Are law firm “partners” obsolete?
In the past few weeks, I have enjoyed stimulating discussions with several Walker Clark clients about whether their law firms should have non-equity partners.
This subject leads to one basic question that has profound implications for many law firms today:
Should we have partners at all?
The question is not whether to have non-equity partners. Instead, it is whether the legal profession has outgrown the concepts of partners and partnerships.
Relatively few law firms in the world are structured as true business partnerships. This is a corporate structure from which most service-sector businesses, including law firms, migrated decades ago. Even fewer firms structured as partnerships actually function like partnerships in the traditional sense.
Nonetheless, the legal profession in many jurisdictions has retained some of the worst features of the partnership structure. Especially in the past five years, managing partners have increasingly told me that their partnership structures more frequently complicate, rather than facilitate, the efficient making and implementing of business decisions in their firms. Today, law firms remain one of the very few remaining enterprises — except perhaps "mom and pop" businesses and sole proprietorships — in which the owners of the business are also expected to:
administer it
market it
lead and manage teams of its workers, and
prepare and deliver its products and services to customers.
These burdens feel much heavier in small law firms, where they are carried on fewer shoulders, but they also can weigh down the management of larger firms.
As clients have become more sophisticated in their needs and expectations for legal services, they also have become more skeptical about traditional law firm structures and processes that appear to them to add cost but not value. Our profession's clinging to the 18th-century concept of a professional services business owned, operated, managed, and marketed by law firm "partners" might now be a serious vulnerability in the 21st century, increasing irrelevant to clients' priorities and financially disadvantageous to law firms.
This is not to suggest that law firms should completely jettison their traditional notions of partners and partnership. However, it might be time for law firms to begin to consider whether more modern corporate structures might produce better business decisions, most cost-effective client services, and better long-term financial performance, while — and this is very important —preserving the truly differentiating ethical and professional values that make the practice of law unique.