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Weighing the Creation of New Partners During Difficult Economic Times
There certainly is no conventional wisdom in today's economy on the depth, length or severity of these difficult economic times. Firms are actively engaged in significant analysis of economics and profitability management, expenses, marketing and personnel.
Coupled with all of the issues with which law firm owners have to deal relating to the operation of their firms is the fact that even with careful management, there is increasing evidence of reduced partner income in many sectors of the legal marketplace. Firms must therefore examine the wisdom of creating new partners.
It is vitally important that partners examine the culture of their firm before making blanket modifications to the partnership structure or admission practices simply to satisfy current, and perhaps short-term, economic issues.
First, assure that the firm has carefully analyzed the various components of its economics and taken appropriate steps to improve its financial health. Then, decide whether the firm's partnership structure and admission practices are a root cause of the economic problem. For example, what changes or modifications to partnership admission will be beneficial?
Consider modifications to existing criteria established for partnership admission, and an increased length of time to partnership. It might be advisable to review associates with a more critical eye, so as to determine more quickly the lawyer's suitability for continuation. This will probably lead to increased terminations, but will also avoid dealing less objectively with associates who have expectations based in significant measure on longevity. Ascertain whether it is timely to seek withdrawal of uncooperative or underproductive partners and whether there are candidates for early retirement. What adverse effects will result from seeking modifications to the existing culture for economic reasons? They may include resignations of associates who are displeased over the changes in required service or protocol and feel that their trust in the firm has been misplaced; an inability to replace defections in a timely enough fashion to provide continuity of service; loss of revenue; loss of clientele; and a decline in morale.
Partnership Criteria
The firm must examine the process as well as the criteria for partnership carefully and, before modifications are made of any sort, a consensus of the partners should be reached. There are issues to be considered and addressed by all partners; they will undoubtedly view them in part on behalf of the firm and in part as potentially affecting each of them personally. Criteria must, for each potential partner, include:
Client origination. The ability to develop and originate new clients for the firm is one of the most significant criteria that will be considered. Although this criterion is certainly important, it is not of itself a condition precedent for elevation to partner status. It is generally recognized, however, that the ability to originate new business is a much-desired attribute.
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