The new face of partnership

  • January 23, 2003
  • Susan Goldberg

From non-equity partners to permanent associates, from three-year partner tracks to women lawyers’ priorities, from a hidebound tradition to a dynamic new flexibility, law firm partnership is changing, and fast. Only the firms that are ahead of the curve will be able to benefit from the shift and survive intact afterwards.

It’s the Holy Grail, the Promised Land, the brass ring – even non-lawyers know about it and how significant it is. For most junior lawyers in private practice, making partner is supposed to mean you’ve arrived. It marks the transition from employee to owner, a passage glittering with higher earnings, increased security, better opportunities, and direct access to the firm’s inner circle of power and influence.

So how come it seems that nobody wants to be a partner anymore?

When you have the potential of partnership after three years, the hierarchy disappears.

Paige Backman, partner, Aird & Berlis, Toronto

That’s overstating it, of course – hundreds of lawyers happily accept their firms’ offers of partnership every year. But hundreds more are balking, preferring to take a wait-and-see approach, or to negotiate a different style of partnership on their own terms, or to leave the firm altogether. These lawyers say partnership is too expensive, overburdened with responsibility, and simply not worth the risk, time and effort.

The partnership model for running a law firm has been the standard virtually since lawyers first took to working together in groups. Even with the rise of the mega-firm, in which dozens if not hundreds of partners are spread out in offices across the country and abroad, the partnership model has long been assumed to be the best way for lawyers to practise together.

But law firm growth through merger and expansion is also putting the model to the test, in everything from profit sharing to corporate governance to decision-making. To accommodate growing numbers of associates, firms have continuously lengthened the partnership track (now 7.5 years on average in Canada) and have developed new partnership categories – the non-equity or salaried partner, the permanent associate, or even counsel. In fast-changing times, flexibility becomes a more important strategic characteristic than tradition.

"Law firms are discovering that the structure of the traditional partnership can be both cumbersome and delicate, and often too fragile to bear the weight of rapid change," say Queen’s University sociology of law professor Fiona Kay and University of Toronto sociology and law professor John Hagan, who penned an Osgoode Hall Law Journal article as early as 1994 on the evolving nature of law firm partnership.

Lawyers, meanwhile, are discovering that partnership isn’t always an automatic ticket to the good life. It’s not just the heavy financial commitment – often by way of hefty bank loan – to make the capital investment in the partnership. Many lawyers who slaved for six or eight years to reach the top are dismayed to find they’re working as hard as they ever were, maybe even harder, to "justify" their new status. Having grasped the brass ring, they find themselves quietly wondering: Is this all there is?

Is partnership passĂ©? No, say managing partners, law firm consultants and lawyers – both those who like the partnership track and those who have chosen other paths. But the model is evolving, to cope with new understandings of what the practice of law is all about.

Immediate partners
"Given the nature and practice of law that I’m familiar with, I think partnership will be with us for a long time," says Kenneth Rosenberg, a partner at Toronto’s Paliare Roland Rosenberg Rothstein LLP. "It’s an effective way to have people working together. It’s a commitment to a common goal, where each partner in individual ways contributes to that goal."

We don’t think it takes eight years to determine if lawyers can do the work, and more importantly, if they’re compatible.

Kenneth Rosenberg, partner, Paliare Roland Rosenberg Rothstein LLP, Toronto

But partnership is evolving, and firms and lawyers who recognize and respond to that evolution will be best equipped to reap its benefits. Rosenberg knows that well. In July 2001, he and 17 colleagues – mostly former partners at Gowling Lafleur Henderson LLP in Toronto – formed Paliare Roland, a boutique litigation and advocacy firm with a unique structural twist.

The lawyers decided that everyone in the new firm would be a partner, including a few who had been called to the bar just that year. "We had people who had been practising law for a few weeks and people who had been practising for 30-plus years," says Rosenberg.

"Since then, we’ve hired three associates, and we tell people who join us – whether they’re a first-year or a more senior lawyer – that within two or three years, we will mutually determine whether they will be a partner or if they will work somewhere else. We don’t think it takes eight years to determine if they can do the work, and more importantly, if they’re compatible."

Paliare Roland chose its partnership model to help cement its vision of a firm culture in which every member had a vested stake. "We wanted people who worked together as a team," explains Rosenberg. "We wanted stability, people dedicated to a common cause, and commitment from the people who join us.

