Two-Person Law-Firm Partnerships Are Unusually Risky

Forming a law firm partnership is the business equivalent of getting married.  And with any partnership, it’s critical to choose the right partner.  In a law firm, there is a risk that the person who has the title of partner or shareholder doesn’t possess the skills or temperament to be a good business owner.  My experience consulting with law firms suggests that the risk of dysfunctional partner behavior may be highest with a two-person partnership.

Some of the risk associated with two decision makers is purely mathematical.  Two people are more likely to split evenly, even if one of the partners takes a position with little or no merit.  There’s a reason why appellate courts have odd numbers of members–to avoid ties and reach decisions.

Two-person partnerships are also likely to be more dysfunctional than law firm partnerships with a larger, even number of partners.  Any even-numbered partnership risks having tie votes, but even a four-person partnership creates a chance for extreme or misguided position of one partner to be outvoted by the three remaining partners.  But with two partners you run a real risk of reaching an impasse or being forced to deal with one partner’s idiosyncratic decisions and needs.

Here are a few examples that I’ve become aware of in the last few years:

  • One partner decides they are fed up with the practice of law and wants to exit the partnership immediately.  So much so that they are comfortable abandoning clients in the middle of a representation and don’t even want to submit timesheets for the work they had performed in the preceding few weeks
  • One partner who does essentially no rainmaking and who bills about two-thirds of the hours of the other partner becomes agitated and somewhat hostile when it’s suggested that a 50/50 profit split may no longer be appropriate.
  • One partner refuses to discipline or reprimand a relatively senior lawyer who is abusive to staff members.

Examples of partners acting badly can arise in any firms of any size.  And I would prefer a firm with two well-functioning partners over a firm with three or more partners who have a dysfunctional element.  The partners’ business and legal abilities, including their ability to communicate, manage, lead, sell, and act as a cohesive team is more important to the firm’s financial future than the sheer number of partners.

But when one partner in a two-person partnership abdicates their responsibilities or demonstrates that they lack the ability to be a solid business partner, the very existence of the firm can be compromised.  One of the most common ways in which this happens is when one partner’s personal financial needs or personal problems requires the firm to distribute money that is not in the best interests of the firm.
A two-person partnership can of course succeed and there are many examples of this.
Nonetheless, two person partnerships create structural risks that too many law firms ignore at their own peril.

Leadership Language For Law Firm Partners

The partnership structure of law firms creates specific communications challenges for law firm leaders. Some communications styles are more effective when leading a group of people over whom you have little absolute authority, and with whom you have to interact on an ongoing basis. Unlike some corporate structures, the people at the top of a partnership often can’t rely on the ability to fire subordinates. To be sure, accomplished communicators in a corporate setting rarely have to rely on overtly threatening to fire those who disagree with what they say. Good leaders in corporations and partnerships rely more on persuasion and motivation than threats of coercion.

And that’s the challenge for many law firm partners.

In my experience consulting with law firms, attorneys tend to be more nuanced writers than speakers. For example, the communication skills litigators bring to a lawsuit often don’t translate well to communications with their colleagues. This is especially true with respect to delicate issues such as partner compensation, where lawyers tend to be hyper-vigilant about the direct and implied meaning of every word (including what may have been said in the past that has now been omitted).

To some extent, effective communication requires law firm partners to avoid their inclination to win arguments with fellow partners. As people in successful long-term relationships know, it is easy to erode trust and damage the relationship by winning a short-term argument. Likewise, the well-being of a partnership often requires law firm leaders to avoid escalating issues and to give all partners a sense that dissenters won’t be punished in the future.

The examples set forth above only touch the surface of the communications skills required of law firm leaders. And different law firm cultures require different communications styles. What works in one firm won’t in another.

What is clear, however, is that communications skills are essential for law firm leaders. But how often do you see a firm select a managing partner on that basis? And even more tellingly, how often are future law firm leaders trained to improve their communications skills?

Well-run corporations invest in such training for their most promising executives. Law firms should follow suit and invest more in improving the communications skills of their present and future leaders.

Successful Law Firms Do More Than One Thing At A Time

Too many law firm partners and leaders confuse multi-tasking with multi-goaling and multi-achieving. Multitasking is trying to do more than one thing at a time, such as drafting a brief while listening in on a conference call. Research shows us that our brains don’t multitask well and that we are better off just doing one thing at a time. Multitasking is relevant for a single individual over the short run.

Multi-goaling, by contrast, is a what I created that refers to institutional goals and the activities of leaders that are intended to move an organization forward to accomplish those goals. And multi-achieving refers to the successfully implementing or reaching more than one institutional goal at a time. In the dynamic legal market, law firm partners need to juggle more goals than they used to. A law firm may need to revamp its compensation system, attract lateral partners, and improve the training of its staff simultaneously. Likewise law firm partners might simultaneously create new speeches, mentor a promising junior partner or of counsel, and agree to enter into an alternative fee arrangement with a new client.

In my experience consulting with law firms, too many partners take a sequential and incremental approach to managing and building their firms. They primarily see themselves as lawyers and thus tend to make time for one “administrative” initiative at a time. Thus, for example, a partner agreed to write an article about a new trend in litigation for the firm’s electronic newsletter targeted to clients. After not hearing from her for several weeks, I learned that the partner had decided to wait to write the article until a court had issued a ruling on a pending case. It appears that the partner’s perfectionist streak was preventing writing an article that might prove to be incomplete in some way.

From a marketing and communications perspective, this borders on crazy talk. It’s as if a newspaper decided not to cover a trial until the jury reached a verdict or the case was resolved on appeal. An emerging litigation trend is interesting and worthy of sharing with clients even if ends up being less impactful than was initially expected. Partners and other lawyers would have to put many of their rainmaking efforts on hold if they had to wait until the ‘complete” story was known.

And on an institutional level, law firm leaders shouldn’t stop moving forward on one goal because another unrelated issue has emerged. For example, a small firm was in the process of discussing whether to elevate a lateral partner and make him an equity partner. The firm dropped these discussions for weeks because a personnel issue arose that involved a different employee.

This kind of sequential, one-thing-at-a-time management can be ruinous in today’s market. In a world where many of the trends effecting law firms aren’t favorable, waiting and postponing management decisions tends to force a firm to make decisions in ever more difficult circumstances. More generally, running an enterprise as complex as a modern law firm requires leaders to do more than one thing at a time. Law firm partners need to be able multi-goal and to multi-achieve. It’s as simple as that.