In 2001 I became managing shareholder of my law firm. At that time we were 14 lawyers. For many years the firm had hired based on perceived temporary need and promoted to shareholder based on objective longevity in practice. There was very little input from members of the shareholder board of directors on more comprehensive determinations of value that the proposed shareholder had already made and would make in the future. Basically, the main rite of passage for an associate was achieving a certain number of years in practice.
One of my first initiatives was to memorialize in writing a set of criteria that our shareholders should commit to consider before agreeing to admit a new shareholder. The criteria we agreed on included specific hourly and collection goals, longevity in the term of years in practice (differentiating between new bar members and lateral hires) and subjective criteria related to the progress of the lawyer in the ability to handle complex legal matters and client relationships without supervision. This set of criteria worked well for the generation, and the compensation system, it was created for. Times have changed, however, and the type of culture leading to success with a new generation has shifted. It’s therefore crucial that law firms striving for sustainability and success in the future consider whether changes need to be made to the criteria used in considering firm ownership.
Tied to Values
The overriding theme of any set of criteria (or guidelines) must be
Experience Tied to Individual Development
Historically, most law firms have had objective longevity criteria; lawyers would not even be considered until they had worked a certain number of years. As with most medical practices, the younger person must make a sufficient amount of money for the owners before they qualify. In my experience with firm management, I have come to the conclusion that the number of years one
There are obvious advantages to this tactic, which gives management an easy way out of confronting difficult issues, but I would argue this is very unfair to a young lawyer who has committed sufficient time and effort to a law firm during such important years of professional life. Criteria tied to clearly stated values, supported by a commitment to personal and professional development—one that progressively increases leadership responsibility as a result of satisfactory development—is an alternative that law firms interested in developing a Millennial generation of lawyers might consider. Regarding “experience,” a firm might consider the following guidelines:
- Have the shareholders had sufficient time to carefully evaluate the attorney as a person, a lawyer
anda potential business partner?
- Has the attorney demonstrated a consistent desire and ability to meet the firm’s value standards?
Quality Tied to Relationship
Criteria for both hiring and shareholder status has for years, in most law firms, focused on law school ranking,
Simply put, a law firm is a business. Success as a business is not guaranteed by what school your lawyer members attended, what grades they achieved, or whether or not they are found, through popular vote, to be “super” or “of distinction” by other lawyers or the businesses that create lists that cater to
In the area of “quality,” a firm might consider the following guidelines:
- Would every shareholder be comfortable with the attorney handling a complex legal matter in his or her area of practice for one of the firm’s valuable clients, considering both technical expertise and client experience?
- Would every shareholder trust the attorney to service independently the firm’s most valued clients in such a manner that the client receives the highest exemplary service consistent with agreed-upon firm values?
Comprehensive Financial Considerations
Law firm shareholder considerations of the past have largely mirrored the importance of objective financial results in compensation systems. These systems contained a heavy emphasis on
Many law firms have expressed a desire to plan for succession and to have long-term organizational viability. In many
In considering the financial contribution and development of a candidate, a firm might contemplate the following guidelines:
- Has the attorney, through all of his or her efforts, demonstrated full engagement in client, firm, community and professional service?
- Has the attorney consistently handled matters efficiently and given value to clients?
- Has the attorney established a record of sustained profitability for the firm?
I have concluded that it is not necessarily wrong for a law firm to continue to have shareholder criteria tied to short-term financials and other objective data. That is a choice. I personally think that choice is detrimental to the long-term viability of the organization, but it is not wrong to choose that route. Notwithstanding