20 May 2013 | By The Lawyer editorial staff
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UK associates may have to move out if they want to move up, as firms look to add strength in growing economies
This year’s partner promotion season in the UK is just about done, and the picture is one of change for firms headquartered here.
Overall, the number of new partners is down, a sign that the economic situation is having a real impact on firms. This is backed up by the increasingly widespread news of redundancies across the market.
Instead, firms are looking to the growth economies to add to their partner strength.
In Europe, Germany comes out top with nearly 10 per cent of all promotions by the UK top 20 this year. Asia and Australia account for a further 9 per cent. The trend is not limited to one type of firm, but can be seen in the magic circle, silver circle and national firms as well as those such as Herbert SmithFreehillsand Norton Rose that have been expanding through merger.
This all makes it tougher to be a UK associate. Which, in turn, makes it key for firms to get the message out that if you want to be a partner, moving away might be necessary.
As Norton Rose chair Stephen Parish notes, “We do tell all associates there are opportunities here, but it’s a fairly flat market and the way law firms grew in the 1980s and 1990s is just not going to happen again unless there’s a huge turnaround in the market.”
The picture in terms of diversity, however, is not changing as fast as most had hoped. Despite the efforts many firms are putting into developing the careers of their female lawyers - and minority groups more generally - the proportion of women made up this year is roughly the same as the previous year. Added to that, women outside the UK miss out in many firms. There is still much work to be done in this regard.
This year’s partnership promotion feature assesses data in a series of groups including the magic and silver circles, recently merged firms and the insurance sector. For many, it will not make comfortable reading.
Of the four magic circle firms, only Linklaters increased the number of promotions this year compared to 2012 - and only by one. The other firms all significantly reduced their promotion rounds, with Allen & Overy’s (A&O) numbers dropping from 23 to 19, Clifford Chance down seven from 27 to 20, and Freshfields Bruckhaus Deringer promoting just 14 compared with 20 in 2012.
Numbers in the City remained stable or were up one at all four firms, meaning international offices missed out most. Europe was the top international focus, particularly for Clifford Chance and Linklaters.
All four made up three new partners in buoyant Germany. Clifford Chance also added three in France and Linklaters promoted a trio of partners across the Benelux region and also in Iberia. A&O promoted five in Asia - three in Hong Kong and one in each of Singapore and Tokyo - but, unlike its rivals, it made up no new partners in the US.
Finance, including capital markets, was the practice area most in focus within the magic circle. Over 50 per cent of A&O’s new partners were in banking or capital markets and half of Clifford Chance’s. Freshfields bucked that trend, with a more even spread across the practice areas and a slight emphasis on litigation.
None of the magic circle does well on the diversity front, with only 10 (13 per cent) of the new promotions this year being female, half of those in London.
Firms downplay the significance of the reduced partner round. Freshfields senior partner Will Lawes says the firm’s numbers this year are only marginally down on the usual range of 15 to 20 internal promotions, and follow four lateral hires during the year.
“We make incredibly long-term decisions about where to invest our partner capital,” Lawes argues, adding that succession planning and the readiness of individuals to be made up is a key consideration each year.
The fact that three of Freshfields’ promotions were in international arbitration, for example, was, says Lawes, “an accident of timing, business needs and succession”. However, he points to the promotion of New York arbitrator Kimberley Zelnick as an example of an area where the firm is intentionally bulking up.
A&O managing partner Wim Dejonghe also says succession planning has a key role to play in the firm’s promotions, although he does acknowledge the difficult markets and its impact on numbers.
“The legal industry as a whole isn’t growing as it used to before 2008,” Dejonghe points out, saying firms are less able to promote large numbers now.
However, Dejonghe adds that at A&O, France and Germany continue to be growth markets. “You’re likely to see a larger number from those countries,” he predicts.
Linklaters managing partner Simon Davies notes that the firm made up partners in a greater number of jurisdictions this year.
“It’s the widest spread for some time but the most significant trend I’m seeing is the exceptional quality of the candidates,” he comments.
