Moving on up: Finding the Perfect Partners

Promotion to equity partnership is the traditional pinnacle of a solicitor’s career, but the pressure is on to select and support the top of the crop.

By Richard Brent.

As sure a sign as the first branches blossoming or the first bulbs breaking through the last of the frost, the UK legal community can be sure that winter is over when law firms start lining up to announce the names of those who have made partner in their latest round. That lucky few may not exactly be spring chickens by the time they reach the key career milestone, but coming in early April, it seems fitting that a new generation of business owners begin their new chapters – and doubtless daunting duties – at a time so closely associated with the granting of a new lease of life.

In 2010 of course, while winter may be behind us, a financial chill still lingers in the air. The UK economy returned to growth in the final quarter of 2009, but as credit supply and budget deficits continue to cause widespread concern, a strong recovery is far from guaranteed in this uncertain election year. Law firms, meanwhile, are left licking their wounds after one of the most difficult years for the overall profession that many will remember. Attempts to make themselves more efficient vehicles as revenues fell fast led not just to job losses for significant swathes of lawyers and a recruitment freeze on new trainees. Sizable chunks of partnersships also departed as commercial work dried up. In January 2009, for example, Addleshaw Goddard decided it would be necessary to part company with 19 (around ten per cent) of its then 182 partners because of the firm’s financial position in the wake of the credit crunch – more than the 16 junior staff to leave the previous summer, which was itself the highest number of redundancies made by the firm since 2003. Chairman Mark Jones (then managing partner) was frank that this had been a “difficult decision” but a “necessary response to the economic slowdown”. Affecting all four key divisions and three offices, however, Addleshaw was not alone in making a move that clearly amounted to more than the managed exit of a few isolated underperformers from senior ranks.

In March 2009, however, the firm then made up seven new lawyers to its partnership across all offices – Manchester, Leeds and London – with only the corporate practice going unrepresented. The number was not a dramatic fall from a year earlier, when it had welcomed nine new partners, including three in the corporate group, one in banking and one in real estate finance. Moreover, those 2008 promotions involved almost twice as many lawyers as had got lucky a year before that, in the class of 2007. Magic-circle law firm Linklaters, another to respond to the recession with some significant restructuring in 2009, also went on to appoint a not insubstantial 18 new partners last April. Although clearly a lower tally than the 28 chosen in 2008, a third of new partners in 2009 were based in London and eight found fighting the transactional corporate corner.

However, this is not to say that the downturn did not have any effect on an average lawyer’s promotion prospects in 2009. The picture is mixed. At Stephenson Harwood – a firm where a vigorous lateral hiring strategy means 50 per cent of current partners have been at the firm for five years or less – only two new partners were promoted last year, one in international arbitration and one in shipping litigation (both, of course, counter-cyclical areas). In 2008 Stephenson Harwood had promoted twice as many, including two in finance and one in corporate, which was the same tally as for the total lateral hires it had made since the previous May. Having recently completed a redundancy exercise, Denton Wilde Sapte also halved its previous year’s promotions in 2009.

The steady stream of 2010 announcements is yet to gather momentum at the time of writing, but early cases show restraint. Addleshaw Goddard has promoted five new partners. Top-30 UK law firm Wragge & Co promoted three to its all-equity partnership in March, two in Birmingham and one in Munich, which is still a clear improvement on the sole appointment – a lone litigation lawyer – it made in 2008. “The past couple of years have been tough for law firms and our clients, but what is important is our response to these challenges,” said senior partner Quentin Poole, while also pointing to the firm’s investment in a new ten-partner office in Paris. Media-focused firm Olswang, meanwhile, has promoted just two new partners, the same number as in its 2009 round.

Prudence and pruning

Nevertheless, although it is important for law firms to invest – and show they are investing – in future talent, it seems likely they will also continue to scrutinise leverage levels closely and take action promptly. The annual ‘client advisory’ report produced by Hildebrandt Baker Robbins and Citi Private bank in 2010 certainly sees further fine-tuning as a trend, arguing many law firms had already become “over partnered” even before the financial crisis hit.

