Partnership. End of a long relationship?
11 December 1996
Employment News — 14 April 2014: parental control: employees were TUPE transferred after share purchase by subsidiary
15 April 2014
1 October 2013
10 May 2013
15 November 2013
10 March 2014
Today, we take for granted the existence of large professional partnerships, while forgetting that their hectic growth was a feature of the prosperous 1980s. In the UK, until 1967 there existed an upper limit of 20 on the number of partners permitted in a professional practice. The removal of that lid caused the kettle to boil over. And 200 partners in a firm is no longer considered excessive.
The partnership culture flourished in times of plenty. Collegiality coupled with tenure was the order of the day. Most professional partnerships became indistinguishable from the 'High Table' of teaching fellows at a university.
The lock-step system of remuneration was almost universally in force. The focus was eternally on competition outside, not within, the practice. Rising profits provided a comfortable living for the partners, which was coupled with security. You might start as a lowly junior partner, but lock-step ensured that you rose steadily to equality with those at the top level at the same pace as those colleagues who entered the firm at the same time.
There was no question of rewarding greater contributions with higher remuneration, but everybody was relatively happy with their lot and under-performers were tolerated.
Sadly, recession brought an end to all that stability. Almost overnight, some partners were perceived as more productive than others. Specialist areas came and went out of fashion with bewildering rapidity. A high profit-earner at the cutting edge on Monday became a provider of a mere commodity item subject to overpowering price pressure by Friday.
The fall-out of clients was equally rapid and painful. You could lose your best client overnight, through no fault of your own, to insolvency or takeover. For the first time, partners started looking inwards rather than at the outside world, and the paramount motivation became fear.
The lock-step system was cast away and replaced by all sorts of merit-based compensation systems. The universal factor governing such systems is that they cannot make all the partners happy. Professional lawyers have a high view of their worth, and to suddenly find that your peers do not share that valuation was a shattering experience for many.
The unproductive partner was discovered. Firms suddenly began to rewrite their partnership agreements to provide an expulsion clause, but sometimes those pushed out were successes elsewhere - it was strange how one firm's unproductive partner became an overnight success story in another environment.
Headhunters rose up from the slime. The telephone call at dead of night heralded unlimited opportunities for the perceived over-producer. Partnership loyalty flew out of the window, and the legal press was full of announcements of those changing allegiances. Individuals or teams moved house with bewildering speed. A two-year stay in a firm was considered perfectly respectable. There were whole partnerships made up of "wonderchildren". The revolving door of these firms resembled the school magazine with its pages dedicated annually to leavers and newcomers.
Such firms prided themselves on their heavy-handed management. The next step adopted - out of logic, so we were told - was to impose sanctions on dissident partners. Thus, if you did not fulfil your targets, imposed, of course, from above, in relation to billings, collections, or time-keeping, you could expect sanctions on your drawings.
No business organisation can flourish by fear alone. We all need the dual motivation of the stick and the carrot. The stick alone creates a situation which is the negation of true partnership. Why specialise, when you can remain a generalist, and hog the fees that you introduce? Who needs junior lawyers, when the seniors have to retain all possible work in order to fulfil their time-recording requirements? The fact that much of that work is unsuitable for a partner is forgotten in the need to preserve that minimum income required to pay the bills.
As a result of these changes, the environment in which barristers have been accustomed to practising has become more attractive. By their professional rules, barristers are prohibited from practising in partnership. However, lawyers are gregarious, and the tendency has been for them to collect together in chambers, where they share expenses, while retaining their profits for themselves.
Chambers provide libraries, secretarial support and any number of other barristers who are available to take on the overflow work without actually acquiring the client from the barrister who introduced them.
As a result, loose alliances could be formed for particular jobs. Such a chambers would normally consist of a few 'big-hitters', who introduced most of the work through their reputation and pulling power. They are the hunters who can kill more than they can eat. They need other lawyers to perform some or all of the legal tasks that are required to produce the finished job and keep clients happy. These might include older and experienced lawyers, who lack client-getting skills but offer certain specialities, or young lawyers who need work.
Provided that all lawyers pay their share of the chambers' expenses, there is no overall interest in who sinks or swims. The hyper-productive can rub shoulders in such a system with the under-producers. There is no need to attend a compensation committee of your peers and suffer humiliation at their hands. In fact, your earnings are your private property, and you can spend as much time as you like in the chambers without any criticism of your time-keeping. Members of chambers are independent contractors.
The impetus towards the chambers-style operation has been accelerated in England by the various moves towards the fusion of the two branches of the legal profession. As the millennium approaches, it becomes ever more difficult to justify the division into solicitors and barristers with their trades union-like restrictions, most of which seem to be for their benefit rather than for the benefit of the public whom they are supposed to be serving.
The views of barristers seem ever more reasonable. They have been reluctant to involve themselves in true partnership, even if they increasingly feel the need to associate in the same working environment as solicitors. Many solicitors are now realising that the restrictions imposed by partnership are not for them.
They will seek a middle ground by joining with enlightened barristers in chambers. Those few partnerships that maintained their stability and their profits by adhering to the lock-step system will become a historical curiosity.
The majority of professionals in the law, who do not fancy life as sole practitioners, will band together in purse-sharing arrangements in chambers, where they share services and their costs while retaining the fees they earn. They will use their colleagues for specialist services, or for mere manpower, if that is what is required. Teleworking will add further to the flexibility in the new arrangements.
The endless hours spent by law firm compensation committees would be better used in client work. Once again, lawyers will be able to look outwards rather than inwards, and the internecine politics currently consuming too many of our firms will become bad memories of the past.
Partnership is dying for all but the enlightened few. Can anyone roll back the tide?