Rather than probing about candidates’ past earnings and future expectations, lateral recruiting teams would benefit by focusing on how candidates can address concrete business needs and growth.

Compensation. Remuneration. Base-and-bonus. Whatever term a recruiting team chooses, if they ask a lateral partner candidate about current earnings, they’re going to get pushback. Compensation is a touchy, personal subject. It’s also a topic that most partners would prefer to avoid, because, well, it’s complicated.

In New York, it’s been illegal to ask about a job applicant’s salary history since October 2017. More than two years later, however, when it comes to questioning lateral partner candidates, we find that about half of AmLaw firms choose to ask anyway. These firms (including some that are structured as corporations and pay partners as employees with a W-2), maintain that because the candidate seeks to join as a shareholder or partner, the rule banning compensation questions does not apply. This is a position that many employment discrimination experts contend is wrong. Meanwhile, the other half of firms opt to ask partner candidates about their earnings “expectations.” That’s an artful dodge, but the “expectations” question nonetheless triggers candidates’ anxieties by requiring a prospective candidate to self-assess—in a vacuum—their overall value to a new firm or else disclose their current compensation as an easy way out.

As New York-based recruiters who have placed hundreds of partners in New York City, we suggest that questions about a prospective partner’s past earnings or future expectations should become less relevant. The burden of coming up with a compensation figure shouldn’t be on a candidate. It should fall on the shoulders of the law firm’s management and hiring teams. Who else understands better how a firm’s compensation system works, and how much the firm can afford or stretch to pay an incoming lateral partner?

We have long recommended that firms map out—in advance of any search—the specific client demands and growth strategies that warrant bringing in lateral partner talent. Ideally, firm management will also have identified the particular business objectives they intend to achieve through lateral recruitment. According to Citi Hildebrandt’s 2020 client advisory, these planning tactics have taken hold: “Firms are now aligning their hiring decisions more closely with the firm’s overall strategy,” the report states.

Citi Hildebrandt’s latest findings also conclude that firms aim to resist the temptations of “opportunistic hiring.” In other words, unless hiring partners can state a compelling, business-driven rationale that their entire partnership will support, they’re increasingly reluctant to make offers that others might perceive as grandiose. Indeed, according to The American Lawyer’s 2020 Forecast, up-and-coming leaders at AmLaw 200 firms are keen to increase harmony among their partners. “Keeping the trust of their colleagues,” the magazine said of next-generation leaders, “Is a high priority.”

Still, striking the proper balance between respect for loyal partners, and rewarding prospective lateral rainmakers, is no easy task. And multiple sources, including Citi Hildebrandt and ALM Intelligence, cite lateral partner hiring as a key component of most firms’ plans to grow revenues. Which brings us back to the delicate topic of compensation.

Obviously, in order for any negotiation to move forward, the parties need to agree on some compensation parameters. We suggest that the law firm should begin that conversation by formulating a figure based on the candidate’s expertise and their portable book of business, aligned with the firm’s overall growth strategy and internal compensation methodology. When firms consider the compensation question this way, they’ll find that the business case for bringing in a lateral partner has very little to do with a lawyer’s past earnings.

Recent high-profile placements prove our point. Last October, for example, when London’s Freshfields Bruckhaus Deringer reportedly agreed to pay M&A expert Ethan Klingsberg $10 million a year through 2024 to head up its burgeoning New York corporate practice, the deal wasn’t a reflection of Klingsberg’s prior pay. In our analysis, Freshfields calculated that a $50 million five-year investment in a practice led by one of the top players on the worldwide M&A stage would be a solid strategic move in building a New York deal practice from the ground up. Granted, the recruiter who claimed credit for the deal, Mark Rosen, told Law.com that in moving to Freshfields, Klingsberg more than tripled his previous earnings at Cleary Gottlieb Steen & Hamilton. In our opinion, Rosen violated client confidentiality by revealing Klingsberg’s compensation, but his disclosure nonetheless supports our argument that prior compensation is irrelevant to determining a lateral’s worth.

The same could be said of Sandra Goldstein’s 2019 move from Cravath, Swaine & Moore to the New York office of Kirkland & Ellis. Under Cravath’s lockstep system, Goldstein, who had been a senior partner and its chief of litigation, undoubtedly took home a good deal less than Kirkland’s guarantee of $11 million-a-year for five years. (According to the AmLaw 100, Cravath’s 2019 profits-per-partner were $4.62 million.) But as we see it, Kirkland didn’t base its offer on what Goldstein made at Cravath. Kirkland proposed a deal that, in the firm’s view, reflected her overall value in the country’s most-competitive and high-priced legal market.

The Klingsberg and Goldstein examples illustrate how and why market demands and a firm’s business-driven hiring needs are far more important than a candidate’s past earnings or future expectations. Besides, as we mentioned at the outset, partners’ compensation histories are often complicated by factors that have nothing to do with their performance. A couple of years ago, for example, we worked with a partner whose compensation had been cut repeatedly despite his keeping pace with his past originations and collections. Firm policies linking seniority with pay caused the declines, which ultimately resulted in an annual pay cut of around 30 percent. We facilitated a lateral move for this partner, with a firm that brought his remuneration up to market—around what it would have been without the punitive policy.

Recently, we spoke with a New York partner at a highly respected litigation boutique who expressed an altogether different compensation-related concern. Although she made around $1.8 million on her own book of business, she said, compared with the city’s big-law salary standards, her pay was probably above-market. She nonetheless wanted to explore lateral partner opportunities among AmLaw firms with business platforms that meshed well with her client base. If management could assure her that the firm would support and reward her contributions going forward, she added, she would entertain opportunities that involved an initial pay cut. What’s more, if prospective firms were to ask this partner only about her prior compensation, those firms would have missed out on knowing that she was willing to take a step back in money to take two steps forward in opportunity.

Law firm leaders and lateral partner candidates alike could take a cue from this candidate’s realism and candor. At the end of the day, arriving at a compensation figure that satisfies everyone requires a complex and nuanced process. Although smart candidates will come to the table with a clear understanding of market demands for their services and the value of their practices, we believe it’s up to the hiring firm’s leadership to address, head-on, their compensation package and system.

Ross Weil and Keith Fall are partners with the New York-based legal recruiting firm, Walker Associates. They can be reached at RWeil@walkersearch.com and Kfall@walkersearch.com, respectively.

This article was published by The New York Law Journal: