Shawn Wolfson is a lawyer who appreciates the hustle. As the managing partner of Blaney McMurtry LLP, he has to make sure his nearly 130-lawyer operation has a strong and steady pipeline of clientele—and he’s under no illusion that such an objective is easy to achieve, especially with a sales force of, well, lawyers. “Law school doesn’t teach you how to develop business,” says Wolfson, speaking from his office at the firm’s headquarters at Queen and Yonge. “So when we have a lawyer who goes out and spends the time to be able to develop an incredible practice, I think we need to be able to measure the true value of that.”
It’s a perfectly reasonable argument. Performance-based compensation has been a pillar of capitalism since the first salesperson won the first commission. In the legal industry, many lawyers need a similar incentive to enter the arena of rainmaking. One reason is that every moment spent wooing clients could also be spent accumulating hours. Without the prospect of a financial reward, lawyers might never redirect their labour away from billable work and toward drumming up new business. Another reason is that, for a significant segment of the profession, schmoozing with clients doesn’t come naturally. As Wolfson puts it: “I do think it’s a rare person who is both absolutely pleased with what they do in terms of the work and incredible at going out there and actually bringing in clients.”
To recognize the effort involved in business development, most law firms hand out origination credits. In the model’s simplest form, a lawyer (usually a partner but not always) earns a credit when landing a new client. Broadly speaking, that credit translates into cash via two common paths. In path one, firms adhere to an eat-what-you-kill formula: the lawyer receives a cut—say, 15 percent, though this number varies widely—of the client’s future legal bills, sometimes in perpetuity. Path two applies to equity partners who work under a compensation committee: when determining the partner’s income, the committee considers the credit alongside a broad set of factors like whether the partner mentors associates or participates in management.
Yet it’s almost impossible to award origination credits in a manner that everyone will consider fair. What should happen, for instance, if a rainmaker nets a client but a second partner oversees the work? At some firms, that second partner would receive no special recognition, which can be a morale killer among those who specialize in client management. Many firms have sought to solve this problem by bestowing a secondary credit on lawyers who preside over the work. But even that policy has a downside. Namely, it can give rise to internal rivalries as partners jostle for the leading role on incoming files. For these and other reasons, lawyers often grumble about credits to their peers and pals.
Yet there are legions of lawyers who are pretty happy with the status quo—specifically, its material impact on their bank accounts. To paraphrase Churchill’s old yarn about democracy: origination credits are the worst way to reward business development, except for all the other methods that have been tried. Still, it’s worth probing how the model became so popular, the problems it can create and what firms can do to incentivize rainmaking more equitably.
Understanding how origination credits became so pervasive requires a look back 40 or 50 years. By the 1980s, governments around the world had passed new regulations in dozens of industries. As the legal needs of most businesses surged in complexity, general counsels transformed into sophisticated and demanding corporate operators. Law firms had to press harder to earn work that, in previous decades, they might have handled by default. “Firms started to need their lawyers to be entrepreneurial,” says Mitt Regan, a professor at Georgetown Law and the director of the school’s Center on Ethics and the Legal Profession. The origination credit emerged as the central tool to make that happen.
Competition within the legal market has only increased. Today, in-house departments can be fiercely choosy about which firm to retain as external counsel. “As the market has become more unstable, client relationships have become more temporary,” says Robert Nelson, an expert on the sociology of the legal profession who teaches at Northwestern University. “Law firms need their lawyers to be out there getting that work.” In such an environment, it perhaps makes sense that the compensation structure would favour the people who bring in clients and revenue.
In practice, however, the origination-credit model can create cleavage, confusion and even conflict. To begin with, it can divide a firm into those who hustle and those who don’t. Partners who lack the skills or inclination to source new business can feel like they’re on the lower level of a two-tier system—especially when the rainmaker vanishes after landing the client. “I think there is frustration when those lawyers who feel they’ve been doing the lion’s share of the work for a client don’t get what they see as a fair share of the money,” says Nelson. Once a sense of exploitation takes hold, it can poison a workplace with bitterness.
It doesn’t help that the rules about who is entitled to origination credits can be subjective and murky. Some firms allow rainmakers to share their credits with colleagues who contribute substantively to the work, a seemingly sensible reform. But a lawyer’s ability to get a piece of a credit depends in large part on the benevolence of the person who holds it. “Often, resentment is born not necessarily from the fact that there are origination credits,” says Regan. “It comes from the extent to which their colleagues are willing to give credit or share it with one another.” If you work with a fair-minded partner inclined to split the pie, you’re in luck; if you’re stuck with a credit hoarder, better luck next year.
