Young salaried partners in legal firms are facing a growth crisis as they are struggling to pull their weight in the absence of their own clients or “books.” A book, in legal parlance, refers to a “book of business,” meaning the financial and client records of a lawyer or a law firm.
The profitability per partner is significantly low, making it hard for them to either get promoted to “equity partners” or find new jobs elsewhere.
Says Akanksha Antil, vice president for law firm and fund recruitment at Vahura, “several law firms are looking to hire people who already have a book. In top tier firms there’s a glut at the salaried/execution level.” Firms now want partners to generate business, lead client relationships and help with strategy and business. “If you want equity eventually,build a visible book,” she suggests.
A young salaried partner with a top law firm acknowledges the pressure of generating enough business.
Anand Desai, managing partner of tier 1 DSK Legal, however, terms it as an undue brouhaha. “The bottomline of having a book is building a reputation of doing valuable work and contributing to the client. Client loyalty results from this. Unfortunately, it is often misunderstood as marketing which is just a part of it,” he opines.
Pressure to “Build a Visible Book”
In law firms, partnerships are the ultimate career goal. And an equity partnership, where you own a slice of the firm, is the proverbial unicorn in the legal land. The positions are difficult to come by, not just because of the steep climb to the top but also because once lawyers get there, they find themselves jostling for space with the existing partners.
The main difference in the hybrid model is that equity partners have ownership in the law firm, sharing in profits and losses and hold significant decision-making authority, while salaried partners are employees who receive a fixed salary, potentially with bonuses, but without an ownership stake or involvement in major firm decisions.
As a ballpark figure, among the tier 1 firms in India, Cyril Amarchand Mangaldas has a staggering 148 salaried partners and 67 equity partners. The corresponding figures for JSA is 92 and 62; and for Khaitan & Co, 58 and 95. Trilegal follows only an equity partner structure and has a reported headcount of 142.
Pallavi Shroff, managing partner of Shardul Amarchand Mangaldas, admits the problems that young salaried partners faces. “For equity partners, it’s a lucrative time as they often move en masse to other firms where they can get a larger chunk of the pie.”
Abhijeet Shinde, head, litigation at the home textiles major Welspun Group, says “law firms are increasingly focussed on revenue generating ability of lawyers. Many competent lawyers find this very challenging,” he says, adding that almost 60 to 65% of the the really talented young partners in law firms are “just stuck and floating around or moving in-house.”
Cost of the salaried partner model
Most lawyers agree that the glut at the young partner level is largely because a talent war is brewing where firms are competing to retain people. And to do that, they are offering faster routes to partnership, more attractive compensation (including variable incentives), and sometimes novel structures like non-equity or fixed income partners to recognise “partner-level” talent without requiring full equity.
Although senior positions are increasing, becoming an equity partner has become harder. Some firms offer non-equity partner paths, which may give partner title but not full ownership or profit share; while equity partner roles are fewer and more competitive.
A recent survey report conducted by Moray McLaren of Harvard Law School’s (HLS) Center on the Legal Profession titled “The Salaried Partner Dilemma”, specially singles out India as “an interesting market, with many firms relying heavily on the salaried role, in part owing to the closely held equity amongst the remaining ‘family-owned’ elite firms.” The report also observes that “an emerging group of firms are opening equity and decision-making in what has been called “democratising the law.”
At the same time, the HLS report also cautions that “ the salaried partner role is creating unintended tensions. These include uncertainty and indecision, where a specific career path was not agreed at the outset, essentially when the salaried partner becomes stuck in a ‘holding bay.’ This can lead to disincentivising an individual at best, or resentment and resignation at worst if left too long.”
Rahul Rai, Founding Partner of niche law firm Axiom 5 believes that the present conundrum has arisen largely because there’s a natural progression of lawyers who have spent their first few years learning and honing the craft of practice of law and acquiring skills to become a good lawyer. So to that extent if you have excellent practice skills , you’ll be able to attract the same client over and over again. “However, if you think you will be able to wean away legacy clients from closely-held old school family firms or equity partners who have spent years building client relationships, you’re being delusional. You should learn the business of law too side by side which unfortunately no one teaches you. Not only that , it is also imperative to expand the pie of work, “ he says.
Gaurav Dani , founding partner of CMS-Indus Law avers, “Institutional clients, often large, prefer to stay with the firm as long as the firm can demonstrate the ability to execute ongoing matters. However, younger partners for their own professional growth should also focus on client relationship development and management.”