Who really owns your law firm?

It’s not clear to me what many law firm partners think they’re doing in that role.

If you have a dog, you’ve probably seen it strain at the leash to chase after cars, with no idea what it would do if it actually caught one. If you have a cat, you’ve probably seen it tear up the stairs in a frenzy, only to stop halfway up as it completely forgets what drove it there. And if you’re in a law firm, you’ve probably seen lawyers strive through tremendous effort and at great personal cost to attain partnership, only to find themselves looking around and wondering what possessed them to do that.

The purported rewards of law firm partnership are well-known: A slice of the firm’s annual profits, a higher level of status with colleagues and clients, and a badge of honour to show (or flaunt) to family and friends. I’m sure many partners enjoy some or all of these benefits to one degree or another. But it’s always seemed to me that many lawyers become partners primarily through inertia — equity partnership was simply the last stop on the law firm career train. Lawyers are task-oriented people who just want to know what the next task is. Many of them became partners because that was the next task to do, the last achievement to unlock.

So, equity partner … what would you say you do here?

There’s much to be written about the impact of unintended partnership on the emotional well-being of lawyers. But I’m currently interested in its impact on the existential well-being of their firms. Many law firms are owned by lawyers who neither understand, nor desire, nor have any intention to fulfil the ownership role they’ve taken on.

Pretty much every law firm partnership includes equity partners who do not view themselves as the owners of a business. They view their equity share not as an opportunity (and responsibility) to guide a legal services business, but as (a) a profit stake, similar to a share in a publicly traded company, and (b) a safeguard against interference with their own autonomy. They are partners because the role bestows several rewards (money, power, prestige). They have little if any interest in the role’s corresponding responsibilities.

What are the responsibilities of law firm partnership? It depends on the specific firm in question, of course, but a good short list would include the responsibility to:

  • generate sufficient business to sustain more than your own practice
  • monitor and help improve the firm’s performance and profitability
  • promote the firm and its capacities to your clients and the market
  • accept and carry out some management and leadership duties
  • manage and mentor less experienced lawyers under your supervision
  • plan your own eventual departure and prepare others to succeed you

Taken as a whole, these can be expressed more simply: They are the responsibilities of ownership. Just as you must meet certain obligations for the comfortable house you live in and the stylish car you drive, you must likewise meet certain obligations for the profitable and prestigious law firm you partly own. Some law firm partners are interested in all the rights of ownership, but none of the corresponding responsibilities. The more of these partners your firm has, the more trouble it’s in.

I’m not really speaking here of partners who exercise their ownership powers in ways that their colleagues find self-serving, irritating, or even antagonistic. These partners aren’t a lot of fun to deal with, and they can do real damage — but at least they’re actively engaged with their ownership role. I’m speaking here of the large number of partners who are largely or entirely disengaged from the ownership role itself. They’re neither good actors nor bad actors; they’re not actors, period. They’re superannuated associates, absentee owners, empty seats at the partnership table.

When too many of the people who have the power of ownership in a law firm fail to exercise it, then the firm inevitably starts to drift, leaderless and increasingly listless. Truly engaged partners are forced to take on more duties, to make the decisions and carry out the obligations for the enterprise as a whole, leaving them worn down and resentful.

Consultants routinely advise law firms to rid themselves of “under-performing partners.” This is, of course, code for “partners who aren’t generating enough money.” I’d like to see that term redefined to mean “partners who aren’t living up to their ownership obligations, to their fellow owners and to the firm as a whole.”  In my ideal world, every partner who declines to take up his or her ownership responsibilities would be considered to have forfeited his or her legitimate claim to partnership.

So this might be a good time to look around your firm and ask yourself: Who are the real owners here? Who takes equity shareholding in this firm seriously — for better or for worse — and who simply sits around reaping the benefits of shareholding while ignoring its duties? My guess is that it won’t take you long to divide the sheep from the goats on this score. I sincerely hope that the engaged outnumber the disengaged, but I’ve seen enough law firms over the years to know that won’t always be the case.

With great power comes great responsi— no, wait, wrong movie.

