"Perpetual origination credit is one of the destructive practices that continue despite the advice of management experts," writes Tom Collins on the morepartnerincome blog. "Continuing origination credit bestows territorial ownership. It puts a fence with a non-trespassing sign around a client or a reference source. Doing that impedes business development by getting in the way of cross-selling and team selling."
I totally agree. Yet a survey of 170 midrange law firms by Juris shows that an astonishing 81% of law firms have no sunsent on origination credit.
"It spells double trouble if the rainmaker has settled into a rocking chair mode, living off of his or her prior accomplishments. It is not unlike the practice of assigning an exclusive territory to a salesperson or dealer in the commercial world. Exclusivity can work if the salesperson is aggressive and effective, but territory sales results go down the tubes if the salesperson becomes ineffective," Tom writes.
In the law firm world, attorneys are accountable for their results as lawyers and not as salespeople. It becomes a royalty, a source of continuing income that is not related to the current work effort or contribution of the attorney. The worst part is that others in the firm, who could expand the business relationship or expand the scope of a referring source do not do so—first because of the “hands off message” conveyed by the perpetual origination credit and second, because of the “nothing in it for me” mentality that such a practice fosters.
“The reward for “bringing in business” needs to be temporary. The most important change needed to continually drive new business is that origination credit should expire with the case or matter, or for a continuing portfolio sale, it should expire after 12 or 24 months. Origination credit should be viewed more as a “bonus” than a way to build a compensation annuity.For more of Tom's viewpoint, see The Case for Limited Origination Credit.