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THE INNOVATION ISSUE

 Table of Contents | Features | Frontlines | Technology | Business

April/May 2009 Issue | Volume 35 Number 3 | Page 60
BUSINESS

Managing

ARE YOU OFFERING THE GOLDEN EGG OR GOLDEN HANDCUFFS? ALTERNATIVES TO PARTNERSHIP

If you want to retain the type of talent that enables good leverage—something that’s especially desirable in a tight economy—your firm may want to exercise some ingenuity in the options it offers to its nonpartner lawyers.

It’s hard to even imagine a typical law firm from just a few decades ago. No computers on the desks. No e-mail. No fancy art on the walls. No billable-hours pressure. All partners were shareholders and all associates were aspiring partners. Partnership was the golden egg— and once you attained it, it was for life.

Fast-forward to this decade, in which partnership is no longer perceived as desirable or even attainable for many lawyers. According to one survey of 3,000 junior lawyers, only 47 percent cited partnership with their current firm as a preferred career option (“One in 10 Now Aspire to Non-Partner Roles in Law,” Legal Week , February 8, 2007). And for those who do aspire to be partner, the time required has increased to an industry average of 8.7 years. With the current economic times, the average is likely to increase.

Plus, a National Association of Legal Professionals study has found that by an associate’s sixth year, roughly two-thirds of associates leave the firms they joined after law school. Junior associates watch those who manage to pass through the proverbial eye of the partnership needle go on to bear an even greater burden of responsibility and workload—all without that lifetime guarantee of job security. For many Generation X and Y associates, what can seem like years of “golden handcuffs,” not some golden egg of partnership, is not the life they yearn for. And, of course, as firms struggle with profitability issues, the contributions of senior nonpartner lawyers emerge as critical to a firm’s financial well-being.

This leaves law firms with the challenge of adapting the traditional structure if they want to retain key talent and critical leverage. What are the alternatives?

Overturning Perceptions of Alternative Roles

The alternatives to partnership have historically fallen under the of counsel , counsel or director umbrellas. Of counsel is the most common, followed by counsel and director, although job titles vary quite widely. The current challenge with these titles is that each firm classifies the career potential of these positions differently, and associates aren’t clear as to whether the positions are stepping stones, permanent or terminal.

For firms considering ways to make these roles or titles more visible, viable and desirable alternatives to partnership, the first thing to consider is the ways in which these roles are perceived:

Which among your lawyers currently becomes counsel or of counsel?

Are they partners emeritus , semi-retired from active duty?

Are these roles considered stepping stones to equity partnership, awarded to associates who are top lawyers capable of meriting shareholder status one day?

Or are the roles considered way stations rewarded to reduced-schedule lawyers or associates self-selecting to abandon the partner track?

In general, these roles are becoming more accepted and respected in the law firm world, but if they currently are not or have not been historically respected in a firm, it may take persistence to overturn existing perceptions. While time and increased use will aid in dispelling negative perceptions, law firms must work to create meaningful and worthy positions and avoid creating new titles as artificial retention tools.

Meeting Halfway: Two-Tier Partnership Structures

Another way that law firms are seeking to widen advancement opportunities is through two-tier partnership structures. A two-tier structure is composed of equity partners and income partners. Equity partners make a capital contribution, directly participate in the profits of the firm, are liable for the firm’s debts, and exert control over firm policies and direction. Income partners make no capital contribution, indirectly participate in the profits of the firm, are protected against losses by equity partners, and usually have limited voting rights.

A two-tier structure is desirable to many associates because it potentially offers an alternative for those who are considered valuable firm assets but cannot or do not desire to meet the requirements of equity partnership. Thus, two-tier structures can be an effective way to eliminate the traditional “up-or-out” policy. However, a large number of firms that have moved to a two-tier structure continue to apply up-or-out policies, forcing all nonequity partners to either eventually meet the equity partner requirements or find work elsewhere. If handled correctly, however, two-tier structures offer firms an honest, respectable way of meeting halfway those top-performing lawyers who do not desire partnership.

Going Flex-Time

Another alternative is offering greater flexibility in lawyers’ work schedules. Although many large firms make part-time schedules available to their experienced lawyers, only 5.4 percent take advantage of the option and, not surprisingly, 75 percent of them are women. Data indicates that the option is readily available, but many are simply not taking advantage of it owing to concerns about the effect of part-time work on career path, advancement opportunities and job security, especially in today’s economic climate.

Some firms have even instituted different levels of billable-hours requirements with corresponding salary reductions for those who may want to limit the demands of normal workloads, even if they are in the office full-time. Many associates are hesitant with this approach as well, though, because they are afraid they will be seen as less committed to the firm. (For more flex-time scheduling ideas and advice on what management can do to overcome the stigma of alternative work arrangements, read “Try This: Work-Life Balance Scheduling” in this issue.)

As law firm managers deal with a generation of lawyers who don’t necessarily put their careers first, the firms must be more creative in finding ways to have their needs met and yet allow their lawyers to have more balanced lives. Here are just a few ideas on that score:

Creating client teams in which a group of lawyers from several practice areas are responsible for the needs of one particular client

Having permanent associate and staff attorney positions for those who do not want to strive for partnership (but these must not be viewed as second-class citizens by the firm)

Facilitating job-sharing opportunities

Providing more opportunities to work virtually, which can save on space and energy costs as well

These and similar initiatives can add flexibility to lawyers’ work lives, increase job satisfaction, create greater client satisfaction and reduce turnover costs. And, of course, firms could devise other options to meet their unique needs. It might be amazing how creative your firm could get if you really put your mind to it.

Opportunity Is Knocking

Clearly there is no turning back the hands of time to the law firm of decades ago. Change is here to stay for 21st century firms. Yet while the current economic woes are wreaking havoc, they may also provide opportunities for firms willing to be creative in their approach to both their structures and alternative work arrangements.

With a little ingenuity, good humor and a willingness to embrace change, there is tremendous opportunity to reengineer structures that are no longer working. Offering alternatives to the traditional partner path can give firms a profitable advantage and provide associates with greater career and life flexibility—handcuff free.

About the Author

Marcia Pennington Shannon is a principal in the Washington, DC, attorney management consulting firm Shannon & Manch, LLP. She is coauthor of Recruiting Lawyers: How to Hire the Best Talent (ABA, 2000).

Note: Many thanks to my colleagues Kathleen Post and Annabelle Wylie for their tremendous assistance with this column.

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