At that stage, you might want to clearly restate for your partners the responsibilities of equity ownership within your firm and re-establish their equal importance to the rights of ownership. You could make this the theme of your next partnership retreat, to signal its importance, and perhaps to lay the groundwork for establishing the annual fulfillment of that list of ownership responsibilities as a sine qua non for continuing participation in the equity circle.

If that’s too much to ask in a firm of powerful veteran partners, and it might well be, then you should at least institute the expectation of “ownership responsibility fulfillment” for every new admission to partnership — in fact, make it part of their annual performance assessment. At too many firms, the only real expectation for new partners is the generation of business — the other responsibilities listed previously are often considered “nice to do” or “soft” activities. You need to harden those expectations, to make it clear that attaining partnership is not the last stop on the train. Maintaining partnership is also mandatory.

Partnership is not the promised land given to lawyers after (10) years in the desert. It’s not merely an achievement to be unlocked or a destination to be enjoyed — it’s an earned privilege with ongoing responsibilities, and nobody is permanently entitled to it. That might be a heretical statement at your law firm. But I think a lot of law firms are overdue for a little heresy at the moment.



9 Comments

  1. Mike O'Horo

    Amen, brother! Say it loud and say it clear!

    Partners-in-name-only is a pervasive failing.

  2. Joel Barolsky

    Yes and no!

    Yes, that rights come with responsibilities. But no that these responsibilities should include “monitor performance”, “perform management duties”, etc.. This smacks of partners second-guessing those in leadership roles.

    Partners, as owners, should take an active interest in the firm’s performance (like any investor should), but far too often I see equity partners white-anting key decisions and being dismissive of agreed firm strategy.

    As Nick Jarret-Kerr states, “Partners are responsible for their dealings with the firm by requiring them to accept the spirit and the letter of the firm’s strategy and to take cabinet responsibility for decisions that have been made in accordance with the firm’s decision-making processes. It should also require them to embrace the firrm’s values. It should establish or reaffirm the expectations the firm has of every partner for their commitment, hard work, and effort.”

  3. Mike O'Horo

    I don’t think that’s what Jordan is talking about. An ownership mentality is feeling a sense ownership vs. employee mentality, i.e., “Whatever it is, outside of marketing and doing billable work, it’s somebody else’s job.”

    That means not waiting for someone in management or leadership to tell you to make sure that younger lawyers are developing, but recognizing it as an ownership responsibility.

    Same with taking an interest in associates participating in and contributing to business generation in appropriate ways, e.g., developing business acumen so they speak clients’ language and understand clients’ business concerns, following business news to spot items that would enable partners to tee up provocative business discussions — instead of waiting for the Marketing Committee to direct you to do it.

    Proactively seeking creative ways to improve service delivery methods and processes — instead of waiting for the Management Committee to say, “Here’s what our firm initiative will be.”

    Seeking client feedback during and after engagements — instead of waiting for the formal client feedback program.

    I could make a much longer list, but you get the idea. “I do my job and draw my pay” isn’t owner thinking. That’s employee thinking.

  4. Gary Luftspring

    And it seems to me that one of the serious
    issues is that the “ownership” mentality and commitment must be fostered at the earliest moment ie throughout the period as an associate. The hard part is associates are always watching and if partners don’t exhibit “partner” behaviours then it is tough to foster in associates.

  5. Jordan Furlong

    Thanks to everyone for your great comments!

    Mike actually expressed my central point better than I did. :-) My difficulty with many law firm partners is that they still view themselves as the employees of the firm, as they were back when they were associates, rather than as the owners and directors they became when they accepted the offer of partnership. “Associates with benefits” probably sums up the way many partners approach their role. I think they were probably happiest as employees, and either misunderstood or chose to ignore the implications of leaving associateship behind. With great power, etc.

    That’s not to say Joel’s warnings aren’t valid, though, because they certainly are. What you don’t want to see is dozens or scores of partners all reaching for the steering wheel, trying to drive the car from the back seat, and that does happen frequently. There’s nothing more aggravating for law firm leaders to be given overall responsibility for the direction of the firm, then to be constantly second-guessed and criticized by the partners in the peanut gallery. That fits the description of the “wrongly active” partner I described in the piece: one who takes his or her ownership role seriously, but executes it poorly or unhelpfully.

