I worry.
To be more specific, I worry about the long run.
Immediate compulsory disclaimer: None of what follows is meant as a critique of non-equity partners, all of whom we can stipulate are hard-working, God-fearing, eminently competent, and some of whom are my best friends. We can also stipulate that the choice non-equity partners have made—to take a very comfortable salary (one 95% of Americans would envy), without pressure to relentlessly build their “book,” is utterly rational. They are consenting adults accepting an attractive offer extended to them.
So, to all the non-equity partners in the crowd, this is not about you. Rather, what follows is written from the perspective of someone who thinks a lot about the industry’s long run.
One of the strongest indices of organizations’ competitive strength over time is the ability to align and renew itself faster than rivals. As Scott Keller and Colin Price wrote in Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage (Wiley, 2011):
Organizational health is about adapting to the present and shaping the future faster and better than the competition. Healthy organizations don’t merely learn to adjust themselves to their current context or to challenges that lie just ahead; they create a capacity to learn and keep changing over time. This, we believe, is where ultimate competitive advantage lies.
This is about, in a word, people.
We know talent matters, we pay through the nose roof for headhunters to deliver lateral upon lateral, the statistical majority of whom will disappoint, we recruit the “best and the brightest” from law school (the statistical majority of whom, etc.), and yet when it’s time for our organizations to be agile and responsive to changing client expectations and market conditions, we find ourselves throttled. How can this be?
Change—real not superficial, meaningful not trivial, lasting not flavor-of-the-month—requires people to go above and beyond. It’s not comfortable, and comfortable people won’t do it. This is where, I believe, the performance hazard of too many non-equity partners in a firm begins to come in. From Keller and Price again (emphasis mine):
When it’s time to get moving, pilot programs are almost always the right way to start working on performance. If things go well, successes can be replicated elsewhere; if they go awry, you can confine mistakes to a small area. Early results also help to build your employees’ motivation and appetite for change. One key to successful pilots, we’ve found, is conducting them in two stages: first, a standard proof of concept and, second, a proof of feasibility, which will ensure that you have a replicable means of capturing the value you’ve identified across your organization. Too many companies don’t take the second step and find that they can’t build on their initial success.
But even the most carefully constructed pilots aren’t enough. Lasting, healthy change also requires an organization motivated to go the extra mile over and over again as employees carry out their routine, day-to-day tasks while fundamentally rethinking many of them. The whole process can feel like trying to change the wheels of a bike while you’re riding it. Not surprising, most companies find this difficult: one of our surveys found that only some 30 percent of all executives who had been through a transformation thought their companies had been completely or mostly successful at mobilizing energy in it.
This is demanding: Indeed, the odds against you are high, and you need every advantage you can muster.
This brings us back to the growing ranks of non-equity partners. I worry that if we as an industry continue down the path of this quite marked demographic change, we will be putting more obstacles between ourselves and the high-performing organizations we all envision.
Maybe a simpler way to present what worries me is this:
| Short Run Benefits/I understand | Long Run Problems/En garde |
|---|---|
| Non-equity partners are easy to make and to un-make
and |
Since when is simplifying management’s life a criteria for selecting and promoting talent? |
| They get things done with minimum learning required
and |
Mid-level and senior associates are deprived of experience they need |
| High realization, profitable rates
and |
Maybe, but who’s going to “own” the client relationship going forward? Not the non-equity people (that’s why they’re non-equity to begin with) |
| Loyal
and |
Not driven in the same way partner-track associates and equity partners are |
| Solid “B” players, which every organization needs
and |
You also need, if you want to stay in the Major Leagues, as many “A” players as you can get your hands on. Too many “B”‘s and soon your entire firm is a B team |
| Provide genuine client service | And what happens in ten years? |
As I said at the beginning, this has changed subtly and unseen by most people. My biggest fear is that we haven’t decided intentionally to do this and we’re only now beginning to live with the consequences of what has largely been a heedless development.
