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For most young lawyers, partnership represents their single minded aim. It is often considered the end to their travails, the point of all their hard work, the pay off. However, the last decade has seen significant changes in the way many large commercial law firms are managed. They are now invariably professionally managed, efficient businesses, which was not always the case ten or fifteen years ago. More than ever before law firms are all about making money, and getting a partnership is not what it once was. This business oriented focus has meant that the route to partnership, and more particularly equity partnership, is now extremely challenging. Furthermore, whereas the perception used to be that once an individual had made partner, his or her hardest work was done, whether or not that was ever true it is certainly no longer the case. In fact, in many ways, it is now the point at which the real pressure starts. Partners who do not perform will be put under extreme pressure and, notwithstanding the fact it is usually exceptionally hard to fire a partner, it is not uncommon for individuals to be effectively forced out. The situation in Asia is complicated further. In many of the bigger firms, which have hugely profitable domestic practices in, say, London, the challenge for many partners is to justify their existence in a less profitable environment. Some firms have dealt with this situation by having separate profit pools, but many retain a single pot from which all their partners take their drawings. The net effect is that for some firms, unless there are significant changes ahead, the business case for lawyers based in Asia to be made equity partners is rarely going to exist. An individual may be an outstanding lawyer, doing a wonderful job, but unless there is a business case, on the basis of his or her billings, the chances of getting equity are slim. A majority of equity partners, at least from English firms, are on a lock-step system, many of which are modified. In other words, with each passing year, partners obtain further equity, in effect climbing a ladder. From the bottom rung of the equity ladder, it will usually take something like ten years, sometimes a little less, sometimes a little more, to achieve a full equity share. Typical modifications to such a system may include "gates" whereby a partner may be required to fulfill certain billing and other, non-financial, targets to move to the next level. In some systems, even those on a full equity share may be able to earn more by way of a performance bonus. The aim tends to be to share the partnership's success, while also rewarding key performers. It is generally considered that high profits per partner are extremely important and not just because that means equity partners come away with more money. Key partners tend to believe that the bigger a firm's declared profits per partner, the easier it will be to keep important partners, recruit top quality new partners, attract the best young talent, win new clients and so on. Therefore unless a candidate for equity partnership can show that he or she will grow the business, and thus make it more profitable, it is very difficult to convince existing partners that the candidacy should be successful. All of which is leading to more salaried partners, and new ideas how to keep them happy without giving them an equity share. Some firms have salaried partners with a profit share, typically relating to, say, the Hong Kong office or perhaps the Asian practice, but not to the worldwide partnership. Other firms utilize an "eat what you kill" system, which is generally regarded as more of a US approach. There is increasing interest amongst some international firms in dividing the World into lock-step zones, which has the effect of providing different profit pools, meaning that equity partners are only paid drawings relative to the profitability of the practice in their zone. One attraction is that it will open the door for more equity partners in less profitable jurisdictions. However, firms with such systems will find it hard to attract the best lawyers in those same zones, at least in the absence of a special arrangement. At the end of the day, it all comes down to money. For a young associate looking ahead, being a good lawyer is only half the story. To be truly successful you will need to know how to turn that ability into big billings. |
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