Pity those poor equity partners. They may pocket an eye-watering wedge of the profits and dictate how the firm is run, but there can be a heavy price to pay.Equity partners have unlimited personal responsibility for the debts, liabilities and losses of the firm, which certainly must concentrate the mind during these difficult economic times. They have fewer statutory rights than mere employees and, once they have left the partnership, are frequently bound by restrictive covenants regarding future work.
They are also constantly under scrutiny and feel insecure and threatened when the partnership introduces intensified monitoring, formal appraisals and sanctions for failure to meet performance targets.
In fact, being an equity partner is a tough call, which could explain why recent research, according to Mike Jones, managing director of business development consultancy Intrinsic Values, has revealed that only 37% of today’s associates aspire to what used to be the ultimate career goal.
Some associates turning their back on partnership cite the poor work/life balance that characterises law firms generally and law firm partners particularly. They are not prepared to sacrifice quality of life in pursuit of a career that can be cut off when the market dips or when they are obliged to retire to make room for younger lawyers coming through.
The money is not necessarily all that it’s made out to be, either. On average, even the best rainmaker partners only pocket one-third of the revenue they generate for their firm. Is it really worth all those long hours of management meetings, networking events and away days?
Absolutely not, reply two former partners who have reverted to fee-earning.
One says: ‘A law firm partnership is worse than a dysfunctional family. There's in-fighting, back stabbing, empire building and plain petty nastiness. You’re tied in with people you would cross the road to avoid in normal circumstances.’
The other says: ‘You are bogged down with administration rather than doing what you are trained and qualified to do. All the business about departmental budgets and key performance indicators just gets in the way of your relationship with clients. It was a relief to get back to fee-earning, being given a task and allowed to practise your profession.’
So, is there a looming shortage of new equity partners? No – or not yet. Many firms have reacted to the economic downturn by cutting equity partner numbers so as to reduce overheads and maintain profitability for the partners that remain. Many other firms have reduced partner promotions as a precaution against what the future might hold. Others have introduced non-equity appointments as an alternative to partnership.
The writing is undoubtedly on the wall for the traditional partnership model, but then law firms are set to change anyway with alternative business structures and other changes ushered in by the Legal Services Act. Interesting times lie ahead for the profession.
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