Associates involved in corporate or banking work are most likely to get promoted among silver circle firms such as Ashurst, Berwin Leighton Paisner (BLP), SJ Berwin and Travers Smith. In fact, more than 45 per cent of promotions in the past five years have been in these firms’ corporate, banking or finance groups.
Those in real estate are next in line, accounting for 12.3 per cent of promotions, while lawyers in litigation or dispute resolution account for less than 10 per cent of associates made up in the past five years.
In terms of geography, London-based associates are statistically best-placed to win a promotion. In every promotions round since 2008 these silver circle firms have made up more in their City offices than any of their overseas outposts. As they grow their non-UK bases, however, this is likely to change.
Ashurst is proud of the fact that in 2013, for the first time, it has more partners located outside of the UK than it does domestically. In 2012, Travers also promoted its first non-London-based partner in its sole overseas office, in Paris. This year, however, the firm kept its promotions in London, making up three City lawyers.
Women still have a long way to go when it comes to equality in the partnership stakes, with figures remaining disappointing in 2013. Only one of SJ Berwin’s five promotions was female, in comparison to two of the nine at BLP, none at Travers and only one of the 12 new partners at Ashurst.
“I’m disappointed that we haven’t been able to promote more women this year,” says Ashurst senior partner Charlie Geffen. “That’s something I’m determined to change.”
So, how do these firms decide who they put up for promotion?
“It’s a detailed process,” says Geffen. “Groups identify who they want to put up for promotion and we look at the firm’s needs and the quality of the candidates on a case-by-case basis.”
And that’s not just hours or business development, but all-round contribution to the firm.
“Where the candidate works, whether by sector, geography or practice, is obviously important as well,” Geffen adds.
As the legal market in the UK and internationally continues to consolidate, it is intriguing to look at the promotions made by recently merged firms.
This year saw the first promotions rounds for Bond Dickinson - formerly Bond Pearce and Dickinson Dees - and Herbert Smith Freehills (HSF). Norton Rose, which has expanded rapidly through merger in recent years, is another firm in mid-transformation.
Norton Rose is preparing for the latest milestone in its growth trajectory at the moment, with its merger with Fulbright & Jaworski set to go live on 1 June. However, Stephen Parish, chair of Norton Rose LLP and former group chair, says the US merger was not top of the agenda this year. Instead, the firm’s promotions are heavily international in flavour.
Australia, Canada and South Africa - all offices acquired through recent mergers - actually account for the bulk of new partners this year. The other jurisdiction in focus was Germany, where legacy Norton Rose’s Frankfurt and Munich offices gained five partners.
“We’re deliberately trying to bulk up in Germany,” says Parish. “We were slightly late getting in and there’s plenty of scope for development and growth there.”
He adds that the number of promotions in Australia, Canada and South Africa reflects the fact that the jurisdictions are all growth economies - a reason for entering into the mergers in the first place. Indeed, associates from slower markets such as the UK are encouraged to move to these jurisdictions, where they could well be made up. Almost half of this year’s promoted partners trained at one of the firm’s legacy outfits.
Similarly, at HSF the Asia Pacific region was a major focus in the firm’s first promotion round following the merger between Herbert Smith and Freehills in October last year. More than half (10 out of 19) of the new partners are in the region, with a further four in London, four in Continental Europe and one in the US.
“The Asia Pacific region, including Australia, will be one of the key growth areas in the world in the next decade and our clients recognise that we foster the right talent to maintain a seamless service across the region and the world,” commented Gavin Bell, HSF’s joint chief executive partner based in Sydney, when the promotions were announced back in April.
The 2013 class marks a stark contrast on legacy Herbert Smith’s promotions in 2012, when just one partner was made up in Asia out of a Europe-centric promotions round of 10. Legacy Freehills, meanwhile promoted 10 partners across Australia in 2012.
HSF is doing quite well when it comes to encouraging its associates to stay at the firm and become partner. Of this year’s new crop of partners 11 trained at either Herbert Smith or Freehills, while eight began their careers elsewhere.
Global growth was not the focus for Bond Dickinson’s merger but national, and that was reflected in the partner promotions. These were decided on by the two legacy firms before the merger took effect.
