Use of the verein structure: all the Biglaw cool kids are doing it. Okay, well maybe not the coolest kids, at least if “cool” is tied to profits per partner and prestige. But there’s no doubt that the verein structure is spreading rapidly throughout Biglaw.
This is partly because firms that use the verein form are fond of combining with other firms. If the talks between Dentons and McKenna Long bear fruit, the resulting entity will surely be a verein, like Dentons and its constituent firms.
But does the verein structure present ethical problems for the firms that employ it? Two observers of the legal profession believe it does….
Former managing partner Edwin Reeser is one of my favorite analysts of the legal profession (or industry, as the case may be). He recently wrote an interesting and thoughtful piece for the ABA Journal with a great title: “Law firms in the Great Recession: looking for change in all the wrong places.”
I’m a sucker for a good double entendre. Here, “looking for change” has at least two meanings. First, there’s “change” in the sense of reform. Second, there’s “change” in the sense of “spare change,” reflected in the sad way that law firm are rifling through the couch cushions — de-equitizing partners, laying off associates and staff, and cutting other costs here and there. These marginal steps have helped keep profits per partner up in the wake of the Great Recession, but they’re no recipe for winning the future.
So what should Biglaw be doing to promote long-term success?
Ed. note: This is the latest installment in a series of posts on lateral partner moves from Lateral Link’s team of expert contributors. Today’s post is written by Elizabeth Katkin, a Senior Director at Lateral Link, where she focuses on partner and practice group transitions and developing strategic relationships with top international firms and companies in the Middle East and Europe.
Do you have one or more of the following frustrations with your current law firm? Inadequate overall or relative compensation. No platform to support or develop your practice. Feeling shut out of management decisions — or even having a voice.
Perhaps you are just beginning the search for a new firm, or perhaps you know where you are headed next — a place with a great footprint, support in the practice areas you need, and a group of lawyers that feels like a good fit. In the world of law firm management today, you already know that what you see is not always what you get. It is essential to gauge the financial and management health of a firm before you move, both to ensure your happiness and viability at the firm and to ease your exit in the event that there is trouble in paradise.
Here are five things you should understand before giving your withdrawal notice to your current firm:
The sky is not falling for the world of large law firms. But could Biglaw be a frog in boiling water? We can’t rule that possibility out just yet.
The latest report on law firm performance, focused on the first six months of this year, shows some signs of weakness. The numbers aren’t awful, but if Biglaw continues to travel down this path, it won’t wind up in a good place….
The new data on Biglaw’s performance in the first half of 2013, mentioned earlier in Morning Docket, shouldn’t surprise anyone. For the first half of 2013 (January through June), when compared to the same period in 2012, gross revenue is up slightly (by 1.5 percent), average hours per lawyer are down slightly (by 2.5 percent), and expenses are up slightly (by 3.5 percent). This is a pretty typical report card in the “new normal” — up a little on this metric, down a little on that metric, and overall basically running in place.
But the survey, from Wells Fargo Private Bank’s Legal Specialty Group, did contain a few interesting tidbits — including depressing information about partner productivity….
Alas, the nickname is less funny in the wake of yesterday’s big layoff news. The firm announced it will be cutting 60 associates and 110 staffers from the payroll. Despite the generous six-month severance for associates, some probably feel like their legal careers have been mangled. The firm also plans to reduce the compensation of about 10 percent of its partners (roughly 30 out of 300, some income and some equity partners).
Let’s take a closer look at the layoffs and try to make sense of them….
We have partner profits on the brain here at Above the Law. Earlier today, we wrote about a law firm that instituted a 20 percent holdback on partner pay — a move that was met with anger by some.
In that story, we noted the “continued expansion in the gap in power and pay between what we’d call ‘super-partners’ — partners in firm management and major rainmakers, who are often one and the same — and rank-and-file partners.” You can see this yawning chasm in the disparities in partner pay that exist within the same firm. As partner turned pundit Steven Harper has argued, partners aren’t true “partners” when they are paid and treated so differently.
New information from the American Lawyer shows how extreme some of these gaps between partners have gotten….
One firm just started pocketing 20 percent of partner pay.
Many lessons can be drawn from the collapse of Dewey & LeBoeuf. We’ve learned, for example, that it’s dangerous to have a law firm name that’s highly susceptible to puns. (Dewey know why that is? Howrey going to find out? Heller if I know.)
Another lesson: avoid excessive dependence upon bank financing. When a firm starts to spiral downwards, that spiraling can be accelerated by a bank calling a loan, not renewing a credit facility, or otherwise taking steps to protect itself that, while reasonable for the bank, can be damaging to the firm.
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When Chintan Panchal decided to leave a global BigLaw partnership to start his own firm, he could only hope that he would face the high-quality problem of firm building that many had cautioned him about. Focused on the uncertainty surrounding of a new firm launch, he decided to tackle staffing needs, IT challenges, and financial planning requirements after he had built up his legal practice.
Panchal Associates LLP–a corporate/finance and outside general counsel boutique–was quickly off to a great start. Clients and matters were flying in the door, and Chintan soon had a team of lawyers and staff with a variety of operational needs. To continue building an excellent team and provide them with a competitive benefits package, to expand his physical presence to include a European practice and additional partners, and to scale his operations and IT capabilities to support this growing enterprise brought with it demands of time, money, and expertise. Chintan knew he needed help.
“With the assistance of NexFirm, we have upgraded the capabilities of our firm to meet, and in some cases exceed, the standards we were used to at our former BigLaw firms. Operationally, we can now attract and service clients we didn’t have the bandwidth to support in the past, and continue to build our team with the best and brightest legal talent in the industry,” said Chintan Panchal, adding “It has worked out quite well in our case; NexFirm is an essential partner for us.”
The holiday season is upon us, and yet again, you have no idea what to get for the fickle lawyer in your life. We’re here to help. Even if your bonus check hasn’t arrived yet, any one of the gifts we’ve highlighted here could be a worthy substitute until your employer decides to make it rain.
We’ve got an eclectic selection for you to choose from, so settle in by that stack of documents yet to be reviewed and dig in…
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