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To ensure the security of the partnership, all partners must contribute to nurturing the personal, professional and economic bonds that keep the firm together. It’s time to evaluate your contributions and assess how you are doing.
In every market and every economy, some law firms persevere and flourish and others falter and fail. The reasons for the dissolutions are many and varied. Time and again, though, it’s clear that it ultimately relates as much—or more—to the partners’ mind-sets as it does to the firm’s financial liabilities. Some firms that are in debt are able to link arms and pull themselves through by sheer will and professional drive, while other firms that are profitable dissolve because arrogance replaces consensus, competition replaces collegiality and greed replaces loyalty.
The lesson learned is that a partnership is a fragile entity—some would say a fluid gathering of professionals. To ensure the security of the partnership— and their own jobs—all partners must contribute to nurturing the personal, professional and economic bonds that keep the firm together. Unfortunately, many law firms basically strip-mine the place every year—distributing substantial partner profits and investing little retained earnings in the firm’s future. But wise partners balance the long-term interests of the firm with the short-term pressures to maximize their net income as individuals. Essentially, partners have to view themselves as the custodians of the firm as an entity and add value to the entity wherever they can. Otherwise, the entity may not survive the egos of the individuals involved.
So what value are you adding as a partner? Or, put differently, what is your worth to the firm and to your partners in terms of the types of contributions that will help the firm triumph through good and bad economic cycles? Here are issues to consider as you ponder that question.
The Work Flow You Generate for the Firm
To begin, consider the basics of profitability and to what extent your partners are benefitting from the work flow you generate. Are you fully utilized and working sufficient hours as a timekeeper? What is the average hourly rate for the work you do after write-offs, write-downs and premiums? Are you watchful of any behaviors on your part that could negatively impact the margin, such as a failure to work effectively with associates and support staff?
Another critical issue is whether your practice is properly leveraged. Do you put paralegals, associates and more-junior partners to good use? Or, do you hoard work to pad your own hours when the client would be better served by someone who bills at a lower hourly rate or works in a different practice area?
Overall, are you a net receiver of work or a net generator? The metrics for determining that will vary, of course, but here is one gauge. In most good-sized markets, a partner with a book of business that represents revenue of between $800,000 and $1 million in fees is likely generating enough revenue to feed himself or herself but not enough to generate work flow for others in the firm. Typically, when you work the first $1 million yourself, you might expect to earn something in the range of $250,000 to $350,000 depending on your firm, its overhead structure and the contribution of your partners.
The Contributions You’ve Made in the Past 12 Months
Another way to assess your value to the partnership is to identify what you have done in the past 12 months in terms of the multiple roles that any partner can—and should—be playing to contribute the firm’s success. So, as you are considering your worth to the firm—and the security of your job as a partner—think about the steps you have taken in the following key areas during the course of the past year, and where you plan to make improvements starting now.
Your Place in the Dynamic
Recognizing that these are tough economic times for law firm partnerships, you have a choice to make: You can either focus on your short-term profits per partner or focus on the long-term interests of the firm as an entity by continuously improving in your contributions as a partner and a custodian of the firm. Those who cannot or will not contribute are in danger of losing their jobs. Those who recognize that there is opportunity in crisis will become stronger.
There is a dynamic between individual and collective philosophy and behavior that helps partnerships triumph through good and bad economic cycles. What about you, are you willing to contribute to that dynamic? Your firm’s future is in your hands.
Karen MacKay is President of Phoenix Legal Inc., where she focuses on leadership, strategy, management and compensation issues for law firms. She is a Fellow of the College of Law Practice Management.