Modified Partnership Structures and Their Effects on Associate Satisfaction

Georgetown Journal of Legal Ethics, The, Winter 2008 by Silverbrand, Ian J

I. INTRODUCTION

Historically, when a senior associate came up for partnership consideration, the firm's management would either decide to elect or to dismiss the associate. This decision was typically guided by analysis of a number of factors.1 During most promotion deliberations, partners would consider elements of each senior associate's human and social capital including associate credentials,2 training,3 quantity and quality of work product,4 interpersonal relations,5 personality,6 pro bono activity,7 and reputation.8 Additionally, some factors that partners consider are largely out of senior associates' control and relate to the firm's business strategies in light of the market for legal services. For example, some firms may consider changes in the demand for their services9 and the qualities of the external labor market.10

Any one of these aforementioned factors could have caused a prospective partner to be fired in spite of otherwise impeccable performance as an associate. Mindful of this inefficient result, firms have been increasingly adopting modified partnership structures. Modified partnership structures grant firm managements evaluating prospective partners more options than simply "up-or-out." A modified partnership structure refers to a promotion to partnership scheme that deviates from the Cravath System-styled single-tiered, six-year partnership track. Typical modified partnership structures involve the addition of a non-equity partnership tier or the lengthening of the partnership track.11

Although modified partnership structures are believed to financially benefit partners, it is heavily disputed the extent to which modified partnership structures sociologically and psychologically affect associates. The existing literature discusses numerous, conflicting effects that modified partnership structures may have upon associates. Most of that literature reaches a conclusion that modified partnership structures affect associate incentives and ultimately workplace dynamic in either "good" or "bad" ways. The author, however, does not believe that modified partnership structures should be evaluated on a wholesale associate level. Instead, it is the author's belief that individual associates are affected by modified partnership structures in different ways in light of their own risk preferences. Regardless, though, of whether modified partnership structures should be interpreted as "good" or "bad", the author believes that they should be recognized more generally as having significant, diverse effects upon associates and workplace dynamics.

Even though modified partnership structures are most popular among large firms, thereby inherently limiting elements of this Note to a small subset of attorneys who practice in the most prestigious and lucrative legal positions,12 modified partnership structures do affect a range of stakeholders beyond the elite core of the profession, particularly because modified partnership structures may soon become the norm in other private practice settings. Given the increasing popularity of modified partnership structures and the high attrition rates in prestigious law firms, elite law firm exiles will likely take to their subsequent firms their knowledge of the types of partnership structures. As a result, exiles will likely reproduce the organizational structures of their past, elite firms in their present and future small and mid-sized firms.13 Consequently, since modified partnership structures have yet to become the norm throughout the entire private practice sector of the profession, a theoretical and empirical analysis of its sociological effects upon a small, influential portion of the profession can inform future law firm managements' decisions of how to organize their partnership structures.

This Note examines the literature and empirically explains the split in authority regarding the effects of modified partnership upon associates. In Part II, this Note details the history of modified partnership structures. In so doing, this section expounds upon the literature's divide about how modified partnership structures affect the profession. Part III provides background about the empirical analysis performed herein, identifies the sources of data, and examines the variables of interest. Part IV reproduces the empirical models and discusses in detail the empirical findings. Part V concludes by noting how the Note's findings may be further developed in future studies.

II. PARTNERSHIP STRUCTURES AND ASSOCIATE SATISFACTION IN ELITE LAW FIRMS

A. WHY DO ASSOCIATES WANT TO BECOME EQUITY PARTNERS?

Election to partnership is a goal for most law firm associates. A recent survey notes that two-thirds of third- and fourth-year associates claim to be on a partnership track, albeit usually at a firm different than the one at which they are currently employed.14 Many have commented on this aspiration rather insidiously.15 Legal scholars have recently noted that as "[t]he odds of an associate becoming a partner [have] declined dramatically," there has been a corresponding "decline in stability and perhaps in institutional loyalty."16 Despite the increasing difficulty of becoming and remaining a partner,17 there still remain a significant number of associates who are interested in and work towards being elected to partnership.