Four of the six new Bond Dickinson partners are legacy Bond Pearce, while two are legacy Dickinson Dees. Geographically, a number of offices missed out. Bond Pearce’s promotions were in London and Bristol, while Dickinson Dees made up one in each of Leeds and Newcastle. Other South West offices and Aberdeen missed out.
The proportional breakdown between the firms matches historic trends. In 2012 Bond Pearce made up five and Dickinson Dees one. In 2011 both firms promoted two.
International has been the flavour of the year for big insurance law firms. Of Clyde & Co’s seven promotions, only two were in the UK and five overseas. In keeping with other shipping and insurance firms, the figures reflect the firm’s focus on its international development programme and follow 11 overseas promotions last year along with three in the UK.
Ince & Co, on the other hand, has not promoted anyone to partnership in the UK since 2011. For the past two years the focus has been on marine work and the promotions reflect the need to build on expertise in shipping hubs, in particular in Hamburg. The firm has made three partner promotions in Germany in the past two years, which supports its intention to build its German law practice.
This year the Middle East and Greece also featured, while last year promotions were made in the Asian hubs of Shanghai and Singapore.
Senior partner James Wilson says that, being primarily a niche firm, Ince aligns partner promotions with business strategy.
“Places like the Middle East and Asia are really important parts of the business but for us, London law and arbitration still dominate maritime,” he says.
Wilson also points out that the numbers of newly made up partners outside the UK could be misleading, as several have been made up in London and relocated.
Holman Fenwick Willan(HFW) has taken a similarly international approach to recent partner promotions. This year, alongside appointing head of shipping and transport George Eddings to the role of managing partner, the firm’s nine promotions spanned Hong Kong, Singapore, Australia, Dubai, Europe and Latin America, with just one in London. The number of promotions was up significantly from just three the previous year, on the top of a number of lateral hires in 2012.
If you’re looking for promotion in the UK in an insurance firm Hill Dickinson looks to be your best bet. The firm made up two partners in its health group in Liverpool last year, and a further three focused on the firm’s core maritime business were made up in Liverpool this year, alongside two in the City office.
If, however, you happen to be a woman, partnership appears to be a little more elusive here than at firms such as Clydes and HFW, where the gender split is relatively even. There have been no women made up at Hill Dickinson since 2011, when three out of nine promotions went to women.
Irwin Mitchell is taking an innovative approach to its development, becoming a legal disciplinary practice in 2010 and opening the door to non-lawyers becoming partner. Since then it has made up a collection of associates to partner, and non-lawyers to the post of associate director each year.
This time around it added 14 to its partnership ranks - nine lawyers, plus its head of communications, head of talent and resourcing, and two members of the firm’s operations team.
“The competencies are the same, they’re just demonstrated differently in fee-earning and non-fee-earning roles,” says Catherine Kenwright, head of knowledge management and learning services at Irwin Mitchell.
The other three firms, which all have international offices, are looking overseas as well as nationally.
Eversheds has promoted an equal number of partners abroad and domestically for the past couple of years. In 2013 it promoted more lawyers abroad than at home for the first time, with 18 new partners across nine offices in Europe, plus 10 in Nottingham, Cambridge, Leeds, Birmingham and Newcastle.
The opposite can be said of Osborne Clarke, which made its first UK promotions this year since its European mergers in 2012. Last year it opted to bolster its new outposts rather than promoting at home, but UK-based lawyers will be glad to see three domestic partners in the mix in 2013 - including two who trained at the firm.
Pinsent Masons continues to promote across its vast network of offices, although its focus is still in the UK. In 2013 the firm made up 11 partners in the UK, and three in Asia. Those based in London are particularly well-placed to make partner. The City has been home to 40 per cent of all the firm’s promotions in the past three years.
One thing is common among all these strong UK firms, however, and it bucks the overall trend - partnership promotions are on the up. Each has bounced back from a dip during the downturn to add the highest number of partners since 2010.
Opportunities for women to move up in the national firms are also relatively high, accounting for around a third of all promotions at Irwin Mitchell, Osborne Clarke and Eversheds in 2013.