“When the train pulled into the station and the doors opened, they pulled everyone off the platform into partnership to keep them,” observes Moray McLaren, sharing a managing partner’s post-COVID reflection during a recent Platforum9 session. This urgency to retain talent has led to unexpected consequences for law firms worldwide, reveals new research from Lexington Consultants and the IBA Law Firm Management Committee.
The State of Legal Markets
Despite global uncertainties, 2024 has been successful for law firms, with high-value legal services driven by wholesale change rather than stalled by uncertainty. However, significant disparities in profitability are emerging between firms, particularly evident in the UK where American law firms have established a clear lead over their British counterparts.
The Three Circles of Success
McLaren identifies three critical elements for firms moving from good to great:
- Direction: Partners need clear objectives and understanding of what they need to achieve
- Alignment: Partners must be “rowing in the same direction”
- Commitment: Partners should demonstrate consistent levels of dedication
The Salary Partner Paradox
Perhaps the most striking finding from the research is the underperformance of salary partners. Only 54% of surveyed firms reported salary partners as more profitable than senior associates, with 27% indicating they actually reduce profit. This so-called “marzipan layer” often fails to justify the 30-40% salary premium they command over senior associates.
Selection Criteria Mismatch
The research reveals a concerning disconnect between selection criteria and partnership requirements. While firms emphasize technical legal skills when choosing salary partners, they rank “partner mindset” and leadership abilities much lower. This mismatch helps explain why many salary partners struggle to transition from being “fed” work to originating their own.
The Post-COVID Partnership Model
McLaren identifies two major shifts in partnership expectations:
- A move beyond purely financial metrics to broader KPIs including people development and relationship building
- Growing acceptance of “multi-speed partnerships” where partners can adjust their pace at different career stages
The Permafrost Challenge
A significant issue facing many firms is the “permafrost layer” – partners aged 45-50 who maintain a certain level of work but aren’t actively building their practice or investing in teams. This issue has been exacerbated by remote working in major cities, creating barriers between generations of lawyers.
Leadership and Performance Management
The research highlights a critical need for stronger leadership in law firms. Leaders must be empowered to:
- Enforce performance expectations
- Have difficult conversations about underperformance
- Implement transparent evaluation systems
- Manage the consequences of not meeting partnership requirements
Looking Forward
The path to partnership is evolving, with firms needing to balance profitability, talent retention, and changing workplace expectations. Success requires clear performance criteria, transparent evaluation systems, and strong leadership willing to manage both high performers and underperforming partners.
As McLaren concludes, size matters in how firms handle these challenges. While some boutique firms can remain highly profitable without extensive infrastructure, mid-sized firms must be particularly careful about their growth and partnership strategies to avoid being caught between the economies of scale of large firms and the agility of boutiques.
