Originally published on March 22, 2010 in our free BigLaw newsletter.
The economic downturn left a lot of casualties in its wake. Legal staff, associates, summer programs, car service, art budgets, breakfast, lunches and dinners … even entire law firms. But, despite the considerable ink spilled reporting on layoffs, deferrals, and cost-cutting at the nation's law firms, chatter about the uncomfortable matter of partner reductions remains relatively hushed. Until now.Law Firms (Quietly) Begin Purging Partners
Recently, a report released by consultants at Hildebrandt Baker Robbins and the Private Bank division of Citigroup made it official: law firms are "overpartnered."
"During 2010," the report concludes, "many firms are likely to begin addressing this issue using a variety of tools including sharper compensation differentiations, early retirement packages, and 'tough love' conversations. We expect to see a general paring back of the ranks of income partners across the market, as well as a weeding out of marginal equity partners."
In the past weeks, several articles in the legal press have focused on the subject of "partner purges. This coverage and the Hildebrandt report gives voice to an issue long discussed behind closed doors. Although some firms have embraced transparency in their quest to reduce the associate ranks (while others have been criticized for "stealth layoffs"), information about the plight of partners remains scarce.
The reluctance of partners to discuss the phenomenon, whether with respect to their own fates or those of their colleagues, is understandable. Nonetheless, we found two partners willing to tackle the issue head on provided we not disclose their identities.
"I'm secure about my own position," said one equity partner at a large Connecticut firm, "but I take part in hiring decisions and sit on my firm's executive compensation committee. Do I think that partners can realistically expect to escape this recession unscathed? Of course not. Do I think that some partners should be shielded from the consequences of their own failure — or inability — to perform? Frankly: no. But it's such a sensitive issue that no one is willing to discuss it outside of the firm."
Another partner, who works at a large national firm notes that firms have been addressing the "overpartnering" phenomenon discreetly for quite some time. "Firms are trying to serve a number of masters," he says. "Clients prefer to have partners work on their cases, but they're demanding lower rates and overall bills. At the same time, firms have substantially reduced leverage, and when leverage goes down, there's just less money to go around … and the partners with a good book of business and a stable of clients will go elsewhere if they're not paid enough."
As one way of maintaining (or perhaps manipulating) the firm ecosystem, he says, many have been quietly throwing partners out, de-equitizing, or shifting them to Of Counsel positions to preserve the pie for other members.
Not surprisingly, says the partner, whether "purging" or "culling" partners is ultimately good or bad, depends on the particulars. "If the firm is really bleeding, it might not be such a bad thing," he said. "And getting rid of weak performers is classic 'survival of the fittest.' But if too many partners are let go, it can be very traumatic to the practice group or the firm as a whole — like cutting off an arm to save the body."
New Business Models Needed, Not Just Fewer Partners
What the partners interviewed for this column hope to see happen next has less to do with the bottom line and more to do with the channels of communication. "I think we need to open up the topic for discussion," said the partner at the national firm.
The Connecticut partner agrees. "We're facing the prospect of painful contraction in the legal profession," he observed. "How firms will balance commodity versus specialty work, whether certain partners would be better off at boutique or smaller-market firms, and how to operate efficiently in this environment are all issues worth discussing. I'd like to see more partners talk honestly about how we, as a profession, can put out heads together and figure out how to provide legal services, make money, and work in the environments that we're each temperamentally and intellectually best suited for. Those are some pretty big challenges, and we need all the mental capital we can devote to exploring them."
With that, BigLaw readers, we open the floor to you. Whether you're an equity or income partner, "retired" partner, Of Counsel, or aspiring partner, please reply with your thoughts on this issue. Or if you'd prefer anonymity contact me directly.
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