Wednesday, December 10, 2008
The financial turmoil that law firms, along with the rest of the economy, are experiencing today may lead to a reassessment of the conventional wisdom that every lawyer should want to become a partner.
Of course, questions about the wisdom of automatic partnership transcend the current economic scene. Would we advise our clients to move forward with a decision if questions like these were on the table? Is becoming a partner wise...
* When your voice may be so small in a large firm as to have no influence over the direction of the firm?
* When the "buy-in" to the partnership is at a value asserted by that partnership rather than by an independent study?
* When the sale of your interest could be only under very restricted terms and at a value determined by a formula different than the formula used for the "buy-in" and only back to the partnership, not to a third party (even if a lawyer)?
* When your income percentage will be determined by a "compensation committee" in which you have little or no voice?
These questions are daunting enough, but consider the partnership risks in today's economy. Why seek to join a partnership when, irrespective of how low your earnings from the firm may be, you will be jointly and severally liable for the debts of the law firm in the event of the firm's collapse? Then consider the opposite side of the issue. Law firms with profitability problems increasingly move to eliminate ("de-equitize") higher paid partners as they continue to hire new, young, lower paid associates. Each of the laid off partners was (presumably) added to the partnership because the firm had a strategic goal for his or her practice at some point. However, when the overall profitability suffers, the leadership may make a change rather than hold on to partners.
I recently spoke with one managing partner who called this process "culling." It also affects lawyers on the low end of the totem pole. Associates are hired out of law school and work for five, six or seven years. Then, if they don't make partner, they're asked to leave to make way for the next group of young "unwashed" law school graduates. Most human beings are optimists (until they conclude otherwise), and I suspect most young associates believe the sacrifices they make early in their careers are worth it because they are convinced they are among the select few who will become partner—right up until the moment that they are shown the door.
Achieving partnership in a law firm of course remains a worthy and honorable goal for most lawyers. But it should not be taken as an automatic one. Strive to become partner—but do so with your eyes open.