Disenfranchising the turkeys
15 November 2011
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31 January 2011
6 December 2010
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12 February 2001
Few countries outside North America have a holiday equivalent to Thanksgiving Day
By Jordan Furlong
Steeped in a mixture of European and Native traditions, Thanksgiving in the United States (November 24 this year) has become a major event replete with huge family reunions, massive Rockwellian feasts, and prime-time NFL games. (Canadians celebrate Thanksgiving earlier in October and with somewhat less fanfare, as is our tendency.)
The main course at most Thanksgiving meals is turkey, which has inspired a turn of phrase not widely used in other countries. When discussing the failure of a particular group to make decisions that would detrimentally affect its own position, we explain it by saying, “That’s because turkeys don’t vote for Thanksgiving.”
I’ve heard this phrase several times recently in the context of law firms’ resistance to change. Even if it appears that a particular innovation could demonstrably improve a firm’s overall prospects, it will go nowhere if the firm’s owners (the equity partners) perceive that it threatens their short-term revenue, medium-term control of the enterprise, or long-term privileges.
Why would partners approve any initiative, no matter how sensible, that might diminish their personal prospects? Why would turkeys vote for Thanksgiving? After hearing this explanation offered one time too many, I recently responded, “Then maybe the problem is that turkeys shouldn’t have the ballot.”
I now strongly suspect that the legal profession is on the verge of the wide-scale disenfranchisement of turkeys.
Privileged partners in positions of power constitute the first and strongest obstacle to law firms’ ability to effect changes to their workflow, delivery, pricing and compensation systems — changes that, especially in the U.K., will be critical to law firms’ prospects in this coming decade of upheaval. Either the partners will bend or the firm will suffer; either way, something’s going to give.
For the first time, we’re seeing signs that the partners might be losing the upper hand in this battle. We’re seeing it in the effort, now underway on both sides of the Atlantic, to redefine who should be a partner and what partnership means.
The Lawyer recently examined the results of the UK 200 Annual Report in light of DLA Piper’s remarkable switch to an all-equity partnership, and asked: “‘When is a partner not a partner?’ The traditional answer is, ‘When they don’t share fully in the equity.’”
That’s a fine answer, and if implemented widely, could finally bring the end of one of those oxymorons that seem to recur regularly in the law: “non-equity partner.” (My favourite such oxymoron is a term popular among Wall Street law firm associates: “lockstep bonuses.”) But I think there’s more to it than that.
I recently wrote that there are three justifications for a lawyer’s entry into partnership:
• She brings in big business, enough to sustain much more than just her own practice.
• She is really superb at maintaining and building client relationships.
• She is an extraordinary manager of the firm, its people, or its processes.
The fact is that only a minority of partners in Anglo-American law firms today meet one of those criteria. Most partners occupy their position through the happy circumstance of coming along at a time when their firms were rich, happy and expansive. Now that times are tougher, firms are moving to reverse some of those decisions and reduce their partnership ranks.
Witness the Smith & Williamson survey that showed half the U.K.’s top 30 firms de-equitizing partners or preparing to do so (U.S. firms are on a similar path). Witness firms like DLA or Eversheds taking steps to winnow the ranks of partners in future. If the turkeys have formed a voting bloc, one way to reduce their power is to start culling the flock.
But the real trend here, I think, is toward minimizing the role of partners in law firms’ strategic decisions and operations. The first movers towards Alternative Business Structures have left no doubt about their intentions: the newest, strongest and most ferocious competitors entering the legal market have no time or patience for negotiating the Dance of a Thousand Partners whenever major decisions must be made. They undoubtedly will appreciate the input of experienced and knowledgeable partners into important decisions; but they will not be giving those partners the keys to the car.
Partnership is a fine way to run a small, closely held collective of lawyers who know each other, trust each other, and run a tidy and profitable legal business. It is no way, as Stephen Mayson has pointed out, to run a major enterprise like a modern law firm. The partnership model is “not building sustainable, attractive businesses,” says Prof. Mayson. “We will have to get rid of the partnership structure, I’m afraid, to survive in the new marketplace. It is not an efficient model.” He is absolutely correct.
Poultry farms that are run by turkeys will suffer, because they will not make decisions that impinge on the interests of turkeys — and like most flightless fowl, turkeys tend to take a markedly short-term view of their interests. I don’t believe that the best way to modernize a farm is to properly incentivize the turkeys to act in the farm’s best interests. I think a better solution is to take away the turkeys’ ability to vote. The legal market is well on its way to carrying that out.
Jordan Furlong of Ottawa, Canada, is a partner with the global consulting firm Edge International, a senior consultant with legal web development company Stem Legal Web Enterprises, and author of the award-winning blog Law21: Dispatches From a Legal Profession on the Brink. He delivers dynamic and thought-provoking presentations to law firms, practice groups, and legal organizations throughout North America.