Last week’s Am Law 100 list revealed publicly a trend that partners at big law firms have been feeling acutely: The largest law firms have de-equitized partners in the last two years in an unprecedented way. In the words of one of the articles, “Equity partner head count alone slipped 0.9 percent last year, after dropping 0.7 percent in 2009.” That trend may undermine the business models of some law firms.
Law firms have many and varied business plans and compensation systems. But one reasonable way to run a firm is to market your most marketable lawyers — concentrate business development in the folks best able to develop business. For that model to work, however, all partners must trust the institution. De-equitization reduces the necessary trust and may kick the stilts out from under this business model.
Here’s how the model works. If a potential new client asks your firm to respond to an RFP for litigation matters, you turn to your half-dozen heaviest-hitting litigators and decide which one will be offered up as the lawyer to lead the new engagement. You know that, if you’re invited to a beauty contest, the heavy-hitter will clinch the deal, because he’s clinched so many deals in the past.
If you read in today’s Wall Street Journal that the plaintiffs’ mass tort bar has just put another industry under seige, you spring into action. Pull together the firm’s marketing materials, identify lawyers with relationships in the relevant industry, draft up outlines of motions to dismiss and oppositions to class certification, assemble an outline of key issues and proposed responses, and then have your relationship lawyers call and email their client contacts, offering to have one of the heavy-hitters meet with the client to explain the firm’s capabilities. The heavy-hitter takes it from there.
If a corporate lawyer gets a serious litigation nibble, the corporate lawyer will naturally advise the head of litigation about the opportunity, so the firm can make an appropriate pitch. The head of litigation asks one of the heavy-hitters to lead the charge.
If a client asks a junior partner in the commercial trial department about the firm’s ability to defend a multi-billion dollar case, the junior partner reports up through the ranks. The firm puts together a response that proposes a talented litigation team to handle the case — led, of course, by one of the heavy-hitters.
This approach to running a firm isn’t crazy. To the contrary: Institutionally, this system makes a lot of sense. You offer up your most impressive lawyers to handle the most important opportunities, land the business, and distribute that business among the masses to keep everyone busy. Collectively, everyone at the firm benefits.