As a headhunter and career counselor for lawyers for more than a quarter of a century, I am always surprised to hear law students’ and lawyers’ disregard for math and the business of law. Ignore the business side at your peril.
They would say: “If I wanted to be in business, I would have gotten an MBA.” If I had a nickel for everyone who said this, I would have had a room full of nickels.
Business of Law: math, finance, accounting
Whether you are in private, public, corporate, or non-profit practices, the engine driving the train is money. You don’t need an accounting or finance degree to understand the the nuances of your organization’s financial life, but there are some questions that you need to ask.
Whether you are new to the practice or a senior, experienced professional, you need a clear idea of:
Where does the money comes from?
Fee-for-service. Contingent fees. Alternative billing arrangements. Restricted or unrestricted grants. Individual or corporate philanthropy.Agency fund-raising. Government funding (national, state, local) from legislative action that requires annual renewal or that has been embedded into statutes.
Who governs the organization? How do they do it?
Board of Directors. Executive Director reporting to a board. CEO reporting to a Board. Management committee with multiple sub-committees. Single Tzar-manager. Small group of founders meeting every week, eating pizza, and managing the enterprise. If you were to make a list of governance configurations, you would be writing until next Tuesday. Make sure that you know how your organization works.
How is compensation determined? Compensation set by government or civil service rules. Owners get an agreed-upon piece of the pie. Single autonomous compensation tzar. Compensation committee allocates all annual compensation and bonuses. By seniority. By an “eat what you kill” system. There are almost as many compensation systems as there are organizations. Find out how your system works.
How is your compensation set? If you are to get a bonus, what are the standards or goals that you were to have attained? If you are junior, will you be compensated for work generated from clients that you bring? If you are a partner, do you understand generation and proliferation credits and all other permutations of work attribution? If you are making a lateral move, how will you be credited for work that you bring from your previous firm? How will your work be billed on work that you bring from your previous firm?
Bad story. Lateral partner makes a well-publicized move to a firm full of his long-time personal and professional pals. On a handshake, he brings a significant book of active, ongoing business. At the end of the year, he finds that the firm has charged him his retail (high) hourly rate for the work that he did on those files. Instead of earning more than $200K on the work, he “earned” less than $20K. Get all of your compensation agreements in writing.
How will you be trained and evaluated? Does the employer provide or support a list of core competencies that you will have to attain so that your progress can be charted and evaluated? Does the employer provide or reimburse you for necessary continuing education? Who evaluates you? How often can you expect formal evaluation? Is it your responsibility to create a network of informal evaluators? Your goal is to create a professional framework that will take all possible surprises out of your annual evaluation.
How are your clients governed? All of the questions that apply to your relationship with your organization apply to your clients and their employee/business relationships. Ask the tough questions. Your clients will benefit from your complete knowledge.
Before you join a new employer, ask questions until you understand the governance and compensation systems. You don’t have your own lawyer? Get one before you sign on any dotted line.