Law Firm Partnership Part 2: Becoming and Remaining an Equity Partner
Our last blog post, “Law Firm Partnership Part 1: Do True Partnerships Still Exist?” explored the changes that have occurred in the partnership model in recent decades and the core aspects to healthy partnerships. In this post, we will examine the qualities needed to advance to equity partner status and what it takes to be an owner and contribute to the ongoing success of the partnership and the firm.
What Promotion Criteria for New Partners Were Common in the Past?
For a long time, especially in lockstep firms that enjoyed long-standing institutional clients, law firms hired the “best and brightest” associates, trained and mentored them, exposed them to challenging matters and clients early on, and then either promoted them or outplaced them often into in-house positions so they became clients. Associates who were advanced up the ladder often were promoted to partner ranks by “keeping their heads down” and doing great work (and a lot of it) for clients. Even for firms that were not part of that elite group, that practice of working hard and doing great work was often the baseline for promotion to partner. Today, many firms are top heavy and have partners who were promoted into the ranks when being a service partner and a good firm citizen were enough but who now may be categorized as underperformers.
For at least twenty years, we have seen many more firms recognize that other critical skills and experience were necessary in order to become a partner, including client development and new business origination skills, financial metrics and perhaps a unique or distinctive practice expertise.
A recent article in the American Lawyer entitled “What it Takes to Become a New Partner” reported that associates definitely feel it is much more challenging now to make it into the partner ranks than it used to be, and it is especially difficult to advance from non-equity partner into equity partner.
What are the Requirements of Successful Equity Partners Today?
Firms now are setting higher expectations for equity partners so that they actually perform as owners of a business. Given how challenging, crowded and competitive the marketplace is for lawyers today, firms must rely on partners who contribute to the health, growth, sustainability and profitability of their firms.
To survive and excel, law firm partnerships will depend upon a broad range of skills and high commitment levels of its equity partners. Many firms seem to focus exclusively on the financial contributions of their partners which can result in firms being held hostage by partners who threaten to take their books elsewhere and tolerating bad behaviors as confirmed in a recent survey.
Partners who are owners definitely must contribute substantially to the partnership’s financial health and success, however, there are a number of other core attributes partners who behave as owners must demonstrate and “true partnerships” must embody in order to thrive:
- Strategic Thinking:
- Considering the firm’s strategic position and business model
- Tracking trends in substantive practice specialty and clients’ industries
- Engaging in systematic competitive and market intelligence
- Developing innovative and efficient ways to deliver services, alternative pricing
- Considering and testing new practice/staffing/service delivery models
- Seeking better methods of project and knowledge management through tools and automation
- Client Management and Business Development:
- Originating profitable new clients, new matters for existing clients and cross-selling
- Nurturing deep and broad client relationships, delivering institutional value, securing large percentage of clients’ legal spend
- Providing strong brand value (personal practice expertise, promoting visibility of team, market share relative to other firms)
- Serving as an ambassador of the firm, enhancing and promoting its profile
- Delivering exceptional service and value as defined by clients
- Superior Financial Performance and Management:
- Personal economic contribution: Achieving requisite goals for personal working hours (enough to cover own compensation, benefits and overhead)
- Generating work for others on team (generating enough to keep # others busy at a minimum)
- Financial discipline: Personal billing practices, collections and receivables; quality of clients
- Profitability of practice: maturity/saturation/value of expertise in the marketplace, level of discounts or price compression
- People and Practice Leadership/Management:
- Serving as a role model as firm citizen, practitioner, subject matter expert, mentor
- Setting the tone for highest ethical conduct professionally and personally
- Recruiting, developing, retaining and advancing the best talent
- Delegating and building, leveraging and motivating teams
- Providing coaching, counselling; help negotiate, address and resolve conflicts
- Engendering open and constructive communication and feedback
- Investment in the Firm/Practice:
- Engaging actively and enthusiastically in the partnership; being a supportive partner to your partners
- Contributing to firm management and leadership by serving in roles, on committees and task forces
- Building the firm’s knowledge and intellectual capital
- Enhancing, complying with and contributing to the firm’s culture, vision and values
- Firm Citizenship:
- Putting the partnership and firm agenda before your own
- Modeling by example the behaviors that support the firm’s values
- Addressing other partners who behave badly
- Supporting and enhancing positive morale and building an esprit de corps
- Regularly going above and beyond
As firms continue to evaluate and make decisions about which associates to promote to partner, which non-equity partners to promote to equity, and in some cases, which equity partners to demote or remove, they will build stronger and more sustainable partnerships by articulating and managing against a more robust set of expectations for driving superior performance and culture.