The Partnership Problem

I thought I would re-post this after reading “The Last Days of Big Law” in New Republic

It has long been apparent to anyone with an ounce of business sense that, by and large, partnerships are not the best way to run a company.  There are, naturally, exceptions and I am not going to take issue with the profitability of the ‘magic circle’ firms that would be eligible for inclusion in the FTSE100 were they to have publicly traded shares.  They have all said, however, they would not seek to float.  There are probably many reasons for this, most of which I couldn’t hope to understand.  But I bet one of them is because the partners of those firms rather like being partners in those firms.

The disappointing level of social mobility in the legal sector, particularly acute I would imagine in the largest firms, isn’t entirely down to the bias towards recruiting trainees who attended private schools and who could get work experience via their parents.  No, I am quite sure that the partnership model itself is the source for many of the legal sector’s woes.

When you think about it, it’s a pretty crazy idea really.  For a start, partnerships hardly encourage decisiveness.  Having worked in a law firm, I can attest that getting anything done was a bit like herding cats (and I make no apologies for linking to this YouTube video again because it makes me laugh).  Trying to get everyone to agree is a slow and painful process for which you don’t get much in the way of thanks.  Not really the environment for making cutting edge, dynamic business decisions.

Equally as problematic is the route to becoming a partner.  To reach these hallowed heights, young lawyers have to toil away, often for long hours, somehow meeting very high standards while doing mostly mundane tasks for however long it takes until they are given the nod.  It’s hardly surprising then that the average age of an equity partner (the ‘owners’ of a law firm) is now 60.  With one eye on securing their safe passage to retirement, these people are, naturally risk averse, and, if my experience is anything to go by, some of the most conservative and change-resistant people on the planet.

By promising jam tomorrow, law firms attempt to elicit unwavering devotion from their junior lawyers.  Aside from being, in many cases, an empty promise (as the Red Queens says: ‘The rule is, jam tomorrow and jam yesterday, but never jam today’) this is no way to promote the innovation and entrepreneurship that enables a company to leapfrog its competitors.  The short termism partnership encourages also gives rise to the ever-present danger, as Labour politician Tony Benn put it, that ‘some of the jam we thought was for tomorrow, we’ve already eaten’.

While I am yet to work in any organisation, legal or otherwise, that doesn’t struggle with a silo mentality at least some of the time, I am quite convinced that partnership exacerbates these tendencies.  Lawyers feel compelled to protect their territories and keep their contacts to themselves; knowledge is, after all, power.  And so you can end up with the absurd situation of grown, mostly men, bickering over issues like children.

The model is just as useless when it comes to ensuring an equal gender balance at the top of the profession.  While women make up 60% of the trainee intake at the big city law firms only about 18% of their partners are female.  Given the track record of the city more generally in getting women into the boardroom, it may be unfair to lay this charge entirely at the partnership door.  However, the collegiate nature of running a business is a rather effective way of excluding women.

Social events geared towards traditionally male pastimes, like golf, are a very subtle, even unconscious, way of demoralising any woman who might harbour ambitions of partnership.  The firm I worked for did not, of course, exclude women deliberately, but every corporate jolly, sorry networking opportunity, that came up, bar awards dinners, involved football, cricket or golf.  I know plenty of women who might enjoy these activities, but not necessarily if they have to go along with a lot of testosterone-charged males.

The problem is that firms can, and do, talk the talk when it comes to promoting diversity but many at the top still secretly believe, even if they won’t admit it, that to get the rewards you have to put the hours in and play the game.  Not to do so amounts to ‘career suicide’.  Which probably explains why efforts to grow the numbers of female equity partners at the UK’s largest firms are failing.

Just as damning, as I have written before, venerating partnership above all else also consigns many in the firm to a ‘citizenship’ that is distinctly second class.  Whatever the rights and wrongs of such a system in the past, it is patently a stupid way to run a modern company.  I can’t see any circumstance in which effectively disenfranchising whole swathes of your staff makes business sense.

And law firms need those other people.  While there are clearly some lawyers who have the skills to become business leaders, it is a fallacy of the partnership model that just because you’re a good lawyer you can lead a law firm.  Those that think they can prove me wrong, well you’ve been doing it in the good times, that was easy.  Surviving in a harsh economic climate is going to require real management and leadership talent.

So thank god the legal profession, and with it the partnership model, is being well and truly shaken up.  Already law firms at the high street end of the market are beginning the feel the effects.  What is extraordinary, given the overwhelming unsuitability of the partnership model for anything other than self-preservation, is that the top city firms still seem to think the shake up has nothing to do with them.  They should remember no firm is too big to fail.

Originally posted on the Quality Solicitors blog in February 2012

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2 thoughts on “The Partnership Problem

  1. Heather Townsend (@HeatherTowns)

    Whilst it can be tempting to blame the legal sector’s problems on the partnership structure, I would suggest this is not the problem. The partnership structure should work incredibly well, if there is the right level of leadership, goverance and cohesion within the partnership group.

    Sadly, for many firms, this is where the problems lie. Far too often legal firms are their own worse enemies by:
    1) focusing on high chargeable time rates rather than building well-rounded, commercially focused and grounded lawyers (and ending up with a succession problem)
    2) stripping out too much profit as drawings and leaving their firm low on working capital and reliant on good cash collection and high fees rates
    3) not using the services of non-legal professionals to help them run their firms, such as HR director, finance director, marketing director etc. Thus making their firm run inefficiently as lawyers with limited marketing or HR expertise are aiming to run these functions for the firm
    4) when using non-legal professionals, often the partners have too high a need for control, thus severely handicapping the very people they brought in to help them run the firm better
    5) inefficient governance structures so often all the equity partners feel they have consultation and decision making rights on everything to do with the firm

    Reply
    1. Louise Restell Post author

      Thanks for your comment. I think though you have rather undermined your own argument. While I accept in principle there may be no reason why partnerships can’t work well, in practice, in law firms at least, precisely the problems you highlight come to bear. I think they are, more than likely, inherent in the legal partnership model and so inevitably render it inefficient and problematic.

      Reply

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