“The number of partners in firms was actually growing at a pace faster than the total number of lawyers,” the report says. The statistics show average associate leverage itself grew from 2.32 in 2001 to 2.72 in 2007 as demand apparently increased. “Firms hired more associates, in part to make up for declining productivity, and they made income partners at a faster pace than the firms themselves were growing. As a result, leverage became considerably more expensive,” it explains.

Hildebrandt suggests law firms are set to respond in a number of ways in 2010, including by remodelling remuneration arrangements, but also through rather more ominous sounding “tough love” negotiations. “We expect to see a general paring back of the ranks of income partners across the market, as well as a general weeding out of marginal equity partners,” the company says.

In general, moreover, the report finds “more cost cutting will become the norm” for 2010. “The watchwords of the day are efficiency and cost effectiveness,” explains Hildebrandt co-managing director James W. Jones.

“While the profession is no longer in crisis mode, we recognise that firms will remain under intense pressure to create new models for pricing and delivery of legal services,” adds Dan DiPietro, the advisory head of Citi’s Law Firm Group.

The partner paradox

Jennifer Overhaus, formerly a global head of outsourcing at Pillsbury Winthrop, and now a mentor and trainer for lawyers who want to make partnership, agrees that law firms are likely to err on the side of caution. “It depends on what happens with the economy in the years ahead, but I don’t expect dramatic increases in the number of partners law firms are making. They just can’t afford that,” she says.

“On the other hand, firms can’t say that nobody will be made partner. There are still a huge number of people for whom partnership is the goal. If they see that it isn’t an attainable goal, what are they working so hard for?”

Indeed, Overhaus believes the uniquely difficult blow dealt by the recent economic downturn has brought a peculiar paradox in law firms to the surface.

“They can only afford to bring in new partners that can support themselves,” she says, but insufficient training at an earlier stage in their legal careers means accumulated business and business-development skills are sadly in short supply among associates eagerly awaiting promotion.

“Firms wait until it’s too late,” Overhaus opines. “In the run up to partnerships firms start to talk about the training they are going to give, but at that stage it’s very difficult. All of a sudden lawyers have entirely new pressures, they probably aren’t getting the same work as before, and it’s all very stressful. They should be preparing for that transition much earlier.

“The recession has really brought to light how difficult, and in some ways how negligent, the process is.”

What is more, there appears to be a further likely paradox in the appointments process. Ironically, the reason associates have not been building their marketing profiles during their long years of service to the firm is that they have been busy billing client work. Those high billable hour targets began to relax a little when the recession affected the work available, but they remain one of the more obvious ways to assess a potential partner’s work ethic and ability, Overhaus explains.

“Especially in larger firms, you can only really judge someone on the basis of some numbers. How hard are they working? What are the billable hours?” she says. “Those are quantifiable facts, but they aren’t accurate indicators of who is going to make the better partner.”

Rather, partner potential should be assessed with reference to “quality attributes” or “softer skills”, she says, which are precisely those that are “difficult to quantify”.

Time for talent

At Stephenson Harwood, however, HR and training director Jeff Marlow says a new partner’s expected performance is rigorously quantified. Initially a candidate will have to convince the management board of his or her suitability, before producing a personal business case with comprehensive information about areas such as financial performance, skills acquired and contacts developed. The practice group leader will then produce a broader business plan in the context of the department as a whole, which leads to a panel interview before a final decision is made.

“When either hiring a lateral or promoting internally, the candidate’s papers are reviewed by the partnership counsel and sent to partners across the firm for any comments before the promotion is confirmed,” Marlow adds.

At top-100 UK law firm TLT Solicitors, meanwhile, potential partners are put through a rigorous day-long assessment centre of scenarios, where performance is measured against a set of key competencies as well as a substantial interview on the business case for their promotion. This does include the development of business and ability to leverage opportunities, HR director Graham de Guise explains, but it also concentrates on “how to manage client relationships and expectations and to coach, nurture and develop people” In addition to having their own talent managed, partners at TLT are expected to be able to develop others in turn.

Some recent developments at the firm also make it clear it is taking the general movement of talent through the pipeline very seriously.

In September 2008, for example, the firm launched a new associate development programme, which de Guise describes as “a potential feeder for partnership” for promising candidates.

