Network Firm News

Thursday, December 05, 2002

Have Business -- Stay a Partner
The Decline of the Meritocracy

The Distasteful Medicine of De-Equitization
Jeff Blumenthal -- The Legal Intelligencer -- 12-05-2002

[Article discusses move toward de-equitization among law firms facing profit squeeze. What's driving the trend? Could it be the publication of "Profits per Partner" data? Hmm.] Duane Morris chairman Sheldon Bonovitz said de-equitization is a combination of cosmetics and substance. The cosmetics surround The American Lawyer magazine's AmLaw 200, which calculates which firms have the highest profits per equity partner. Firms want the good public relations that go along with high PPP. It helps with recruiting both lateral partners and upper-echelon, entry-level talent as well as retaining key personnel.

Altman Weil law firm consultant Tom Clay said there are two reasons for the rise in de-equitization:

-- the economic downturn, and
-- the fact that many firms promoted people to partnership status that have no business being partners.

Clay said firms would not have to de-equitize partners if they had not promoted associates to the position who did not deserve such status in the first place. He said [some] firms do not have enough business generators and have too many partners that fit into the category of self-sufficient, service or technical specialist partners.

Loose Your Client, Loose Your Equity Status:
"The greater problem is people who have been partners with the firm for a while and had a substantial amount of business but whose contributions have declined. That's the hardest part and that's what I hear more about around town," according to Wolf, Block, Schorr and Solis-Cohen chairman Mark Alderman.

Lack of Business Plan: "I talk to senior associates who don't even have a business plan," Major Hagen & Africa legal recruiter Frank D'Amore said. "They always tell me that they are too busy billing hours. But especially with the economy the way it is, it's important to carve out some time for that. If you want to make partner, and eventually equity partner, that's what's necessary to get it done."

Clay's 5 Types of Partners:
Entrepreneurial leader: Consistently keeps multiple partners, associates and paralegals busy, often in many practice areas. His or her presence drives the firm brand, transitioning relationships to others and creating deeper, broader relations with clients. These partners are very rare.

Business-generating partner: Capable of staying busy and keeping one to three others busy on a consistent basis with their own business and growing existing client relationships cultivated by others.

Self-sufficient partner: Someone who keeps busy but usually gets a portion of work from others and manages to export a portion of work from others. He or she leverages equally the firm's brand and his or her personal market presence for marketing.

Service partner: Usually a sophisticated lawyer and client manager who can manage a service delivery team but does not generate a significant volume of work on his or her own. This type of partner would not meet the test for self-sufficiency.

Technical specialist partner: A sophisticated problem-solver who is often uncomfortable with the social aspects of client interaction. This person will generally not lead a legal team but may lead a project team on a specific legal issue.

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