"As a counsel firm, we need to create a model where we could compete for the best and the brightest," he adds. "And one way we can attract younger, excellent lawyers to our firm is by making them think like partners in training, not like associates with an eight-year track."

The fast track
Toronto’s Aird & Berlis has long held a similar view: since at least the mid-1970s, its associates have been eligible for partnership three years after being called. The structure, says managing partner David Malach, fosters an environment in which every lawyer thinks like an owner – or a potential owner – of the firm.

"You treat your house a little better when you own it than when you rent it. We find the same thing here," he says. "Owners of the firm care more about service, about the product we’re putting out, about the client."

Paige Backman, 31, was called to the Ontario bar in 2000 and became a partner at Aird & Berlis this past January. The three-year track, she says, is a sign of the firm’s commitment to its younger lawyers in the early stages of their careers. And it helps to eliminate a "we/them" mentality between partners and associates.

"There’s an awful lot of [associate] movement in and out of firms in years four and five," Backman observes. Early partnership, she says, "is an incentive to stick with it, to work hard, to develop your skills and craft. And when you have the potential of partnership after three years, the hierarchy disappears.

"From a very early stage, I was given a great deal of client contact and responsibility," she recalls. "Today, I have significant day-to-day interactions with, and responsibility or partial responsibility for, one of the firm’s largest clients." That kind of job benefit is becoming an important advantage for firms trying to keep lawyers from jumping ship in the current competitive environment.

Neither firm, say Rosenberg and Malach, distinguishes between 4th-year and 30th-year partners when it comes to disclosure of information: everyone is party to partnership decisions, including those involving compensation. A shorter partnership track, however, obviously requires a rethinking of some of the more traditional notions of what a partner is.

The longstanding image of a partner is that of a highly experienced, "go-to" person with a mature, economically self-sustaining practice and a large book of business. These days, however, firms bank on younger lawyers’ potential, while structuring compensation levels accordingly and providing ongoing training and mentoring.

An equitable approach
Other firms have taken a different tack. In order to commit to their associates while also easing the transition to partnership, Toronto’s McMillan Binch LLP is one of many firms that have created a two-tier partnership track. "Non-equity" partners occupy a category between senior associate and full or "equity" partners.

"Our objective was to provide potential new equity partners with a taste and understanding of what’s involved in partnership, and equity partners with an opportunity to work with these new non-equity partners," says Graham Scott, McMillan Binch’s managing director. "It’s an intermediate step that carries some of the responsibilities and pressures of partnership, while brushing up those extra skills they might need to possess more effectively to be partner."

The category of non-equity partner is purely internal, says Scott: clients aren’t aware of the distinction, and this partnership tier is privy to all of the firm’s inner workings, other than compensation decisions. Working with a mentor, a non-equity partner develops a detailed written plan that focuses on areas for improvement – client relations, business development and leadership, for example.

Over the next couple of years, the partner works on those skills with the eventual goal of being admitted to full partnership. But even for those lawyers who decide that partnership’s not for them and leave the firm, the two-tier partnership plan seems to make sense.

"I think it’s a good transitional process," says "Trevor," a former non-equity partner who ultimately left McMillan Binch when an opportunity opened up at a boutique. "It exposes you to some managerial roles and recognizes your tenure and seniority within the firm, while at the same time not requiring you to take a full equity role in the firm."

Permanent associates
Then there’s another alternative to partnership: the permanent, salaried lawyer for whom partnership isn’t an option, either because it simply doesn’t exist or because he or she has opted out – or has been asked to opt out.

The new partner guide
Here are some tips from those who’ve been there on how to approach your new position, meet firm expectations, and make an impact.

1. Keep doing what you’re doing.
If you’ve made partner, you’re already doing something right. "Remember that you’re the same person," says legal consultant Michael Anderson of Edge Consulting in Vancouver. "The people who have problems are the ones who think they’re different because they’re a partner." Keep working with the drive and initiative that got you admitted to partnership, and continue to treat your partners, associates and support staff with respect.