Nothing, repeat nothing, does more to determine an organization’s future success than the DNA of its talent pool. If I’m even half right about the challenges I outlined in Growth Is Dead, and if Keller and Price’s estimate that 70% of firms attempting serious change fail, we will need as hard-working, committed, and ambitious a group of professionals as we can find.
Finally, for many firms outside the fortunate precincts of capital markets centers, or whose practices have no natural competitive barriers to entry, getting close to your clients—bordering on intimate—has never been more critical. Lawyers without powerful instincts for client relationship management may become a luxury you can no longer afford.
In the long run, that is.
Of course, you are managing for the long run. Right?
Bruce – great post and as always, you cut to the most important issues to discuss.
The numbers don’t lie, but I’m not sure that I am ready to accept all of your short and long run conclusions … you may be right – especially regarding your assessment that you shouldn’t create these kinds of classes for short-term profitability or to avoid difficult management decisions and responsibilities. But something in me is uncomfortable with regard to your last few conclusions – I can’t help but think that you’re making presumptions about who non-equity partners are and how they’ll behave based on a long-standing bias about what drives equity partners and how they’ll behave. I think it’s dangerous to define today’s non-equity partners based on those terms. I think many represent a new breed of legal professionals who are anything but equity partners’ Mini-Me’s.
The truth is that this experiment is still young and many of the results are not yet in: what it is that drives lawyers to choose different relationship status with their firms in today’s marketplace is fundamentally changing with both generational and emerging new market realities.
For instance, I’m not so sure that non-equities might not be MORE loyal to the firm or BETTER shepherds of long-term client interests than their equity colleagues going forward. Many seem far more institutionally committed to their firms than many of their equity colleagues. If we are truly moving from a law firm service model that rewards activity and revenues toward one that rewards results and profitability, then I’m not so sure that logic dictates that the equity partners in today’s firms are better or more loyal to the cause of long-term health and increased firm profitability.
More to the point, I’ve found a lot of fault lately in the behaviors and driving incentives of some equity partners in some firms lately, who are anything but “firm-loyal” or “client-interested.” Hoarding work, avoid strategic decision-making, holding hostage or nixing important investments, and constantly shopping for a more lucrative firm in which to perch are not the hallmarks of partners who are investing in the long-term health of their firms. I’ve also seen (and am honestly still learning about) the changing work ethic of many younger lawyers today – they are incredibly committed to their work, the quality/improvement of their practice, and their clients – just not to self-obsessive point that typified my generation. Many in my generation only know how to reward lots of hours, which isn’t what value-based services demand. My generation judged lawyers’ merit by whether they billed more hours, were willing to skip weekends and cancel vacations, and agreed to put off having families (or investing in other interests in their lives) so that they could be seen as loyal team players. Is that really how we should define either loyalty or merit in a firm today? Does that kind of thinking or practice really drive success, or increasing dysfunction?
Of course, in discussing this issue, we’re both making generalizations in order to advance our arguments and tweak the discussion. Just as you believe that many non-equity partners provide great value, I know many equity partners who are the most invested, strategic and firm-aligned leaders on earth.
My comment is simply to note that your judgment of how non-equities will behave over the coming years is based on a presumption that lawyers in both equity and non-equity classes are still the same creatures that most lawyers were a generation ago, before this experiment really got underway; it’s based on a presumption that they work in firms that will succeed if they continue to drive traditional thinking about how it is that lawyers should contribute their talents to assure success for the firm. I think times are changing the definition of successful business models and that there are new breeds of lawyers out there in both classes who will behave much differently, and are driven by different interests, than their peers and firms in the past. And that accordingly, the jury’s still out on whether the non-equities of today will or won’t end up making incredibly valued and important contributions to the long term health of their firms. We agree that firms must deliberately choose to create non-equity tracks for the right reasons and with insight and forethought. I don’t believe that it is a given that those who made that decision, however, will find that their long term interests aren’t well-served by their choice.
