Community Table: Origination Fees for New Hires, “It Gets Weird”

Episode Notes

Transcript

Announcer:

This is Unbillable Hours community table, a monthly virtual round table where lawyers discuss issues their practices are facing, and receive feedback from lawyer and law firm management consultant Christopher T Anderson. Join the conversation live every third Thursday at 3:00 PM Eastern. The first two segments are a discussion about how to implement origination percentages for an attorney who is joining the firm.

Caller #1:

I have a current attorney who is of counsel, who has agreed to come on full-time. He is uncharacteristically excited about it, super motivated and likes the comp structure back to basics that we set forth. That being said, and there are no problems, I think we could work all the rest of it out. There are a few lingering items that he had asked me about and I wanted your input on them. Let me just go through, okay. Origination, I think the origin, if I give an origination percentage, should it be paid monthly, quarterly, probably quarterly. Or wait till the whole case is over In Case I have to do refunds. But if I do refunds, I can always claw it back.

Christopher T. Anderson:

Yeah, you claw it back. My general feeling on it is driven more by pragmatics than by anything else. It’s that calculating these things monthly or every rebuilding cycle can be an administrative headache. Also, when if you have an eligibility clause as to how origination is earned, it requires the quarterly period kind of locks the employee in a little bit more than a monthly, because otherwise they may be walking away from

Caller #1:

The amount.

Christopher T. Anderson:

Yeah, some accumulated origination. I am less concerned with that as it regards origination, and under the circumstances that I’m looking to reward origination, I am more inclined to do that monthly than I am a production bonus. For instance, production bonuses I’m more likely to hold onto because at the end of the day, origination is not that hard to calculate as long as they’ve raised their hand and said, these are my cases, these are the ones I’ve originated. And one of the things that I think is important to do when if you’re going to be paying it monthly, even if you’re going to pay it quarterly or whatever the rule is, is that it’s not, at the end of the day, you will be calculating it, but that it’s not your responsibility. So in other words, the attorneys or the originators, whoever they are, need to raise their hand and say, I originated this case by doing X, Y, or Z. It’s a personal friend. It’s a friend of a friend. My chiropractor sent them whatever, just enough so that you know that it wasn’t, oh, they saw the ad that the firm paid for and just happened to be the guy who picked up the phone.

That’s not origination. If it’s a client who the firm originated and they hire for a second matter, that’s not origination. And it’s just, I like it to be incumbent upon the originator that they claim their origination and the reason, and here’s the downside to the monthly, if they fail to claim the origination at the time that originations are calculated, they can’t come back and ask for it. It’s done.

And it’s not to be mean. The reason for it is that you’ve now allocated that origination somewhere else. Maybe somebody else in the firm claimed it. You’re not going to pay two people and you don’t want to fight. Maybe you allocated what would’ve gone to origination to marketing dollars and fed that budget with it, but the money’s gone. And so it’s incumbent upon them. Now, if they said, I originated this because Rob Lightner sent it to me, and you have a problem with that explanation, it takes you longer to figure it out. You don’t pay it this quarter. That’s not on them, that’s on you. You got to pay it. If you figure out, yes, it was their origination, but if they fail to claim it at all, it’s lost. And that’s just to say that monthly is a very quick time and you need to have some mechanism. And the way I do it is I have a firm roster of all clients that we share with the entire team. And one of the columns, it’s a spreadsheet. One of the columns of the spreadsheet is origination, and it’s incumbent on you to look at that at least once a month and make sure that your name is where it should be.

Caller #1:

You have a spreadsheet. Really. Just kidding. Okay. And then one of the other issues

Christopher T. Anderson:

Only I haven’t figured out how to do it in Clio.

Caller #1:

Yeah, yeah, yeah. The other issue is that he has seven cases of his own.

Christopher T. Anderson:

Before we move on to your other issue, Rob was raising his hand. I want to make sure that Rob and Joshua both get a chance to chime in on what we were just talking about.

