If you think that making partner is like winning the Biglaw race, you haven’t actually been paying attention to what’s been happening to partners over the past few years. Sure, Biglaw partnerships overall are enjoying higher profits now than they were during the darkest days of the recession (while associate salaries remain stagnant, of course). But average “profits per partner” numbers can be misleading.
Steven Harper, the former Kirkland & Ellis partner turned law professor, writes that the income gap between the top earning partners and everybody else is “exploding.” It’s never been more lucrative to have a nice book of business.
And to keep it for yourself….
If you like money, you can’t understate how good it is to be a Biglaw partner with a portable book of business. Harper has written a lot about Jamie Wareham, the man who left Paul Hastings for $5 million a year at DLA Piper (no word on whether Wareham’s signing bonus included a personal Porta-Potty).
But that high bonus comes at a cost, according to Harper’s Am Law Daily article:
As I’ve observed previously, the reasons for the lateral explosion have much to do with big law’s evolution. The prevailing business model encourages partners to keep clients in individual silos away from fellow partners, lest others claim a share of billings that determine compensation. Paradoxically, such behavior also maximizes a partner’s lateral options and makes his or her exit more likely. In other words, the institutional wounds are self-inflicted.
Hey, it wouldn’t be the first time business concerns made Biglaw a crappier, less collegial place to work.
But the other angle of poaching the rainmaking partners is that it turns most partners reading this into the 99% (of the 1%).
Edwin B. Reeser and Patrick J. McKenna correctly observe that a firm’s average PPP is not all that informative. The authors focus principally on the growing cohort of non-equity partners amid a climate in which clients are unwilling to pay for first- and second-year associates. But Reeser and McKenna make a telling point on a seemingly unrelated topic: the income gap within equity partnerships has exploded.
They note that a few years ago the equity partner pay spread was typically three-to-one; at some firms it’s now ten-to-one or even twelve-to-one:
“Over the last few years there has been a dramatic change in the balance of compensation, to a large degree undisclosed, in which increasing numbers of partners fall below the firm’s reported average profits per equity partner (PPP)…Typically, two-thirds of the equity partners earn less, and some earn only perhaps half, of the average PPP.”
The rich get richer while the also very well off get squeezed?
Partners (and those who would like to be partners someday) notice what the focus is: it’s not about doing the best work, it’s about getting the most business. Increasingly, “service partners” are just that: there to serve the firm’s real rainmakers. But those rainmakers have no real loyalty to the firm. Their clients are their own, not the firm’s.
Which makes you wonder if this kind of rainmaking inequality will lead to firm dissolutions. If most of the business generated by the firm is in the hands of a select cadre of partners, then you can kill a firm by poaching a few key people.
Get busy billing, or get busy dying.