Two-Tiered Partner Firms – A Discussion

Partnership Structure at American Law Firms

Whether you are looking for a job or climbing the law firm ladder, it’s important to think about how law firms are structured and how you fit in.  There has been a lot written in the past year about the changing structure of the American law firm.  In the past, the structure was simple: there were partners and associates.  Somewhere along the line, there were other titles added (Of Counsel, Counsel, Senior This, Senior That, Contract Attorney, etc.) but none were more disruptive to the prior model than the introduction of the non-equity partner (also known as non-capital, B-share, income or contract partners).

The American Lawyer reported that the AmLaw 100 firms had increased the number of non-equity partners threefold in the period from 1999-2009.

What this does is change the landscape for attorneys.  It’s no longer a race to partnership.  It’s a journey to make the first-tier of partnership with an opportunity to chart your next steps.  Advocates say that this new class of partner provides opportunities for employment, a chance for growth and a chance to have more work-life balance, but others argue that some attorneys are finding themselves in B-share purgatory.  So is this new system a winner or will we need to find a new way to structure attorneys at a law firm?  Here are some arguments for and against the current system to help you make up your own mind:

The argument to keep this system.
So who wins in this model?  Some will say that the capital partners win by leveraging another group’s work.  It makes short-term economic sense.   But what about the non-cap partner?  Don’t they also win?  In the old model, an attorney was up-or-out after serving as an associate.  They made partner or they left the firm.  Doesn’t this model provide for greater stability and the ability for an attorney to stay with a firm?

And what about the fact that the lower-tier partners can do what the capital partners may not want to do – say, for example, the day-to-day work on the files.  If the argument is that the capital partners bring in the business, shouldn’t their time be freed to go out and generate more business?

Finally, we see a lot of attorneys who are thankful that this class of attorney exists.  They are exceptional lawyers who want to make the practice of law their job, not their life.  They have kids or other interests and, even though they have fantastic legal skills, have decided that the capital-partner-track is not for them.  Others are pleased that there is an intermediary step to partnership so that they have more time to develop a book of business.

The argument against this system.
What’s the downside of the two-tiered partnership? Some will say that it creates a culture of second-class partners who will struggle to rise to capital partners.  If the assignment to this class is permanent, those in this class could get jealous of the capital partners and could poison the corporate well in terms of morale.

Another argument is that if B-share partners are limited in the scope of their work at the law firm, they won’t have the opportunity to network with clients.  A firm that doesn’t push to have ALL of its attorneys generating business won’t be viable in this hyper-competitive new economy.

Only time will tell whether the partnership bubble will burst or make the law firm more viable in the new economy.  What is important is that you understand what value you bring to the table at your firm and know how you can slot into the new structure.

 

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