Rob Leitner:

Sure. Thank you. So the minute you started talking about someone, an attorney who was of counsel moving to full-time, my thoughts went to origination, but I took a left instead of a Right. What I’m thinking of, was this a solo practitioner?

Caller #1:

Yes.

Rob Leitner:

Did this person have a website and a phone number that possibly brings in leads?

Caller #1:

Yes and no. He’s been my of counsel for five years.

Rob Leitner:

Okay. So I’d want to know the phone number to his separate firm and the website, the domain name, is there traffic, because this also falls under the purview of origination. You possibly could have his domain forward to your domain, or in other words, you could just have a contact us form, go to your site. Phone number is easy to track. In other words, at the end of the day, whether it’s phone, the domain, the website to contact us, theoretically, this could be a really nice marketing tool that you can leverage to bring in leads. And this attorney can get origination on anything that comes in through their former, his or her former ip.

Caller #1:

That’s a good point. I didn’t even think of that.

Christopher T. Anderson:

Yep. That is a really great point. Really good point, Carrie. As I’ve grown our businesses and we’ve acquired other lawyers in this way, that’s exactly what we’ve done, and I just didn’t think about it right now. But yeah, don’t kill their

Caller #1:

Ip,

Christopher T. Anderson:

Use it to drive business to you,

Caller #1:

But it would be their origination.

Rob Leitner:

Sure.

Christopher T. Anderson:

But yeah, again, under the same rubric that you didn’t pay for it anyway.

Caller #1:

That’s right. That’s right. And maybe just put a contact us form up on it, which is a great point. Did Josh want to add anything? This other question is a little more complicated.

Christopher T. Anderson:

Before Joshua goes in, I’d go beyond just a contact us page. I would have a 3 0 1, 3 0 1

Caller #1:

Redirect redirect

Christopher T. Anderson:

To a landing page that highlights that attorney. But in your branding, the landing page, we’re so excited that this attorney is now a member of our firm and so glad that you reached out to him, blah, blah, blah. All the words that we would use.

Joshua Lenon:

Okay.

Christopher T. Anderson:

Joshua,

Joshua Lenon:

One thing that I would look at personally is how are you compensating this higher now? So if they’re getting a monthly salary or a paycheck every two weeks, and you’re paying the taxes on their income as part of payroll taxes, then I would sync your origination fees to that payment cycle. Right? So if you’re going to calculate it monthly and it comes out then with payroll taxes, but if it’s going to be seen more as a bonus or profit as a partner, then I would do a quarterly to help with their estimated tax payments. And so do the calculation based on how you’re going to be distributing the money rather than a fixed cycle that’s separate from that.

Christopher T. Anderson:

Interesting. Yeah, that’s really interesting.

Joshua Lenon:

And I think that’ll just make it easier for your bookkeeper and your payroll software to handle it all.

Caller #1:

Okay. That’s interesting.

Joshua Lenon:

Definitely food for thought on that.

Caller #1:

Second question is, so right now from his independent firm, true solo, no staff, no nothing has seven cases. So he asked me, and they’re not at the hourly rate that they would be here. It’s like a 25% if they were to come over. And he does things a little more not structured than I have. So he had asked me if it would be okay if he looked it up, and you’re allowed to work at two separate law firms so long as there’s no conflict time here, and then his own thing, which is interesting, but be that as it may, that if he could just wrap up those seven cases independently and then if that’s the case, he could start in two weeks.

Christopher T. Anderson:

I guess the question is when does he expect to wrap them up?

