Wednesday, July 15th, 2015
By Gideon Grunfeld
The organizational structure of law firms is changing rapidly. The traditional structure was pyramid shaped, with equity partners on the top, followed by a few of counsel, a select number of senior associates, more mid-level associates, and a generous smattering of junior associates, many of whom came from the firm’s summer associate program.
Now law firms that serve corporations and other institutional clients are taking on a hodgepodge shape that is more akin to a diamond shape. The ranks of equity partners often dwarfs the number of non-equity partners. Of Counsel may never even be considered for partnership. And since the financial crisis of 2008, the number of junior associates being hired has declined significantly. Thus, the base of the organizational chart is narrower than it used to be.
One of the most recent and underappreciated trends involves associates and the increasing number of sub-categories that they may occupy. Some associates continue to be on a traditional partner track. But an increasing percentage of associates are not. They may be subject to lower billable hours requirements. And some firms are beginning to experiment with a medical-residency approach, in which law school graduates are hired for a year or two, are paid less than their counterparts, and are expected to leave the firm at the end of a predetermined time.
In addition, firms are creating classes of staff attorneys who, for example, may specialize in handling e-discovery. These staff attorneys can stay at the firm for an indefinite period, but there is a mutual and explicit understanding that they won’t be considered for partnership and that they will command a lower salary than partnership-track associates. And firms are using contract lawyers for assignments well beyond the traditional document review. Together these changes are fragmenting the structure of law firms while allowing them to scale up and down based on their variable staffing needs.
It would be a mistake, however, to assume that these changes are entirely the result of the law firms’ desire to reduce staffing costs. Much to their chagrin, an increasing percentage of law firm partners are realizing that even the most accomplished associates have no desire to put in the amount of work necessary to achieve partnership status. To some extent, this is an issue that is impacting many professions, not just lawyers. For example, while doctors historically aspired to start their own practices, younger doctors are more likely to seek out working for Kaiser Permanente and other organizations in which they don’t have to deal with business development and management issues.
On some level, this is a generational indictment of the lives of law firm partners. Lawyers who have graduated from law school in the last ten years or so are looking at what partners do, what they earn, and the personal and professional toll required to make partner and stay there, and they want something different for themselves.
Can you blame them?
Law firms have more staffing options than ever, but their workforce is also more dynamic and mobile than ever. That is the essence of the current situation, and it’s not likely to change anytime soon.