributed, since money is provided to associates according to a calculation instead of the discretion of managers.  However, firms can establish programs that merely entitle associates to ten to twenty percent of the revenue from clients they originate so the lion’s share of revenue is still in the control of the firm.

Some might say that origination bonuses shouldn’t be necessary, and that associates should see business development as part of their job.  Indeed, some may argue that associates are not being team players if they only strive to originate business when there is something directly in it for them.  However, most associates are simply tasked with billing time to generate revenue, and developing business is not within their normal job description.  In addition, people should not denigrate associates for being motivated by making more money, and firms should try to incentivize associates accordingly.  Although firms may have to pay associates additional compensation with origination bonuses, the extra revenue and professional development opportunities are usually well worth the expense.

Jordan Rothman is a partner of The Rothman Law Firm, a New Jersey and New York full-service law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jrothman@rothmanlawyer.com.

Sponsored

Bonus Time

Enter your email address to sign up for ATL's Bonus & Salary Increase Alerts.

Topics

, , , , ,