Caller #1:

Well, some of them are ongoing. Some of them, I asked that question, who knows? But the point is that it wouldn’t necessarily affect what he needs to do for me and meet those hourly requirements, although that’s a risk I would be taking by putting him on the new salary and all the things. And then what crossed my mind is, am I losing any money? Although I have to tell you, his clientele couldn’t afford, they’d be out of the retainer in about 10 seconds, which would be bad blood. So

Christopher T. Anderson:

Let me answer it this way without saying, while making clear, this is not necessarily my recommendation, alright, I’m going to give you what I feel is best practice and then I’m going to shut up and not give a recommendation. I’m going to let Rob and Joshua give some recommendations on this. So this is what I think is a way to do it. One, your grandfather, his rates absolutely don’t screw

Caller #1:

The price about that hundred percent

Christopher T. Anderson:

The clients

Caller #1:

Forever and ever and ever until with

Christopher T. Anderson:

Those clients, either forever and ever or for six months or whatever. But ask him how long he thinks those cases are going to go and grandfather it that long. But you don’t want to give these clients any reason to just jump because of a price hike. So you grandfather the rates, you bring it into your billing and your firm bills it. You’re paying the guys a full time. So moonlighting from the day one just feels weird because now I’m paying you full time, but you’re over here putting a hundred percent of the fees in your pocket over here. Obviously he gets origination on those and they go and they count towards his hours. Then under those circumstances, that’s a way to do it. So before I give my recommendation as to how to do it, but I’d like you to first of all just explain a little bit more why which way this goes affects his start date and then let Rob and Joshua chime in.

Caller #1:

I guess it doesn’t necessarily.

Christopher T. Anderson:

Yeah. All right. Any thoughts, Joshua? Yeah.

Joshua Lenon:

For me, it’s all about your professional liability insurance and whether or not they’ll cover these incoming cases or will the incoming attorney need to maintain their own to cover these clients and cases. And that I think should impact. Do you bring this into your system if your liability insurer is not going to cover it, right? If they’re not, you don’t want these cases in your system. You don’t want to be responsible for the billing. You want those completely separate. If they are going to cover it, then I do agree, go with Chris’s approach. But I think that would be where I would start to research this. If he’s going to be maintaining these cases as a separate workflow, what’s going to be the impact to your insurance risk and then plan accordingly around that.

Rob Leitner:

I only have a little bit to add. Number one, I agree a hundred percent grandfather those rates honor it, not worth it. Number two, we need to understand the cases a little bit. How much time and energy possibly would be required for them to complete? What’s the timeframe? I want to analysis number three, if we do bring them over and there is origination, I’d want to know the ROI on the case, right? Because we’re still paying and there’s going to be an origination fee as well. So I’d bake that into an analysis of does it make sense for the case to come over? I’d want to know how much money is in trust. I’d want to know all the financials about the transactions. Was this flat fee? Is there retainer? Is it trust? What do the funds look like in trust? The balance? And perhaps most importantly, will your firm’s resources be required to support the case going forward? So I know it was his case, but he no longer has a firm and it’s just him. Is he doing this on his own or would he start leveraging some of your firm’s resources to bring these cases to completion? And if so, that changes the dynamic and the equation a little bit.

Caller #1:

And I have a third idea on how to handle this, but with both very good points, my suspicion, and he told me about one, my suspicion is that he didn’t have a very good operating system. My suspicion is that these people gave him retainers and he spent it.

Christopher T. Anderson:

That’s what I’m guessing too.

Caller #1:

And he doesn’t want to come out of pocket to put it in my, and some of them owe him money, but he knows they’re going to pay eventually, and he doesn’t want to bring that into my world. And frankly, I don’t want it in my world.

Christopher T. Anderson:

Well, the AR should come into your world if he’s going to be working under your salary, but you don’t have to listen. You could just decide, you know what, that’s fine. I’m going to load you up. I expect you not to whine about it. And it’s fine if you feel like these are just financial problems that you just don’t want to deal with.

Caller #1:

Well, it’s also that’s

Christopher T. Anderson:

Okay too.