    Here’s a fuller description of what I meant by those bullet-point “ownership responsibilities” in the post:

    * monitor and help improve the firm’s performance and profitability — Too many partners have little idea about the firm’s overall profitability, and care less: All they’re interested in is their own draw. A good shareholder should care about the overall viability and success of the enterprise in which he or she is invested, and should keep himself or herself informed of the firm’s financial health. If the firm is not meeting its targets, a good owner doesn’t challenge or criticize leaders (unless there’s really good reason); he or she asks, “What can I do to help improve the situation?”

    * promote the firm and its capacities to your clients and the market — Too many partners also ignore the critical importance of cross-selling to the firm’s success. Partners should be enthusiastically promoting the firm’s expertise in other practice areas or markets, and evangelizing his or her colleagues to their own clients. If the partner believes those colleagues and capacities to be unworthy of cross-selling, that’s another matter altogether. But if you’re content to be co-firm-owners with someone, and you grasp the basics of cross-selling’s immense importance to the firm’s success, then you absolutely must step up in this area.

    * accept and carry out some management and leadership duties — I should probably have been more clear that this does not mean back-seat driving. It means recognizing that an owner has an obligation to perform some degree of management and leadership, formally or (more often) informally, to make the firm and its people more productive and effective. This is most often and best expressed through the next bullet on the list: Manage and mentor less experienced lawyers under your supervision.

    * plan your own eventual departure and prepare others to succeed you — This is the key one for me. It goes to the issue of stewardship, which is at the heart of professional firm ownership: the idea that you have inherited something good from the hard work of those who came before you and you are obliged to pass it on, as good or preferably better, to those who come after you. To the degree any given partner can be moved by talk of “legacy,” this is where I try to move them. Employees don’t leave legacies; owners do. What do you want your ownership legacy to be? What do you want to be said about you after you’re gone?

    I actually quite like Nick’s description of the partnership role, as quoted by Joel (Nick’s a former colleague of mine, and he knows this area well). It’s important for partners to rally around their leaders and take “cabinet responsibility” (a great term) for the decisions leaders take. But I think there are other dimensions in which partners can embrace and fulfill their responsibilities as owners of a professional services business.

    The irony is that many partners seem to think that attaining partnership means they’ve gained the right to sit back and do nothing about the firm’s bigger issues. I contend that accepting partnership means the exact opposite: that you’ve given that right up.

  6. James Speakman

    In our firm, I equate equity partnership (and ownership) with my friend who owns a successful coffee shop in the neighbourhood. Each morning he drives down the hill to turn on the lights and each night he goes down the hill to make sure the cash gets in the safe and the lights are turned off and doors locked. I talk about the responsibility to figuratively “turn the lights on and turn the lights off”.

  7. James Bliwas

    Thanks, Jordan, for the expansion on your initial post.

    I smiled when I read “Too many partners have little idea about the firm’s overall profitability, and care less.” This is because not a lot of firms have a real idea about their profitability other than at the end of the year there’s a pile of money to be divided up.

    We’ve done work with firms to assess the profitability of both clients and lawyers. At one such assignment, we found that a practice group generated a large amount of fee revenue every year but the work was profitable only if the work was actually done by mid-career associates, paralegals and clerks with partners just managing the files. When a partner in the group actually worked a file, profitability fell off the desk.

    The results astounded the firm’s leaders. They responded by cutting the entertainment budget in the group – why spend money chasing after more work that was only marginally profitable? – and reassigned some senior associates to other areas. It also stopped recruiting for lateral partner hires to the group.

    Until law firms begin assessing the profitability of specific practice areas, clients and partners, they won’t be able to truly get partners to grasp the concept of their own profitability. Yes, there are cultural and “collegial” issues that have to be addressed but the outcome of such an analysis not only makes the firm more profitable, it increases everyone’s year-end payout.

  8. Patricia O’Toole

    Thanks to all for this good exchange.
    Cross-selling, true collaboration, and honest review of profitability with courage to make necessary changes – those are key points.


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