Law firms traditionally operated a simple quid pro quo dynamic whereby young lawyers were expected to devote years of their professional life in exchange for the estimable carrot of partnership. Trainees joined prestigious firms following a rigorous selection process which conditioned their mind-set from the very beginning – “I am and will continue to be part of an elite”. Their performance and sacrifices would in time lead to significant kudos and financial reward.
However, the impact on law firm profitability from economic and macro conditions over the past few years has placed this equation under severe strain, and frankly it no longer holds true for most law firms.
The traditional model was predicated on a principal tenet that what is good for the partners is good for the firm as a whole; that the pursuit of profitability which drove the partners would likewise motivate the associates, trainees etc. Inclement markets on a global scale, coupled with the fact that law firms had expanded so drastically pre-2008, have meant that the numbers no longer stack up: there are not enough partner slots to meet the aspirations of talented young lawyers and in many cases the financial upside is not even close to as compelling as it used to be.
As firms grapple with PEP erosion, the issue of career progression has gathered momentum, as associates have woken up to the fact that the risk reward analysis of yesteryear is a myth, and that firms can only deliver partnership to a minuscule proportion of their intake. Accordingly private practice lawyers are re-evaluating what career progression means to them, and indeed more so than ever, whether partnership is worth aspiring to anymore.
In the past associates worked hard to put themselves into a position of contention, with the ‘risk’ that one might not get promoted being mitigated by the idea that you could ultimately move to another firm, potentially into direct partnership, relocate overseas or move into a coveted in-house position. The current reality is that many are opting out of the partnership track altogether, adopting a far more pragmatic stance around work life balance. Associates are no longer willing to work around the clock only to be told by firms that there are 7 to 10 people ahead of them in the queue.
More and more lawyers we speak to say they would rather a more modest but consistent remuneration over a longer period of time, which reflects individual performance and value-add whilst also enabling a better quality of life and a more sustainable working dynamic. Accordingly, decision makers within law firms have to a greater or lesser degree rallied around to find ways to retain talent by providing palatable alternatives to the partnership track while making people feel valued.
This includes increased stratification within the associate lockstep, with the introduction of gateways such as Managing Associate, Senior Legal Advisor and Counsel. There has also been a trend of segmenting the partner lockstep, making it more meritocratic and setting milestones to achieve. These are all moves which strive to balance out the need to retain people through progression and financial incentive while remaining financially viable.
Moving in-house remains a very attractive transition for those who want to move out of private practice completely, however it is no longer a panacea as it used to be, being both risky and less highly remunerated. It is also often perceived as a dead end due to the lack of liquidity of roles we have witnessed over the course of the double/triple dip recession.
Where does this leave us? Law firms have created so many barriers to partnership and career progression that ultimately they have fuelled an alternative market for lawyers outside of the partnership model. Lawyers are having to ‘think outside the box’ more than ever, especially now that the in-house market has contracted and they can no longer default to moving into standard in-house legal roles. We have, and continue to witness, a recalibration of lawyers’ career trajectory with increased diversification into areas like Compliance, Risk Advisory and Investigations. We have also seen greater appetite for entrepreneurial opportunities; where traditionally risk averse lawyers would have shyed away from start-ups, many are willing to take a gamble for fulfilling and interesting roles which may be riskier but potentially offer a more compelling upside. The demographics are evolving such that many of the preconceptions and stereotypes which have infused the legal community for decades are being challenged.