Gaining Admittance To Law Firms: Current Trends In Partnership

Summary

The partnership structure of law firms is constantly evolving, and views are changing on what it means to become a partner. In the past, the view was that becoming a partner meant that a lawyer had achieved success in their profession, and would gain the prestige and larger salary associated with the title. However, today, many lawyers are questioning the value of becoming a partner, and are instead choosing to remain an associate or become in-house counsel.

One primary factor of this change in viewpoint is the increased competition for partners. Due to the growth of the legal industry, there are now more lawyers competing for a diminishing number of partnership opportunities. Additionally, the increased competition has caused many firms to change their approach to rewarding lawyers for their work, making the path to partnership longer and more difficult.

The economic landscape of law firms has also contributed to a change in the partnership structure. The Great Recession caused many law firms to take drastic actions in order to remain solvent, such as cutting back on partner compensation and benefits, reducing staff, and implementing cost-saving measures. As a result, many lawyers have opted to stay as associates, rather than invest in the uncertain future of a partner position.

The increased use of technology has made it easier to contract out legal work, or to hire in-house counsel, eliminating the need for many partner positions. Additionally, the amount of administrative paperwork and other non-legal tasks that a partner must now oversee has shifted the focus away from practicing law and towards managing a practice. This has caused many lawyers to question the value of a partner position.

In conclusion, a combination of increased competition, economic concerns, and technological advancements have caused a shift in the partnership structure of law firms. Many lawyers are now choosing to remain as associates or become in-house counsel, rather than pursue a partner position. This changing view of what it means to become a partner has had a profound effect on the legal industry, resulting in changes in compensation and benefits, as well as a greater emphasis on alternative legal career paths.

Questions Answered In This Article

 

What is a non-equity partnership (NEP)?

A non-equity partnership (NEP) is a form of partnership status in which the partners are not provided with equity or full ownership stake in their law firm. This arrangement allows lawyers to become part of a firm’s partnership without assuming full equity partners’ financial obligations and commitments.
 

Are there any types of NEPs?

Yes, there are two types of NEPs; temporary and permanent. Temporary status is often used for associates or laterals elected to partnership for a designated period, usually two to three years before they are considered for equity status. Permanent status involves lawyers being designated as partners without defining their NEP status.
 

What are the benefits of having a NEP position?

For attorneys, the main advantage of having a NEP designation is that it allows them to develop their skills before facing the possibility of not being elected to full partnership. It also provides more flexibility in terms of time commitments and financial obligations. For law firms, having NEPs allows them to retain valuable lawyers without making them full equity partners.
 

Are there any alternatives to NEP?

Yes, there are other alternatives for law firms besides having NEPs. These include creating a permanent category of “senior associate,” “senior lawyer,” or “special counsel”; or designating certain associates as “senior associates” and giving them substantial bonuses. Another option is to let go of senior associates without allowing them to achieve partnership.
 

What should I do if my law firm is not in a position to offer me a partnership?

If your current law firm cannot offer you a partnership, an attractive alternative to a partnership, or even go into discussions about your prospects for a partnership, don’t be discouraged. There is no need to feel that there is no longer a place for you within the realm of a law firm. You may consider considering joining another law firm that may be in a better position to offer you partnership or other career opportunities.

As more associates decide they no longer want to strive to reach the near-perfect standards required to make equity partnership, firms are responding by creating new tracks that still allow for career advancement to keep them interested.

Associates' Views on Partnership Has Shifted.

Today's associates are not necessarily as interested in making partner as they once were. For some, it seems more unattainable and less desirable than it has been for associates in the past. This is especially true coming out of a recession, when firms are typically electing fewer partners. As a result, there appears to be a definite shift in the goals of some of today's law firm associates.
 

Increasingly, lawyers are now more focused on using their time at law firms to gain work experience and earn money, without having to commit long-term. Associates often leave law firms before they can even be considered for partner, either by moving in house or out of the profession entirely. In fact, we've met some associates who go to law firms without any intention of staying there long enough to be a partner. Law firms do not always discourage such attitudes since economically they can't make everyone partner.

There are many reasons why associates quit, including poor performance reviews, the pressure of billable-hour requirements and family obligations. Another very common reason why associates leave their firms is the lack of perceived opportunity for advancement. Especially in extremely large law firms, associates believe making partner is out of their grasp. And, for many, it is true. The bar is certainly higher to become an equity partner. The saying, "you work hard and pay your dues and you'll make partner" no longer always applies. Partnership is not just about a well-developed skill set or technical expertise in a practice area, but also the associate's potential to be a savvy business developer.


