By David Bargman, Esq.
President, Neena Legal Consulting
Firms are carefully thinking about which partners should share in profits and the pandemic has complicated that question. By and large, the pandemic tightened criteria for equity partner promotions, as well as “underperforming” equity partners who could remain in the equity ranks. The nonequity partner tiers grew in 2020 at dozens of large law firms. Far fewer firms shrank their nonequity tier. Meanwhile, according to reporting by the American Lawyer, the equity partner ranks at many big firms stayed flat. Several reasons could explain this: with declining profits during the pandemic, firms maintain their profits per equity for ranking purposes; more young lawyers moving into the equity partnership than equity partners who retire; less hesitancy among equity partners to demote less “productive” demand isn't dramatically dropping; preserve profits and cut expenses, and the pandemic stiffening the criteria for entering equity partner ranks, and finally out of a concern to maintain high profits to draw or maintain clients.
Lawyers coming into firms, have to assess how future downturns will affect their upward mobility, especially swelling non-equity tiers. Many lateral partners into firms with mandatory nom equity tiers in the beginning. It will be interesting to see how those who have their career paths slowed, when big firms return to satisfactory profitability. It makes sense for a firm to maintain profitability in metrics dominated industry. Nevertheless, there is a risk to growth swelling the number of associates, counsel and non-equity partners. A perverse effect might be to stall upward mobility and, thus sustainability. After all, retirement and attrition can make only so much of a dent in headcount. Not to mention the competition to grow by seducing “productive” lateral” partners. Or retiring senior partners that were being serviced by recently demoted non-equity partners
The lesson to be learned is that equity status, once based on excellence, contributions to the firm including originations, or servicing an important client or partner, is becoming only a function of originations in a hot practice area.
Young lawyers beware. You may get what you work for.
Copyright 2021
David Bargman