November 30, 2010 2:00 PM

Law Firm Leaders Survey 2010:
Change You Can Believe In

Posted by Ed Shanahan

By Aric Press from the December 2010 Issue of
The American Lawyer

Despite the hard-earned optimism expressed in our annual Law Firm Leaders survey, 2011 will be another difficult year for big-firm partnerships. While the marketplace waits to see which of the buzzwords of the moment turn into game-changing trends--alternate fees, outsourcing, disaggregation, clients in revolt, you know the litany--the nature of the partnership itself has changed rather dramatically and irrevocably.

The evidence is in the answers to our questions posed on a confidential basis to the heads of the Am Law 100 and Second Hundred firms. Among other things, we asked whether they expected to force out or demote some of their partners. Sixty-seven percent said they plan to ask partners to leave their firms next year; 31 percent said they plan to deequitize others; and 57 percent have tried to realign compensation to reward partners who cooperate in change-agenda initiatives such as project or knowledge management efforts.

These answers confirm the trends of the last several years; in that sense, this is not news. Firm fires partner (or vice versa), ho hum. But in another sense, the responses are very significant, for they demonstrate the embrace of an alternate sensibility. In an arena where little changes and nothing changes quickly, the notion that tenure and comp structures--the alpha and omega of partnerships--are no longer givens, and that changing them seems like just another business decision, means that at least one important part of this marketplace is very different. Partnership: It just ain't what it used to be.

To be fair, there is usually some sadness attached to the acknowledgment of these changes. But the nostalgia for the days gone by--and not coming back--is diluted by the frustration these leaders express about their mates. As usual, our survey asked law firm leaders what disappointed them the most during the past year. The most common response was the failure of their partners to develop new business, understand the new challenges they faced, and/­or give up their bad old habits. Several respondents used the same phrase: "a lack of urgency" in their partners to get in step with the new times. As one put it, a bit more colorfully: "Not fully accepting the new model required in [the] new normal. That would include everyone--top to bottom--working harder, as was more the case in the industry in the 1980s and 1990s, before the lifestyle era of the 2000s."

(The only answer better than this paean to the good old days when all the partners were above average was the note from one leader whose sole expressed disappointment was the advent of ever more surveys.)

If the current partners are the problem, the expressed solution is all too clear: a new and better set of partners. In fact, the failure to recruit just such stars was a frequently expressed disappointment. A few particularly candid leaders admitted that some of the hot properties they had recruited had failed to live up to their advance billing—literally and figuratively. Indeed there is an idea afoot that the great lateral movement square dance of the last few record-setting years has been a case of "buying each other's problems." At firms with this harsh experience, the music has stopped. Elsewhere, evidently, the partners are, to borrow the name of a recent documentary, still waiting for Superman.

The wait may go on for a while. A majority of firms expect to keep growing next year, even as they hold their incoming associate classes flat. Many of the added troops will be known as partners--at least for now.

All of which points to challenge and difficulty ahead. To review, this will be another year of partner ousters and reminders of impermanence at many firms. For some that's a healthy spur. For others, the signs that the ties of partnership are no more enduring than last year's K-1 is license to move, and move quickly. For the leadership cohort it means shopping for your competitors' talent even as others shop for yours. And it means trying to peer through the fog of the lateral warfare to discern whether that shiny superstar is moving so fast because his current partners are pushing him downhill and out. To make all this just a little more acute, this drama will be played out in front of anxious juniors trying to decide whom, if anyone, to emulate. Change is here, and, as always, it's not so pretty.

Complete survey results are available here.

 

Contact ALM editor in chief Aric Press at [email protected].

Image: Bruno Budrovic/Getty Images

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