Best Practice: The equity partner problem
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am a member of our firm's executive committee. We are an 18-attorney firm in Baltimore with four equity partners, five non-equity partners, and nine associates. Recently we asked one of our non-equity partners to join the equity ranks and he said no. We were shocked and taken by surprise. Is this a common occurrence? We would like to hear your thoughts
A. This is becoming a more common occurrence and this is causing havoc with growth, succession and transition plans. Many law firms are seeing a growing sense of disillusionment from young lawyers that may not want to be an equity partner. While they want to be lawyers they do not want to take the financial and other business risks nor make the other work commitments such as working nights, weekends, and the 24-hour commitment that has historically been the requirements for equity partners in law firms. Work-life balance has become a priority for younger lawyers.
I believe you should use performance reviews, survey questionnaires, and other tools to gather information. This will give you a feel for where your non-equity partners and associates stand as far as attitudes toward business and financial risk, desirability of being an equity owner, and willingness to invest capital and time in the firm. If it looks like you have too many worker bees, find attorneys that have an interest and the mindset it takes to be an equity owner. This can be done through laterals or new attorneys.
John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at firstname.lastname@example.org.