Tuesday, February 06, 2007

Promotion to Partnership Tournament

Bill Henderson has a telling post on the longitudinal changes in the promotion to partnership tournament in law firms at the Empirical Legal Studies Blog. It seems this year's big rise in associate salaries disguises a drop in the rate at which partners are being made and a decrease in the numbers of equity partners within firms. The partnership prize is becoming increasingly remote for today's lawyers starting out in practice in the US.

Some law firms think they can remedy this situation. I think, in the immortal words of Darryl Kerrigan in the best legal film ever, The Castle, "They're dreaming!" Allen & Overy, for example, reported churn or attrition rates of 26% last year among its associates. That's a lot of wasted expertise. To counter this A&O has now appointed an associate to its management team. It will show, apparently, that associates are important, even loved. A&O has also devised a range of senior associate positions and more to entice associates to stay. The idea is to get associates to stay, not to promote them to partner. Lawyers are clever people; do we honestly expect them to be taken in by these ruses? I imagine not.

A recent survey by YouGov for The Lawyer showed that only 37% of associates in the large law firms (ie. with a turnover of more than £250m) expect to make partner. What drives their ambition? More money. But their greatest fear in making partner? Insecurity and risk management. It's tough being an associate.

So, how can we summarize these indices of change? The tournament model almost belongs to another era. The changes Bill Henderson is analyzing are also occurring in the UK.
  • One, associates don't even consider becoming partners or an ever-diminishing number do. This may be because they see it as too remote or because frankly it isn't worth the battle. Partners like associates are essentially fungible unless you possess some key rainmaking skills.
  • Two, there are plenty of alternative careers for lawyers now, which no longer carry the stigma of failure. Banking is increasingly attractive, either as inhouse counsel or as a banker. Consider Harvey Miller's move from Weil Gotshal to Greenhill. Annual attrition rates are now approaching 30% for associates. It's probably too late for law firms to do anything to counter the trend. I don't think Allen & Overy's associate on the management board will suffice, nor will all the other arrangements that firms are thinking about.
  • Finally, when the Clementi changes go through in the Legal Services Bill and law firms start to be owned by external investors, eg, Goldman Sachs, KKR, Blackstone, etc, partnership will die a lingering death as they chase the IPOs and become directors and employees.

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5 comments:

John Flood said...

As Wabi Sabi at What the Thunder Said tried to add a comment, so I've imported it:

Comment on "Promotion to Partnership Tournament"

I tried to post my comment on Professor Flood's post "Promotion to Partnership Tournament" but twice my comment got eaten up by Blogger. I may try again later. Meanwhile, here it is:

Just some personal observations from the trenches - it seems to be getting more difficult to be promoted to even senior associate level at biglaws. Recently, a senior I have worked with resigned from the firm (I wrote about it here on my blog). Instead of promoting one of the juniors who have been working under that senior and are therefore familiar with the client portfolio and the work left behind, the client portfolio got 'taken over' by a partner. There are juniors who have been around for at least six or seven years and would have been a perfect fit. Now instead of drafting letters to be sent out in the name of the senior associate, letters are drafted to be sent out in the name of the partner. (Being a junior hereabouts - regardless how many years you have been at it - means that you don't really have signing power to anything.) The same thing happened before too when another senior associate left. And now work just gets held up because... partners are just not as responsive as senior associates. You can't really 'chase' a partner to approve your draft for something urgent*, the way you can always 'chase' a senior associate without much formality. And how can there be any real working relationship with someone one cannot speak to without first saying 'sorry'? (Having read the story in your research of barristers and clerks**, I have been trying to formulate my own observations of forms of address within a firm of solicitors. Unfortunately, the only observation I have come up with so far is that every conversation one attempts to start with a partner begins with 'sorry, [partner's name]'.)

* Some partners have really elaborate rules as to how drafts should be submitted for their approval. And each of these partners have their own set of unique rules.

** Just a note to laymen: The research in question can be found online here. Basically, the story goes like this - a senior clerk tells a new junior clerk,“When I call a barrister by his first name, you call him ‘Mr Smith’. When I call him ‘Mr Smith’, you call him ‘Sir’. When I call him ‘Sir’, you don’t speak to him.”

Posted at 09:30 PM in Associates, Big-law, Career, Partners | Permalink

Wabisabi said...

Thank you for taking the trouble to import the comment. (I was about to do it myself.)

BabyBarista said...

Who do you think will be the winners post-Clementi?

John Flood said...

babybarista's question is the big one. Broadly speaking I think there will be something in the order of three sets of winners. The first is those with the money and clout to buy into legal practice, which includes say supermarkets, insurance companies, private equity and investment banks. Law represents a good, steady income stream. The second will be the elite members of the legal profession, eg, Clifford Chance or Brick Court chambers. They are secure and will remain in demand. The third group will be those lawyers who are far-sighted enough to realise what's coming and take advantage of it. They will be able to exploit alternative business structures, but it will be tough and they may lose as they compete with banks and private equity funds. One example was mentioned to me by a barrister's clerk: he could start 'Barristers 'R Us' employ a stable of barristers, pay them a salary, 25 days holiday a year, and run them. I could see that happening.

Mike from Lytchett said...

Sorry - but who needs a barrister's clerk. Large law firms and accountancy firms are organisations with marketing departments.

That barrister's clerk has an exalted opinion of his importance. Usually B Clerks are just glorified PA's. Barristers need to form corporate entities.