2. Figure out money matters. 
Becoming a partner in a law firm means becoming co-owner in a business. Make sure you understand the financial implications of partnership: read financial statements, pay quarterly GST and income tax installments, know which expenses are deductible, handle tax returns and RRSP contributions, and manage a personal budget on gross wages.

One group of new partners at Aird & Berlis in Toronto had a chartered accountant come in to explain the new financial world order of partnership. "It was very helpful, and very comforting," says first-year partner Paige Backman.

3. Don’t assume that you now know everything.
"One thing you worry about with newer partners is that they’ll stop asking the important questions, and we’re watching for that," says Aird & Berlis managing partner David Malach. "New partners have to learn how to tell the client that they don’t know the answer, while still keeping that client’s confidence. The key is to do that research and get back to the client quickly."

4. Develop estimating skills. 
Lawyers are incredibly expensive, and clients are concerned about the cost: do you really want to call up a client and say your cost estimate was too low? "Estimating may be one of the most inexact sciences around, and most entrepreneurs take years to get any good at it," says Malach. "Consult a senior lawyer if it comes up."

5. Take the initiative. 
It sounds like a clichĂ©, but it’s true. "Ask questions, be alert to the issues, take some risks, make decisions, see what works and doesn’t – and learn from your mistakes," says Stephen Nash of The Counsel Network in Toronto. "People don’t often get encouraged to do that, but all of those things are necessary to establish a presence and be perceived as a leader. And firms want leaders, because that’s who makes the money."

6. Do great work – on time, and with integrity.
Some new (and even some senior) partners focus too much on the work and not enough on backing up that work with excellent service, says Malach. If something gets messed up, as it inevitably will, explain the situation to the client, and apologize.

7. Have goals beyond partnership. 
If your sole focus for the past five to nine years has been making partner, you may be left without a clear direction once you achieve it. Set new goals. "Ask yourself, ‘What do I want to be famous for?’" suggests Anderson.

"Making partner was a personal goal because it was a commitment from the firm to me," says Backman. "But my career goals are unrelated to being a partner. They are very specific to developing a position in the community in specific areas of law. I’m still striving for and will strive for many years to become a go-to person in the areas of technology and privacy law."

8. Act like a partner. 
No, that doesn’t mean demanding a corner office or sloughing off your work onto your juniors. It means taking a proprietary interest in the firm by attracting new clients, acting like a firm ambassador, and seeking out opportunities for client contact. Ask for feedback from your seniors and brush up on any skills you’ll need to be a successful partner. Nash sums it up: "Focus on understanding what it means to be a leader."

At Trevor’s new firm, for example, there is no defined partnership track. "In order to recognize my tenure and experience, and my partial management function, I have the title of counsel," he says. "I don’t focus too much on the formal legal nature of the relationship. It’s more about what I do in practice."

As the biggest firms get even bigger, lawyers in cozier practices are also finding an unexpected benefit: greater influence. "In some small firms, associates feel they have more input than partners do at large firms," says Trevor. "It’s a nice feature."

While fairly common in boutiques or as employees of sole practitioners, permanent "employee lawyers" are "still a pretty rare phenomenon" in Canadian law firms, says recruiter Stephen Nash of The Counsel Network, who’s helped lawyers and firms find each other in both Vancouver and Toronto.

"That employee category is more common in the U.S. or the U.K., where 1,000-lawyer firms can accommodate more categories of lawyers," says Nash. "In Canada, the firms haven’t yet progressed to that size. You’re either a partner or an associate. Some have managed to carve out some special role or niche, but you could count them on one hand."

"It’s tough," agrees Lori Brazier, a consultant with Catalyst Consulting/Altman Weil in Toronto and Chair of the CBA’s Law Practice Management Section. "There’s still that expectation that if you’re a partner, you’re contributing to the business. If an individual is viewed as being absolutely valuable to a particular client or an expert in some esoteric area of the law, then there may be some room for them in a large firm."

Outside the center
Toronto isn’t the only place where traditional partnership models are under stress. Outside the country’s largest business centres, many firms have taken a sink-or-swim approach to partnership. "Brian," an associate at a medium-sized Winnipeg firm, says Manitoba firms began offering their associates a percentage of their billings instead of a salary, in an effort to compete with the large associate salaries offered by New York and Toronto firms.

The result? A business culture in which an associate has the same responsibilities as – and can conceivably earn more than – a partner in the same firm, without the overhead.