“It doesn’t guarantee partnership, but it does fast-track development, and if associates maximise the opportunities available and take their chances, it should accelerate their development to future leadership positions,” he says.

“If they embed what they learn back in the workplace, their contribution levels should rise, which will then put them in the best possible shape to be considered.”

Partners in the process Stephenson Harwood also runs an associate development programme, where Marlow says partner involvement in the training process has “dramatically increased”. “Partners are becoming more activist managers,” he explains, with half trained to become ‘development partners’. “Over the past three years we have doubled our budget spend on people development,” he adds. The associate programme includes topics such as presentation skills, time management and media training as well as the more traditional financial and transaction management skills.

The programme is also “integrated back to the ‘day job’,” says Marlow, and TLT’s training is similarly designed to include an element tied closely to its practical needs as a business, according to de Guise. Dubbed ‘Aspire’, the programme runs for two years, culminating in September. The initial decisions about who to put through the partnership assessment process are then made in October, so the two processes do seem to “dovetail”, he explains. In addition to a formal mentoring scheme, those ‘chosen ones’ – ten in the first intake – are participating in quarterly workshops lasting for up to two days, but they also undertake annual firm-based project work that reports back to the operational board. Core abilities monitored include “commercial awareness”, “consultative selling skills”, and again leadership in the development of others.

Building on this, moreover, in May 2010 TLT will also see the first of its partners embark on a partner development programme designed by business school Ashridge. Around five partners will be coached alongside decision makers from other law firms and sectors each year. “They will learn from other experiences and the challenges that affect our clients”, de Guise says. The new programme is theoretically open to fixed share partners as well as those with equity, he adds. Participation will be tied to the appraisal process for all partners which the firm already undertakes.

The idea for such training originated with A TLT partner, since retired, who had carried out a research paper, speaking to a wide cross-section of her colleagues to understand what they would want from such a development.

“There was a real appetite for augmenting the experience in the workplace with something more theoretical but which also had a practical application,” de Guise explains.

“That was on the backburner a bit while we were focusing on managing our way carefully out of the economic difficulties, but now the time is right. There is the opportunity for people to look above the parapet again.”

Partners on paper

Pragmatic partner development is also on the current agenda at Bircham Dyson Bell (BDB). HR director Jo Larbie explains that her firm took a fresh look at how to identify and develop its partners at around the time she joined the management board in 2007, when fixed share partners were also introduced for the first time. The managing partner and other management board members pulled together a full working paper on the roles and responsibilities of a partner.

“There had been other things before, but they probably weren’t as detailed. This was much more formal,” Larbie says. “It was about articulating what we expect, assessing what we need as a business and deciding the sort of people we would need to deliver that.”

The roles and responsibilities include consideration of key competencies, but the selection process of potential partners is also closely linked to annual performance and development reviews (PDRs), which take place in January for non-partners. Candidates will meet with the various members of the management board, which includes the directors of marketing, finance, IT and Larbie herself, to assess development needs, helping them prepare promotion proposals, which are then incorporated in a document submitted to the partnership board by the managing partner. In April the partnership board then interviews the aspiring partners together with their sponsoring partner, who is normally the head of department. “As the firm has grown, we recognise that the individual won’t be well known to everyone on the partnership board,” Larbie explains. “Quite some time is then spent looking at the business plan and how the lawyers see themselves building the business.”

However, Larbie also stresses that the firm reviews a lawyer’s ongoing development needs closely prior to partnership. Similar to TLT, the firm has a new senior associate management development programme (previously piloted as a new partner programme), designed with and delivered by an external agency. At BDB this is delivered internally, with workshops every two months on subjects such as finance awareness and managing a legal practice, building a personal business plan, building and developing client relationships and leadership.

“We’re trying to emulate an external management course; allowing people to have that time to step back, look at what they’re doing and develop some practical skills they can then go away and apply,” Larbie explains.

With election outcome and economic recovery both in the balance, any real breather or spring break for a new partner is likely to be all too brief of course. Well designed partner development programmes might give the fortunate fee-earners an appropriate opportunity to reflect on the path they have taken, but with a business case now to prove in practice, they will also have to hit the ground running.