(On October 21st, I’ll be presenting a session on how to use the pandemic as a catalyst for positive change in law firms, through CLEBC. Find information on that session here: https://store.cle.bc.ca/productdetails.aspx?title=Using-COVID-19-and-other-Challenges-to-Progress-Your-Firm&cid=1821 . In this blog post, I’ll highlight one element of that presentation).
When he first took office, Obama suggested that the only time real change has happened in America was during particularly difficult times, when leaders must be bold and the public is actually open to change. We are certainly in the middle of our own “difficult times”. Could this provide us with an opportunity for game-changing disruption and rethinking of the law firm business model?
It would be about time, as that model hasn’t changed that much over the years, and frankly isn’t that efficient to begin with. Take, for example, the growth path of the typical Associate. In larger firms, an average of one in seven Associates will actually make it to Partner. It is said to cost around $300k to get an Associate to fifth year when they finally start to make money for their firm. The 5th to 8th year period is when they tend to get poached. Or when law firms realize that they don’t have someone worthy of moving into the Partnership after all. So consider that each lawyer invited into a Partnership may have cost the firm $1.8m in sunk costs for the departed six, + loss of profit for those six lawyers from whenever they left to whenever they would have made Partner. And there’s no guarantee that one who made it will be a successful Partner, or will remain with the firm.
But that’s not the only problem.
- In some firms, senior lawyers are holding on longer to their roles. Yet the firm’s juniors have to go somewhere. So firms, afraid of losing decent senior Associates, are moving them into the crowded Partnership anyway. As a result, such firms are top-heavy which means they have no leverage. And that can be problematic from a financial perspective.
- The value systems of younger lawyers are different from older lawyers. Older lawyers might say that younger lawyers don’t want to work that hard. Young lawyers would say that they want a life with more balance and to create a more sustainable career than they’ve seen in senior partners with multiple failed marriages, alienated children and congestive heart failure. But bottom line is that younger lawyers aren’t prepared to sacrifice what older lawyers felt was necessary to have a successful law career. So there are battles occurring over firm evolution and compensation that threaten to split some firms between the old guard and the new guard.
- Firms can lose good producers because the only option for advancement is Partnership. In 20+ years of lawyer coaching, I can tell you that many Associates aren’t particularly interested in Partnership. At least not the kind with the firm’s current Partnership requirements. And if Partnership is the only role available, the other option is to leave. So these senior Associates leave for smaller firm, an in-house counsel role, work for the government or leave the practice of law entirely because being a good, producing lawyers was not enough for their prior firm.
So where does this leave law firms? In a desperate need for a new model that will work with the next generation of lawyers, provided you want your firm to survive.
One idea is to broaden perspective on how Associates might remain with the firm. Perhaps Partnership doesn’t have to be the only game in town. What if an Associate had different option that would still give them what they need: an opportunity to do what they love, a decent living, respect, a degree of autonomy, support when they need it, and access to firm infrastructure?
These things aren’t only available with equity Partnership. A lawyer who wishes to stay with the firm without full Partnership could remain in another capacity such as:
- Permanent Associate
- Permanent Associate but called a (non-equity) Partner
- A lawyer, on contract.
Law firms might find that having some of your Associates move into one of these positions (instead of Partner) might be more financial advantageous for the firm. An employee doesn’t cut into the Partner profit pool, they don’t have a vote, they often don’t have access to the same resources (office size, personal assistant) or benefits as a Partner – all funded by the firm. A productive employee can serve a firm extremely well, financially.
One could argue that an employee has less enticement to remain with the firm, and may be more of a free agent than a Partner. But Partners leave firms, too. If the working conditions are good, the pay is equitable, and if bonusing is available to further incentivize production, the employee lawyer might be considerably happier in one of these other roles than if they had been forced to become a Partner in order to remain with the firm.
It’s important to have the conversation with the Associate over time to let them know the options available, and to see how they feel about those various options. Start by learning what each Associate wants from their career. Let them know what it takes to become a Partner, and give them a long ramp to get there. Check in with them annually to see if Partnership is still their goal, or if they want to explore other options. Allow them to change their mind: if they’ve opted for a non-equity Partnership position but later want to become an equity Partner, allow them to step up and deliver on those requirements.
Don’t be afraid to offer alternatives to Partnership. Associates realize that if they don’t want the responsibility and hours associated with Partnership, they’ll probably have to sacrifice some income. But if that role better aligns with their needs, they will be happy to have the position.
Heather Gray-Grant is a business strategist, marketing expert and executive coach for law firms and lawyers. She can be reached at firstname.lastname@example.org