Increasing leverage and restricted partnership prospects have hurt law firms’ cultures and hit the morale of the rising numbers of assistants, according to top business lawyers — but they still believe firms will continue to push leverage for the foreseeable future.
New research shows almost two-thirds (64%) of top
These are the results of the latest Legal Week/EJ Legal Big Question survey, which polls more than 100 leading business lawyers. The survey found that more than half (54%) say the rise in leverage, which has contributed to spiralling partner profits in major commercial firms, has gone far enough.
Travers Smith corporate head Chris Hale commented: “Firms are judged increasingly on profits per equity partner (PEP). Equity ranks are being depleted rather than added to. A number of firms are taking draconian action and they are risking their culture. I would not expect equity numbers to rise that much over the next few years.”
Hammonds Birmingham litigation head Ann Benzimra added: “One problem is that in some firms, the partnership goalposts constantly move, which makes people dissatisfied. People need to be clear about what they need to do to make partnership. At
Despite the problems, 77% of partners believe firms will continue to increase leverage over the next three years. Just over a fifth (21%) said firms would ‘robustly cut back equity partnership’ and a further 56% said they would push it ‘a little further’.
The results are likely to provide grim reading for ranks of junior lawyers who complain of long hours combined with diminishing partnership prospects.
Commenting on profit increases at the magic circle firms, one poster on legalweek.com wrote: “The magic circle firms are chasing an illusion at huge cost to their cultures.”
CMS Cameron McKenna banking head Will Meredith said: “It is definitely tougher to make partner now than when I was made up. Firms are taking a more businesslike approach. There is a real issue for firms of getting the most of your assets, i.e. your people, while on the flipside also making the firm a good place to work.”
Some lawyers feel entry into equity partnership has been devalued as a result of the changes in the profession, with 26% saying either that equity partnership has become ‘somewhat devalued’ or the prestige of partnership had been completely destroyed to the extent that it was no longer something junior lawyers aspire to.
Conversely, 36% said because the partnership carrot was now so hard to achieve, it had made full partnership more prestigious and 15% said it had become ‘considerably more valued’.
Hale said: “PEP is receiving far too much focus and firms are becoming consumed with profits. A lot of assistants now regard law firms as places they come to on the way to somewhere else, rather than somewhere for life.”
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