Indian law firms: Too young to live

The main problem in the internal and external perceptions of Amarchand and Mangaldas and Suresh A. Shroff and Co.’s model and that of myriad other Indian law firms stems actually from their youth.

Managing any professional services organisation is notoriously difficult; abroad, partners often liken managing a law firm to herding cats.

With each partner being a firm’s main revenue source, brand and business vertical, the highest performers often come with commensurate ego and ambition. Nurturing and controlling such inclinations in big rainmakers is the main challenge.

“What you’ve got to do, however you do it, is channel the sort of drive that is probably larger than all of us and can turn to selfish behaviour when not properly channelled,” says ex-Slaughter and May partner George Goulding, who is now on Amarchand’s management committee as an external consultant (20 February 2012).

Internationally, almost all law firms are run as pure democracies. Every equity and sometimes non-equity partner has one vote and management can be ousted if it is not seen to be performing or it does not play the political game well enough.

That model sounds attractive to many young Indian lawyers, an increasing number of whom earned their wings and worked up a hunger abroad.

“When it comes to law firms, especially in India, there is a huge spectrum in terms of managerial capability and how much have they been able to move away from personalities into really a firm,” says Boston Consulting Group partner Vikram Bhalla, who led the Amarchand 3.0 exercise. “I would argue very few firms have been able to do that.”

That creates its own set of challenges, he admits. “Why would top lawyers join a firm that is a personality-driven firm?”

The Shroffs’ unabashed vision of the family’s eternal role in the firm can, therefore, rub some non-family partners the wrong way and create the perception of glass ceilings. It also places huge expectation and burden on the next generation of Shroffs, who are all lawyers but still too young for anyone to be able to tell whether they will be able to take up their parents’ heavy mantles one day.

Variations on the same problem exist at many other Indian law firms. Some are making the right noises or exhibit intentions to transform from promoter-driven law firms to institutions with more egalitarian partnerships. Luthra and Luthra Law Offices, for example, announced a wider equity-sharing model almost three years ago, but has still not implemented it.

Figuring out exactly what to do, as well as founder partners’ inertia and sense of entitlement as the original entrepreneurs can often act as roadblocks here.

Even the five founding partners of Trilegal, which has a best friend relationship with international magic circle law firm Allen and Overy, searched their souls long and hard before finally converting into a lockstep equity model in 2007. Less than a year later, Trilegal nevertheless lost three partners who were slotted in at the bottom despite having almost been with the firm since its founding.

The reservations are not just theoretical and there is indisputable appeal in running a law firm, or any organisation, as a dictator, benign or otherwise.

Less time is wasted on partnership politics, which often turn nasty abroad, partner attrition is near impossible to eliminate under any model, and decision-making is fast when promoters are happy to shoulder the risks and upsides of failures and successes.

“What the promoter brings to the table is entrepreneurship,” argues Amarchand’s Cyril Shroff. “Why have certain firms collapsed? It is nobody’s baby.”

The Mumbai landscape, in particular, is littered with law firms that were once great, but are now at risk of becoming late, with senior partners who harbour few common ambitions or strategies for future survival. Some of the few old-school Mumbai firms that have adapted are Kanga and Co. or Wadia Ghandy and Co., for example, where younger partners have been permitted to drive the firm forward.

But for those firms that have benefited from a strong first generation promoter, succession planning is a perennial issue. Mumbai technology specialist firm Thakker and Thakker closed shop entirely on 50 lawyers when the founding partner decided to retire and pursue philanthropic projects in late 2010.

Similarly, Nishith Desai Associates is built around the identity of its sole equity partner and founder, despite being one of the most smoothly run and professional law firms in India.

Even firms that have already set up a professional, democratic and institutional model will face upheaval when the first-generation founders leave. J Sagar Associates’ (JSA’s) founding partner Jyoti Sagar is due to retire in April 2013, closely followed by senior partner Berjis Desai. The hope at JSA is that the institution and systems in place will be able to adapt to the new realities when the founder is less visible.

But all those problems are not uniquely Indian. The only real difference to the US or the UK is that at international firms, all that is normally left of their founders are names that would otherwise have been long forgotten.

A version of this article was first published on livemint.com.