Biglaw, Money

Biglaw Partners On The Hot Seat: Firms Are Demoting Partners Hand Over Fist

Time to trim the partnership fat.

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depressed lawyer

Remember when partnership sounded like securing a key to a magical kingdom? Sure, the work would be hard, but with high effort came high reward. And the job security simply couldn’t be beat. Law firms don’t fire partners… well, unless they commit securities fraud or something, but they don’t fire partners on their best behavior!

Welcome to 2016, friends. Being a Biglaw partner just ain’t what it used to be.

The Wall Street Journal notes that law firms are demoting — if not firing — partners at a healthy clip over profitability fears:

Faced with client pressure to keep down costs and industry competition to achieve the highest profits, law firms now frequently assess which lawyers are worthy enough for the top rungs of partnership. Those who don’t bill enough hours or bring in enough business are quietly asked to leave or demoted from the so-called equity tier.

In a survey of law firm leaders from late last year by legal trade publication the American Lawyer, 56% said they planned to take away equity from partners in the coming year, and 67% said they planned to ask partners to leave.

The story comes on the heels of Shearman & Sterling’s announcement that it was eyeing a partnership demotion to salvage some profits and Chadbourne getting hit with a $100 million discrimination suit after it demoted litigatrix Kerrie Campbell.

Why the sudden rush to give partners the boot? Well, some of it has to do with partners coasting on past success. Legal consultant Peter Zeughauser told WSJ that there are “a lot of firms” with partners billing in the 1100-hour range. That’s pretty extreme, but I’d be curious to know if these are the partners getting shoved aside. Having seen (and even prepared) a Biglaw bill or two in my time, it struck me that the underbilling partners tended to be the very senior attorneys who may not be logging many hours but whose connections brought the business in the door. They may not be directly adding to the firm’s coffers, but the indirect value could not be discounted. These partners aren’t getting shunted into a non-equity track.

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After a summer of unbridled — potentially reckless — optimism with associate raises reaching nearly every corner of Biglaw, there had to be another shoe to drop. Unless firm profits skyrocketed this year, raises were going to cut into the PPP unless firms started cutting back on the denominator a bit.

Perhaps this marks the first, furtive steps into a new Biglaw model, where the 8-year track gives way to a more corporate structure featuring a well-compensated middle management tier spending 5-10 additional years in a non-equity role. In the short term, no firm could make such a wholesale change because its rivals would eat them alive in lateral recruiting. But with demand anemic and the almighty PPP figure looming over everything, big players in the industry might take the hit to be on the forefront of the next organizational revolution.

After all, the current model dates back to the turn of the last century. It’s possible the market has evolved since then.

Law Firms Demote Partners as Pressure Mounts Over Profits [Wall Street Journal]

Earlier: The Evolving Law Firm Partnership: Divergent Perspectives

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Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

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