In the continuing—and to-be-continued for quite some time, judging by the rate comments are com ing in—discussion about the virtues
and vices of firms switching to a two-tier partnership model, here’s
one more data point. The results of the poll I launched about
10 days ago:
Here’s what we see: The most popular response,
by a reasonable margin, was "to retain valuable associates we would
otherwise have had to lose." Second to that is an arguably
related purpose, "to provide a period to additionally evaluate people." These
two together captured 58% of all votes, whereas "to increase profits
per partner" received only 13%, and actually tied with "to provide
an alternative ‘lifestyle’ career track."
Now, the question is whether we’re witnessing revisionist
history in action, or whether our respondents are being perfectly
candid and all the posturing by the consulting industry about how
going two-tier would boost PPP was smoke and mirrors: Smoke
and mirrors, I might add, which our readers saw right through if
these responses are accurate about firms’ actual motivations at the
time of the switch.
Option A: Revisionist History. This would posit that
the popularity of the rationale "to increase PPP" at the time of
switching to two-tier status was real. But now that we
know that such a switch, in and of itself, does
no such thing,
rather than eat crow people are simply positing that different factors
were at work.
Option B: People Are Truthful. This would posit that
the readers of "Adam Smith, Esq." are responding accurately to the
poll and that boosting PPP as a rationale was, at the very least,
grossly oversold by the consultants. Firms that switched did
so primarily for the utterly defensible and arguably humane reason
of providing a way to "keep valued associates."
I lean rather strongly towards Option B. Not only do I have
a pronounced preference for believing the "Adam Smith, Esq." community
is by default truthful, I also, following Occam’s
Razor, prefer the
simpler to the more baroque explanation.
So what does this tell us? By and large, it supports Prof.
Bill Henderson’s theory that one primary reason firms shifted to
two-tier status was to keep rainmakers happy (and on-board) by concentrating
voting and economic power in the partnership in their hands, while
also retaining enough competent, senior-level lawyers to actually
get the firm’s work done. The motivation for the shift, in
other words, was more qualitative than quantitative.
That is to say, two-tier firms enjoy the ability to offer productive,
profitable senior attorneys a career track that may constitute a
long-run stable equilibrium choice both for those lawyers and the
firms. In a single-tier firm, those same lawyers (who by hypothesis
are not rainmakers) would be shown the door.
