In an ideal world, law firms would work the way a Fortune 500 company works. A board of directors appoints the CEO and other officers, who are answerable to the board as well as the shareholders. That way everyone has an interest in stability, efficiency, and profit; there are checks and balances; and people are always being offered opportunities. I can tell you that law firms do not work anything like that. Rather, law firms are fiefdoms in which the partners/owners each have their zone of control in an arrangement that bears remarkable similarity to the feudal system of medieval Europe. I pursue this description to its logical conclusions below.
The feudal system
This is a social relationship in the form of a pyramid, which is orchestrated to maximize the power of the person at the top while minimizing his or her commitment to the person at the bottom. Essentially, though, there are two classes: land owners (upper caste) and laborers (lower caste).
Law firms as feudal enterprises
In this analogy, land owners are law firm partners, and laborers are associates. And I'm not talking about partners in the sense that term is used at large law firms; I'm talking about the actual owners of the law firm, known in the profession as equity partners. Rule of thumb: anyone who signs or guaranties the lease and other financial obligations is an owner of the firm. Anyone who doesn't sign or guaranty the lease or other obligations is a non-owner of the firm. The feudal system is a dream for everyone at the top, and a nightmare for everyone at the bottom. That's because, unlike a Fortune 500 company, the owners of a law firm are dictators for life or as long as they can stand each other's presence, and there is no way to vote them out like shareholders at a company might do.
A law firm obtains loyalty through the concept of "golden handcuffs." In a healthy workplace, this is a mutually beneficial arrangement in which the recipient of rewards doesn't feel like a prisoner, and wants to stay semi-voluntarily. In an unhealthy workplace, the recipient of incentives is basically an indentured servant. For example, some firms will lend money to a new partner to buy a house, but the interest rate or other terms of repayment are tied to the person's continued relationship with the firm. These kinds of offers come with many strings attached, and the offeree is not sure whether to accept or reject the offer because they could end up saddled with massive debt if they leave. What if they have a baby on the way and have no choice financially? That's one sure way to build resentment and insecurity.
Law firms cross refer cases only within their peer group. This is because the people at each level of the system all know each other, or at least know who the people are in their peer group. This is why you see the same names over and over again at conferences and presentations, and in journal articles.
A firm should have, at all times, a succession plan for how to serve the firm's clients in the event of a major life transition such as death or bankruptcy of the firm's owner. It's a lot better when contingency plans are spelled out in the partnership agreement instead of made up on an ad hoc basis. Unfortunately, this is rarely done, which leads to the dissolution of law firms upon the death of the founder and the awkward situation of working to promote the name of a departed owner.
For some reason, people hold on as long as possible to their positions. This prevents more junior people from rising through the ranks because there is not enough room at the top. If only law firms took lessons from the military, where there is a limited number of slots for generals as well as mandatory retirement, the world would be a better place. Instead, you have an aging cadre of elderly partners who are taking a lot of money but not producing as much revenue as the mid-career partners who want to replace them. In a firm where all the partners are the same age, this is a huge problem because there could be multiple retirements or deaths at the same time. At one firm I know of, the owner was in the office working on the day before he died of cancer. Fortunately, his son had been groomed to replace him and is doing a great job. But most people are not so lucky.
In light of the foregoing, what should a lawyer do? Let's be honest: no one can predict the future. In the event of a sudden, major transition event such as a personal bankruptcy, unpredictable things can happen. Law firm partners and their associates can certainly be wooed away with promises of largesse and security in a new pasture, which may be one reason I constantly see targeted ads from Hanson Bridgett in my LinkedIn feed ("Looking for a new home?" Lol). Anyway, my recommendation is this: king yourself by establishing your own firm once you have it in you and you have the financial backing to do so. This should be done at the earliest reasonable opportunity in order to avoid delay and the uncertainty of the future.
Last updated: July 6, 2018
© 2018 Andrew G. Watters