"I’ve got my own client load. I’ve got to bill them, collect for them, act for them, and ensure the quality of my work," says Brian. "You can earn a very good living as an associate, and make a very high percentage of your billings. But it’s harsh. If you’re sick for six weeks, you don’t get paid. You have to produce. And if you don’t produce like a partner, you won’t make a living."

As a partner, he notes, he’d earn a higher percentage of his billings, be able to vote in partnership decisions, and have a higher overhead. "Other than that, nothing would change; the CCRA already considers me a partner. There is the prestige, though," Brian adds. "I think that when you market yourself, people like to know they’re dealing with a partner."

And some lawyers are deciding that they simply want no part of partnership at all. Stephen Aftanas left both partnership and private practice after seven years with a solid Halifax firm (2 1/2 years as a partner) to work as in-house counsel for Emera Inc. "The pluses for me as in-house counsel are that I’m not running a business anymore," says Aftanas, who worked at another firm in Winnipeg before coming to Halifax.

"I work about the same hours, but I have no marketing, no billing, no collecting, just a lot of law practice," says Aftanas. "It’s very satisfying for now and I’m enjoying it."

Women and partnership
No discussion of how partnership models are evolving would be complete without noting one area in which they are not – the admission of women. Studies repeatedly show that women still lag behind men when it comes to making partner, notes Fiona Kay (see also: "Women in law," National, August/September 2002).

In her own study of 1,600 Ontario lawyers and 700 Quebec lawyers called to the bar between 1975 and 1990, men were consistently much more likely than women to be partners – regardless of billings, experience, client responsibility or field of law. Kay cites several studies that show that female partners earn less than their male counterparts and are disproportionately represented in non-partnership employment tiers.

But with women graduating from law school in equal – or greater – numbers than men for a few years now, the issue of women partners is becoming a top agenda item at many firms, which are recognizing the potential impact of this demographic trend. And it’s having an effect on current lawyers who are aiming for partnership themselves.

Chantal Chatelain, a partner at Langlois Kronström Desjardins in Montreal, says law firms must proactively approach issues of parental leave and younger parents’ desires to spend time with their children. Taking the lead in that kind of decision-making and strategic planning, she notes, is a key aspect of partnership.

"Becoming a partner means that your vision is enlarged," she points out. "You become not just a lawyer doing legal work, but an entrepreneur, part of a business that needs to decide: ‘Where do we want to be in five, 15, 25 years?’ By then, I’ll be a senior partner. What kind of firm do I want? We have to think about maternity leave and its effect on profitability. What is going to change, and how do we want to react?"

Chatelain became a partner in 2001 (one of three new partners that year, all women), became pregnant the same year, took a seven-month maternity leave in 2002, and is now pregnant again. After a couple of months with her first child, she contacted the firm every few days and continued working on one file from home, logging about 100 hours. She plans to take four months off with her second child.

"Obviously, the firm supported my choices, financially and morally," Chatelain says. "But if you’re a partner and an entrepreneur, you don’t take a maternity leave for six months and not call up. It’s your firm, so you want to be there. The fact that I was concerned, that I was linked, made a difference."

New relationships
Partnership is a work in progress, with lawyers and law firms continuing to re-envision and redefine their long-held ways of doing business. But fundamentally, what’s changing is lawyers’ view of their relationship to each other and, more importantly, to the entity – the firm – at which they’re employed. Those relationships may never be the same.

As firms grow larger, partners will have to sacrifice consensual decision-making to top-down government by committee. As work/family balance becomes increasingly important to a new generation of practitioners, fewer young lawyers will be prepared to make the commitment of time and energy their predecessors did. As lateral movement becomes more common, lawyers will feel less loyalty to (and from) the firm that pays their bills.

"The concept of partner is disappearing," says David Malach. "When you have a 500-lawyer firm, it’s hard for partners to feel like they have a role in decision-making: they don’t feel like a partner, but more like an employee.

"The question becomes: Are you really a partner in a law firm, or are you [just] profit-sharing?"

Rosenberg Photo: Ruth Kaplan / Backman Photo: Curtis Trent

Susan Goldberg is a Toronto freelance writer. Her last article for National, "I Want my Law TV," appeared in our January/February 2003 issue.