Thanks, Susan:
Not just for your generous words (of course), but for realizing the fundamental point that this is not about equity vs. non-equity partners (or either of them “vs.” associates, for that matter).
It’s about the long run “organizational health” of firms, and their ability to adapt and thrive on a vastly more challenging competitive landscape.
The whole point of this column is to get firms thinking – if they’re not already – about what type of professional workforce they want to have for the long run. And whether they think about it or not (most, I submit, have not really thought about it in a disciplined way across their professional populations), they will get the workforce they deserve.
Bruce
One issue with your analysis is that it seems to be missing some fundamental information. At my firm, at least, non-equity partnership is looked at as a “first step.” Unless you built up a large book of business as an associate (which rarely happens these days, since few clients want to hire an associate as their main attorney with the firm), if the firm likes you and wants to keep you, you get made a non-equity partner. You then start using your new title and the access it provides to build your book. When you have a strong book of business, you are then put up for consideration for equity partnership. Obviously some people will stay at non-equity and some will even start as an equity partner, but it’s not the plan for the attorneys or even the norm. Your analysis seems to overlook this, and possibly misunderstands the way partnership is approached in these new times.
Stacy:
Many thanks for taking the time to contribute; I appreciate your observations.
At the risk of abusing Tolstoy, the reality of law firm land is not far from his observation about happy and unhappy families: “All single-tier partnerships are alike; all two-tier partnerships are two-tier in their own way.”
Believe me, I’ve seen many different ways firms define, manage, populate, de-populate, and in general control the non-equity tier. They can be, for example:
The thrust of this column was not remotely to debate the merits, demerits, strengths, and weaknesses of the concept, existentially if you will, of a non-equity tier. The thrust was to point out that our firms’ demographics have changed rather dramatically in ways that I believe too few people appreciate.
Thanks again,
Bruce
Bruce,
I enjoyed this post–but was also troubled by something critical I felt was missing. We all focus on what means the most to us—and in addition to my many friends and colleagues still stranded in the senior associate and income partner phantom zone, I have devoted the four years since leaving my firm (after 25 yrs) to pressing for improved business, business generation and other practical skills training for associates and young partners. So while I appreciated your digging into a topic most lawyers and commentators are uncomfortable discussing, I think you missed an opportunity to hold firms accountable for the ways in which they may have failed their associates and young partners, setting them up to be set adrift as client demand for high priced legal services dipped.
Ed Reeser said it perfectly in a post last week– law firms need to get back into the “people business”. And I don’t think they can really “manage for the long term”, as you put it in this post, until they do.
What most concerned me in your post was the apparent assumption that client-centric skills are instinctive. You use the word “instinct” when emphasizing the urgency of the situation for those firms less hardy than the top tier. But–in my own experience, I am certain that many income partners could have been “A-players” had their firms offered put in the time to build the A team.
So–although you directly address the fact that law firms are somehow missing the point–that it’s all about the “people”….the talent (talent that has –like the average over-abundant lateral — disappointed), I wish you had also taken them to task for the myopic decision-making that resulted in fine lawyers being under-skilled in business generation and client development.
There are a few law firms out there who have chosen to invest hard dollars AND substantial, otherwise billable, partner hours in the development of their future partners. Really the hours –and even (call me crazy) some credit sharing and sponsorship–would be vastly more important than the dollars…but–of course, time is money..
Our new lawyers arrive on the job with little business and finance knowledge, minimal practical legal skills, and a weak professional network—-well behind their contemporaries in other corporate settings. Most of their firms still manage people and profits off the billable hours comp and pricing model.
We don’t disagree that management has lacked vision…I’d just like to dig back to some original sin, and try to fix it. This generation of lawyers has got to be broadly and deeply trained to survive, and to succeed us.
Anyway, thanks for providing a worthy topic for my long neglected blog. 🙂