ABSs have changed the partnership game

Throughout history there have been famous partnerships: Hansel and Gretel, Thelma and Louise and Bonnie and Clyde. Perhaps the most elusive and exclusive partnership of them all, at least in the eyes of a junior lawyer, is the law firm partnership.

Trainees were previously fed the notion that sheer hard work would almost definitely bring about a supposed career-long dream of equity partnership with the firm they trained with. It was an American law firm, Cravath Swaine & Moore,
which invented the concept
of ‘big law’ early in the 20th century. Cravath actively and openly recruited associates to be trained and promoted exclusively from within. Many law firms (including those outside the Magic Circle) adopted this same business model.

The recession, along with
the introduction of alternative business structures (ABSs), caused many firms to rethink offering the route to partnership. Tough economic times prompted firms to elongate the overall route to equity partnership in an increased drive to retain an attractive level of profit per equity partner (PEP), likely making achieving partnership more a case of luck and not merely hard work. Figures published in Legal Week exemplified this: in 2006,
the average post-qualification experience of those that made partner was 8.6 years and in 2013 this figure increased to 10.6.

ABSs have been operating since 6 October 2011. They initiated a storm of debate, partly owing to the fact that, for the first time, non-lawyers could partake in management of a law firm. Junior lawyers no longer have the advantage of management operating as an exclusive club open only to lawyers. For some firms, a non-lawyer with business management experience may make a more attractive option than a lawyer with little, if any, such experience.

A survey undertaken last year provided some rough figures which made for grim reading. For example, the chances of a trainee being made a partner in one Magic Circle firm were 2 per cent; at some firms the chances posted were as low as nil.

It seems apparent that the traditional Cravath business model has become outdated,
but is this necessarily a bad thing?

As partnership becomes
ever more unreachable, the opportunities to work in-house have increased and provide
an alternative route for those
junior lawyers striving for a management position. According to SRA figures, there are now 25,600 solicitors working in house, twice the number
in 2000. Further, many
junior lawyers have become disillusioned with the idea of partnership; research conducted by Eversheds found that nearly
40 per cent of junior lawyers worldwide found the partnership model out of touch with the 21st century.

Being made partner used to
be the ultimate goal for nearly
all junior lawyers, proving more attractive to delve into than the notoriously delicious ice cream produced by the Ben and Jerry partnership. Now that the legal landscape has changed so dramatically, junior lawyers are taking advantage of the wave of entrepreneurialism that recessions undoubtedly inspire by looking outside the realms of partnership. The partnership business model has changed, but it is not broken. SJ