Are Non-Equity Partnerships the Future of Law Firms?

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By Casey C. Sullivan, Esq. on October 20, 2015 3:33 PM

Is it time to move beyond the traditional law firm partnership model? The current default law firm structure leaves both clients and attorneys wanting. Clients feel overcharged and attorneys feel overworked. Some experts have blamed the "outdated partnership model" which fails "virtually all of its stakeholders."

Few firms have renounced partnerships altogether. But many are beginning to experiment with alternative partnership formulations -- particularly, two-tier partnerships with both equity and non-equity partners.

The Rise of the Non-Equity Partnership

One of the biggest legal developments in the past decade has been the rise of "non-equity partnerships." More than half of larger firms offer two-tier partnership systems. In these setups, talented attorneys are put off by the partner lifestyle. It should be noted that such attorneys are everywhere. FindLaw's post on "Is Making Junior Partner Worth the Trouble?" remains perennially popular. Thousands of lawyers jump off the partner-track, by their own volition, every year.

Non-equity partners get the title boost of partner, without the requirement of committing equity to the firm or the internal politics of managing a practice. It's less stress, less responsibility, less pay, and greater life satisfaction. Of course, non-equity partners aren't partners in the traditional sense, but you would rarely hear clients complain about that fact. Plus, fewer equity partners means more streamlined decision making, allowing firms to "speed up the decision process by eliminating needless voices."

A Personal and Professional Decision

The trend has been driven by "a new generation of lawyers who are more concerned with lifestyle than investing capital and putting in the long hours to achieve traditional partnership status," writes Daryl-Lynn Carlson in the Canadian Bar Association's Practice Link. Sure, that's Canada and we could write it off as just some frost-bitten craziness. But that might mean missing opportunities. As Edwin Reeser, a California business lawyer, writes for the American Bar Association:

A firm that refocuses its approach upon delivering value through hiring a select number of people and making every effort it can to invest in and retain as many of those people as it can-in skill development and compensation sharing that supports collaboration and fair value to all of the members of the team and to the stability of the business enterprise-will have an enormous competitive cost advantage over the present leveraged model that prevails.

Making a space for lawyers who don't want to or aren't willing to become equity partners could mean keeping talent around longer without risking too much in-firm competition.

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