Caller #1:

Yeah. And to some extent, I’m taking a little bit of a, given any other situation and any other timing and where I am in the business, I wouldn’t take this approach. But frankly, to send out retainer agreements, chase these people down to resign, they don’t understand what’s happening, et cetera, opening their file internally, et cetera, et cetera, et cetera. Yes, it can be done, but there’s people going out and now there’s people coming in and it’s a lot. Seven people aren’t a lot, but I’m just saying. But my other thought was why not have him pay me an originate, not an origination, but a percentage of what he’s, if he’s moonlighting on my, no,

Christopher T. Anderson:

That gets weird. Either bring the cases in or let ’em keep ’em worked up, keep it clear one way or the other. Don’t think. The other thing, and this is not advice regarding any specific state bar, but my general knowledge of state bar rules are that while what you said is true, when you have an attorney working for both firms, all conflicts are transmuted to both

Caller #1:

Firms. That’s correct.

Christopher T. Anderson:

Okay.

Caller #1:

That’s correct.

Christopher T. Anderson:

Yeah,

Caller #1:

He’s, anything new that comes his way is going to be under my umbrella.

Christopher T. Anderson:

Yeah,

Caller #1:

He just wants to wrap up these seven, the seven ones he has pending,

Christopher T. Anderson:

But you’ll just want to run a conflict check on all seven.

Caller #1:

Oh, yeah, yeah, yeah. In fact, we already have that in place when we have off counsel. Okay,

Christopher T. Anderson:

Good.

Caller #1:

Yeah.

Christopher T. Anderson:

Alright. Does that cover what you were asking?

Caller #1:

I think so. And I think it doesn’t either way. Doesn’t affect the start date.

Christopher T. Anderson:

I don’t think it should. I mean, I haven’t heard something that would make the start date affected by it by that decision.

Announcer:

Our last segment is Christopher’s and Rob’s response to a write in question about managing the communication preferences of your team.

Christopher T. Anderson:

Alright, Rob, this one’s for you. This is in the mailbag. Now, this follow up question. How do you manage a team that might have a diverse set of communication preference habits?

Rob Leitner:

Interesting. That is a great question. So we all know we have a million communication channels. We have a mobile phone, we have texting, we have Slack, we have teams, we have email, we have voiceover ip, we have walking into the office next door. If you are so inclined and probably others that I’m not naming, it gets impossible to scale your organization in terms of keeping your information and data organized when things are found all over the place, right? It’s very difficult. So what I recommend is creating an SOP to define the mandated means of communications, not preferred. A typical example would be all internal communications happen via Slack or teams. All internal communications occur via Slack or teams. Within that, you have to make sure that those communications are on threads. So an example would be you open up a new channel for a particular matter in Clio or something like that.

You put the number and the name of the case, all communications about that case occur under that thread. Another example would be for hiring or hr, you set up a channel for hiring or hr, you start a channel, you start a thread for a particular candidate. All subsequent information about that candidate will be included as a reply to that threat to consolidate the information. Typically, email, we’re all bombarded with email. It’s become a very ineffective communication tool in the year 2025. A lot of firms only use email for external communication. That’s it. You don’t email someone else in your firm exceptions. Maybe you’re forwarding something that was emailed to you and you have to forward to someone else internally. That could be an exception. And I would also make it clear whether or not texting firm information or information regarding a case is allowed, or if it’s only to be used in emergency circumstances and then followed up with a more formal message on Slack or something similar.

It’s up to the owner to, this gets into the corporate culture. Do you want a free for all? Are people having issues, finding information and finding strands of information for cases that have gone on for many months or even years? It’s an effective way to organize information, store information, and define the rules of the road for communication. It’s very important to set those boundaries via SOPs and enforce them. And even in Christopher’s firm to this day, if someone puts a message on there that should have been in a thread, meaning within the appropriate subject, people will say, they’ll put a little picture of a thread and that means, Hey, this has already been talked about. Put it in its proper place. And it’s kind of funny. It’s kind of annoying, but it actually works. It gets people, you’re conditioning people to follow the rules of the road.