  Road to Partnerships Is Getting Longer
The fast track at top law firms is slowing down. Major law firms are sometimes prolonging the period leading up to partnership because of the desire for more experienced associates, an active market for lateral partners and greater pressure to improve profitability. At firms where an associate's first shot at partnership once came around 7 years after law school graduation, it can now come around 10 years after, or longer.

Partners want associates to have more experience. However, at the same time, clients are demanding leaner staffing on matters thereby resulting in fewer opportunities for associates to gain experience. And in a down economy, there are less deals where associates can build their skills. Also, lateral hiring of partners with business results in a large pool of homegrown senior associates who have to wait for partnership consideration. Further, there is another pool of lateral senior associate hires who usually have to face a prolonged wait for partnership as well, especially since firms often take their time to reach a high comfort level with associates who were trained elsewhere. Finally, because low partnership numbers drive up profits per partner, firms may be wary of making a large number of even well-qualified associates partners.


  What Is Left For Those Who Do Not Make Equity Partner?
Inevitably, there remains a plethora of senior level associates who start to feel alienated and, unless the firm gives them effective feedback on the prospects of partnership, will most likely opt to quit the firm.

One method firms have been using to deal with this situation has been the institution of non-equity partnership tiers. In fact, over the years, many changes have occurred in the traditional partner-associate structure. Permanent associates, temporary attorneys, staff or contract lawyers, of counsel and non-equity partners (NEPs) have all been added to the mix.

Non-equity partnerships have long been utilized by large law firms, but the use of this alternative is on the rise. In fact, most large law firms have created some form of NEPs. Even smaller firms are following the trend. The popularity of this structure continues to grow to the extent that the number of non-equity partners in many firms is increasing more rapidly than the number of equity partners.


  NEPs - Reasons For The Rise.
There are at least five reasons more firms are creating an NEP tier:

1. to lengthen the equity partnership track in order to give younger lawyers more time to build their skills and their business;
2. to postpone on having to decide who deserves to make partner;
3. to avoid reducing profits per partner, particularly when profits are down;
4. to try to retain associates who may not, or will not, become equity partners and might otherwise leave the firm; and
5. to accommodate the many young lawyers today who don't want to become equity partners because they don't want to assume the responsibilities associated with partnership, and a non-equity partnership will provide this middle ground.

Types of NEPs.
There are two types of NEPs: temporary and permanent.

Temporary status. In firms where NEP status is defined as "temporary," or simply an additional step to full partnership, associates (or laterals) are elected NEPs for a designated period, usually not more than two to three years. The additional time before consideration for equity status enables them to gain more legal and client service experience, develop areas of expertise and develop more business. It also gives the firm more time to evaluate the lawyers.

Permanent status. In firms where the category is defined as "permanent," NEPs will generally not then be considered for equity partnership—although there can be exceptions. In order to retain these lawyers, the firm designates them as "partners" to the public without defining their NEP status.


  The Advantages of NEPs.
NEP status has advantages for both lawyers and law firms. For one, while the lawyers are considered to be full partners to the public, they gain additional time to develop before facing the possibility of not being elected to full partnership. And lawyers who don't wish to assume the financial obligations and time commitments required of equity partners can still become partners. From the firm's perspective, the tier allows them to buy time and hold on to valuable lawyers without having to make them full equity partner.


  Other Alternatives
Non-equity partnership is not the only alternative for a firm. Other options include creating a permanent category of "senior associate," "senior lawyer," or "special counsel"; or designating certain associates as "senior associates" and giving them substantial bonuses. This usually indicates the firm's strong commitment to making these associates equity partners once they complete the normal partnership track. Of course, there is always the option to just let go of senior associates without allowing them to achieve partnership.

Conclusion.
Just because the prospect of equity partnership is not as easy to come by or may take longer than in the past does not mean that you cannot have a long, stable career with a law firm. At the very least, you should know that there are other options available for lawyers at law firms besides straight equity partnership. Perhaps a non-equity partnership arrangement may even work out better for your career goals. If your current law firm is not in a position to offer you partnership, an attractive alternative to partnership or even go into discussions about your prospects for partnership, don't be discouraged. There is no need to feel that there is no longer a place for you within the realm of a law firm. Perhaps it's just time to go into discussions about joining another law firm.