Many law firms have a serious structural problem on their hands. In the boom years of the late 1990s, when the surge in corporate work was at its height, the key to the success of any law firm was recruitment and retention – to have enough bodies at all levels to cope with the tidal wave of work coming through the door.
At a time when law firms were in expansion mode, the creation of large ranks of junior equity partners (JEPs) made perfect sense. Awarding ambitious senior associates or assistants the badge of partner, without admitting them to the full equity and diluting profits unduly, would meet their immediate demands for personal advancement. The natural growth in the firm’s revenue and profits would soon allow them to join the top table. That was the rationale, at least.
Of course, with hindsight, it did not quite work out like that. With the precipitous drop in corporate work, suddenly there are too many JEPs scrambling for too few chairs. Like in the last recession, many JEPs cannot progress to the next stage, not least because they are earning more than their seniors. Typically, many floating equity partners are on massively reduced drawings of between £110,000-£140,000, while JEPs are on £135,000-£150,000.
Unlike the last recession, JEPs are more vulnerable than most. In hard times, the first casualties are the trainees and newly-qualifieds, but next in line are the poor old JEPs. They are both expensive and sometimes perceived as lacking the hunger of senior associates or assistants, on the basis that they have reached first base already.
At the other end of the scale, a number of plateau equity partners are generating less than they are drawing and have been doing so for a while. Yet, although some firms have had to let a few people go due to economic conditions, many say that it is not in their culture to get rid of them. The problem is exacerbated at those firms where there is no real mechanism for delaying progress up the equity ladder, and even where ‘gateways’ in the equity structure do exist and are applied, this recession has shown that a large number of partners have somehow got past them. Unfortunately for JEPs, it is these very same people that are often responsible for signing off their figures, and who are most likely to lose their jobs if the figures for their group are not as high as they should be. The partnership structure brings out the defensive nature of many lawyers, and expensive JEPs are obvious candidates for the chop.
Inevitably, the environment in many firms is becoming intensely political. Friends stick together and it is not unusual for equity partners to protect their protégés by allocating some of their billings from their files.
And even in an era when so many firms have been ‘Hildebrandted’, to coin a phrase, and the criteria for progression from fixed-share to full equity partner are laid out in a much more transparent way, many firms are allowing some star departments to throw their weight around and appoint partners who do not always meet the agreed standards.
For lawyers without a patron, or in less fashionable departments, the outlook can appear to be bleak. But these are not necessarily the least valuable people for the future of the firm.
A lot of good JEPs are, for the reasons above and others, considering their options. They are, and should be regarded as, the future of their firms. They should be looked after and listened to. Those who complain are not always the ones that firms would secretly be glad to see the back of.
The treatment of many JEPs also seems to threaten the very future of the partnership model. During the last recession, all partners, junior and senior, weathered the peaks and troughs together. This time around, much of the ‘glue’ that characterised the traditional law firm seems to have been lost. This may be a natural consequence of the fact that law firms increasingly see themselves as businesses, but well-run businesses do not treat their best assets in such a cavalier way. Neither should law firms.