Christopher T. Anderson:

Great stuff. So I want to actually go to the heart of the question because what Rob said was exactly right. The question was, people that have a diverse set of communication preferences and habits, every team you put together will have a diverse set of communication preferences and habits. Some people like to text, some people like to use Slack, some people like email. Some people like to pick up the phone. And like Rob said, if you’re in a physical office space, some people like to just come in your office, but you get past a certain size that doesn’t work. And I’m going to explain why it doesn’t work. You may as well start doing it right while you’re small because breaking habits down the road just gets harder and harder and harder. Here’s why it doesn’t work. We live in a society and a law. There’s no exception where things move fast.

So individually, when the question is people have a diverse set of communication preferences and habits, the truth is that everybody really has the same preference and the preference is the one that will kill your business. The habit that most people have is to communicate quickly and efficiently and easily. That’s why they’ll just pop in your office. That’s why they’ll just pick up the phone. That’s why I love, I forget what community it is that says I can’t stand it and talk about his iPhone. My iPhone has an app called Phone and I can’t stand it when people use it against me. I hate when people call me because I don’t have a block for sit around and wait for people to call me. So the preference is to communicate quickly. Here’s why that’ll kill your business. And the way this was described in Come Up Rare by Nick Sonenberg, great book and crediting him with this thought because he put it into terms I hadn’t thought about before.

And that is that people prefer speed of communication. But that is a nightmare for the business because Rob’s speed of communication is, and I’m just making it up, right? This isn’t really true, but Rob’s is SMS. And Grace’s is pick up the phone and Lisa’s is paper airplane, on and on and on. Well, a month from now when Lisa says, don’t you remember that conversation? And now I’m in my office looking for paper airplanes, right? But Rob says, well, when I participated in that communication, now I’m in my office looking for SMS messages. I’ll spend a lot of time, and this for our listeners, this probably rings true for you. If something’s happened more than a few days ago, you will spend a lot of time finding it. How do I search for that? What were the words Rob used? Right? Because I got to search for Rob and Mal Gat Soup, and maybe he didn’t call it gat soup, he just called it Indian Tomato Soup.

Then I’ll never find it. Your business wants speed of retrieval. We all should want speed of retrieval. Focusing on speed of retrieval saves way more time than speed of communication. Does it slow down the initial communication? Yes, it does. For instance, as Rob mentioned, we have a rule that all internal communications are by Slack. Well, in order for them to be by Slack, we also enforce that they should be in the correct channel. So if we’re talking about the Jones versus Smith case, which should be in the Jones versus Smith channel. If we’re talking about high-speed internet installation, that should be in the operations channel, et cetera, et cetera. So speed of retrieval means that if we’re talking about the Jones versus Smith, you can go into that Slack channel and just see what the conversation’s been about. If Rob needs to find a conversation that he knows he and I had about internet installations, then he can go to the operations channel and search for it there.

If Grace knows that, we talked about what color paper we prefer to have in the law firm, just so y’all know, I once spent a week choosing the color of paper for our law firm, but she doesn’t know where to look. Where would you talk about paper? You can search across all of Slack and just go color of paper, Anderson neurotic, and then you’ll find it. And now these tools have AI to even help more with that. You have no idea how many colors of bright white there are. And so not just the two people having the conversation or three people having the conversation, but everybody in the firm has the benefit of the speed of retrieval. And so that if I go on vacation or the amount available for some reason, the conversation can continue all there. But if I go on vacation with my phone, everything that was ever sent into my SMS is with me. It’s gone. It’s out of everybody else’s knowledge. So when we talk about people having different communication preferences, the answer’s a little bit like it’s not all about meeting everybody where they are. It’s about meeting the firm where it needs to be.

I’ve not done this whole but venture. If you polled people that work with me, they wouldn’t give up Slack for anything because once you’ve tasted the benefit of speed of retrieve, you won’t go back. So that to Red come full circle answers the question of how you manage a team that has a diverse set of communication preferences. As you make a clear set of the firm’s communication preferences that meets the firm culture and the firm’s culture is speed of retrieval.

Announcer:

Thank you for listening. This has been Unbillable Hours. Community Table on the Legal Talk network.

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