The recession has seen promotions dry up. Is this a necessary step or a knee-jerk reaction?
It was always on the cards that the number of lawyers promoted to partner this year was going to take a nosedive. The legal market is facing the toughest economic environment in living memory.
But the senior partners of the UK’s top firms were quick to leap to the defence of their decision to reduce partner promotions, pointing out that, whatever the circumstances, the determining factor remained the business case and an individual’s quality.
“As in any year, the decision of who to promote and where is governed by both individual ability and business need,” says Ashurst managing partner Simon Bromwich. “That said, a short-termist approach is taken at the risk of losing valuable talent, which has more potential to drive the firm’s growth in the medium term. Essentially, it’s a careful balancing exercise.”
Last week The Lawyer contacted all 30 of the UK’s top firms and quizzed them on the drivers behind this year’s promotions. The response from virtually every one highlighted both the sensitivity of the issue and the determination of top management to assure their junior lawyers that, recession or no recession, they still have a chance of making partner.
Bromwich’s short-term gain versus long-term investment is a recurring theme.
“It’s true that we have fewer promotions this year than last, but we hope and expect them to be partners with the firm for the long-term,” says Pinsent Masons director of HR and learning Jonathan Bond.
“All promotions are made with the long-term in mind,” echoes Shoosmiths chief executive Paul Stothard. “These are people who have demonstrated their capabilities over time, and who we have no doubt will continue to do so for a long time to come.”
At Bird & Bird, which saw one of the biggest reductions in partnership promotions among the top 30 (14 down to four), chief executive David Kerr says the firm’s associates were “more than aware” of the current market conditions.
But, he adds, Bird & Bird is continuing to invest in its long-term strategic plans, claiming “we have no conscious desire to raise the bar of entry at all”.
Yet, however obvious it might seem that in the current economic climate firms are likely to make up fewer partners, The Lawyer’s questions clearly touch a nerve.
“This year we promoted 13 and last year it was 18, but the year before it was nine,” argues Herbert Smith senior partner David Gold. “So this year is still up on two years ago and last year was a bumper year. Therefore, the trend is generally up.”
That said, Gold admits that, although Herbert Smith has not held back any candidates because of the recession, “we did say about six months ago that if they’re in the balance or require the benefit of the doubt, we should not exercise it in favour of the candidate”.
Nineteen out of the 24 firms in the UK top 30 that have announced figures so far this year (Clifford Chance, Irwin Mitchell, Osborne Clarke, Salans, Simmons & Simmons and Taylor Wessing are yet to report their promotions for this year) saw a drop in the number of lawyers they promoted.
The conclusion is that the UK’s top firms have responded to the recession with a knee-jerk slashing of partnership positions for their associates.
The implication is also that, whatever firms might say, the bar for acceptance into the equity has been ramped up as firm’s finances have gone south.
The hard sell
“It’s harder to make a business case for promotion to partner when the market is quiet,” admits Olswang managing partner David Stewart. “No one in their right mind should be making people up if there is no business case to justify it.”
Not everyone we interviewed was as candid as Stewart but the overall message is more or less consistent. The financial crisis has hit UK associates on partnership track hard, and those in some practice areas even harder still.
Yet, as our story on the front page this week highlights, this is not a one-size-fits-all solution. One of the key findings to emerge from The Lawyer’s research is that the biggest practice area beneficiary this year, in the majority of firms, was not the expected countercyclical disputes, but ‘quiet’ corporate.
Although Olswang, which only promoted two lawyers internally this year compared with 10 last year, had no corporate promotions, it did bring Peter Schorling straight into the partnership when he joined the firm from Freshfields Bruckhaus Deringer in Germany in March (The Lawyer, 25 March).
“You’ll die as a law firm if you don’t promote your talented lawyers – you can’t just shut the door,” says Stewart. “Corporate will lead most commercial law firms out of this recession.”
Norton Rose chief executive Peter Martyr admits that the current health of the UK market, with its rollercoaster stock market, makes pinpointing the timing of any recovery “extremely hard to judge”. That said, Norton Rose has pretty much stuck to its partnership timetable this year.
“We haven’t changed the process in any way because of the economic circumstances,” insists Martyr. “Yes, there were fewer new partners but there were 16 last year and 23 both of the years before that.”
Martyr points to Norton Rose’s growth over the past four years, during which time the firm has gradually released its equity.
“We have more equity partners now than we had four years ago,” he says. “If someone’s good enough to make partner you don’t want to hold them back. But have we made up as many as a year ago? No. You can’t overload the business.”
Striking a balance
While corporate may have benefited disproportionately this year, most firms have taken a balanced approach to new partners, both in terms of their practice groups and overseas networks.
“It would be wrong to claim market conditions didn’t play a part in our decision-making around partner promotions,” admits Duncan Weston, managing partner of CMS Cameron McKenna. “However, our 17 promotions have come from right across the business, reflecting the broad strength of our firm and with representatives from our dedicated industry sector groups.”
Indeed, with the UK economy in such dire straits, the odds on firms’ overseas lawyers making partner would appear to be the best ever.
“Right now, as a snapshot, probably yes, this is the best time for an international lawyer to get a partnership,” says Herbert Smith’s Gold. “But if the recession has bottomed, then that could quickly change. It doesn’t take much.”
But even when this happens, the reality is that the majority of UK law firms are simply far more international today than they have ever been. Consequently there is more opportunity for their lawyers overseas to break into the equity.
As Cameron’s Weston puts it: “Our international business has been a very strong part of our firm for the last three or four years. Since 2005 we tripled the size of our international practice and we have around 60 partners outside the UK.
“In this year’s promotions, seven of the 17 new partners were outside the UK, which is a reflection of both the strength now and the potential for the future that we see internationally.”