Complicating matters is that lawyers will sometimes trade credits—or slices of credits—among themselves as a sort of shadow currency, to call in or acknowledge favours. “There’s a kind of informal bargaining process that goes on,” says Regan. While firms are aware of such machinations, many are quick to look away: “It’s generally not regulated by the firm because they really don’t want to get in the middle of it.”
In light of these shortcomings, some firms have chosen to avoid origination credits entirely. That includes the six-lawyer litigation boutique St. Lawrence Barristers PC. Having logged years in the Bay Street trenches, Alexi Wood and Anna Matas, the firm’s two partners, want to prevent the toxic territorialism that credits can provoke.
Both Wood and Matas handle the vast majority of business development without any who-brought-in-what bickering. “Alexi and I share the idea that a rising tide lifts all ships,” says Matas. “We work together to bring in high-quality work that we want to do and that our juniors want to do. We found the solution that works for us.” Wood acknowledges that a credit-free structure is more feasible at a smaller shop than it would be at a major firm with hundreds of lawyers. But she’s committed to it in the long term. If the St. Lawrence Barristers partnership expands, she has no intention of introducing a credit system—which she views as “inherently antithetical” to the collaborative approach she’s been working to foster since she started the firm in 2017. She simply can’t condone the harm that can come from, as she sees it, pitting colleagues against one another: “I’ve never seen it work where, at some point, somebody doesn’t feel that they have been treated unfairly.”
So, yes: origination credits can be messy. Aware of the model’s limitations, some firms are working to refine it into something better. Which brings us back to Blaney McMurtry. The complexities of lawyer compensation certainly aren’t lost on Wolfson. In his 22-year legal career, he’s seen lawyers stockpile credits until they retire, while others happily spread them around like glitter. (Blaney McMurtry allows credit sharing.) “Neither approach is right or wrong; they’re just different,” says Wolfson. “Our compensation scheme is, I think, flexible enough to deal with all of those aspects working at once.”
Here’s one example of that adaptability: both associates and income partners at the firm can earn origination credits—not just the equity partners. “If a first-year associate brings in the client, that credit is absolutely theirs,” says Wolfson. “It’s just part of our model.” Associates and income partners receive payouts for their credits through discretionary bonuses, based on the amount and nature of business generated from the new client.
For the firm’s roughly 50 equity partners, Blaney McMurtry has a compensation committee—comprising four members of the firm’s executive and four elected partners at large—that considers more than just numbers when determining each person’s pay, assessing qualitative and quantitative contributions over a pair of marathon meetings. “We know we need to think about the softer things,” says Wolfson, such as which partners have put time into mentoring juniors or firm management. The committee debates and deliberates until it arrives at a set of figures that every equity partner can see, thanks to the firm’s open compensation system.
Does everyone end up happy? Of course not. The work of compensation committees can often cause frustration. And besides: “Lawyers have a proclivity for being difficult to deal with at times,” says Wolfson, with a smile. “But I think in the end most people understand that it’s a pretty fair process.”
Still, Wolfson sees room to improve further. Earlier this year, the firm’s leadership sent a survey to every equity partner on the subject of origination credits, an attempt to establish concurrence on what constitutes a fair outcome in scenarios that range from the straightforward (when lawyers bring in a new client utterly unknown to the firm) to the nuanced (when lawyers bring in a client for a file that falls outside their area of specialization and on which a colleague will be logging most of the hours). The executive committee is still reviewing the data in depth, but Wolfson is optimistic that the feedback will enhance the firm’s approach. “I don’t think it’s possible to get absolute consensus on it,” he acknowledges. “But we want to get to some collective understanding of how we can treat things in a way that is fundamentally fair to everybody.”
Gradual evolution of this sort may not satisfy critics of the model. But experts contend that anything more dramatic is likely unrealistic in an environment that currently benefits many of the industry’s top performers. Still, says Regan, organizations have begun to understand the importance of making incremental changes to their origination-credit structures. He’s seen firms implement sunset provisions that cause credits to expire after a certain number of years, so a lawyer can’t pocket revenue from a client indefinitely. He’s also seen firms issue sub-credits for different types of revenue-producing work, such as generating new business from an existing client. “Firms are becoming more sophisticated in appreciating that there are multiple people who contribute to getting clients and keeping them happy,” says Regan. “More and more are seeing it as a team process, where each person plays a role—not just the solo stars.”
Illustration by Raymond Biesinger.
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