5/11/12

Are Service Partners Second Class Citizens?


Following up on the post about The Dewey Situation, I had seen some dialog about how service partners are becoming second class citizens. First off – I define service partner as a partner with sufficient legal skills, but not one with a sufficient book of business. These are typically very good lawyers and their role is focused on overseeing major client work, but not as the one who brings the client and work in the door.

There is much information in the market that suggests that firms may have too many partners, at least for the level of work they currently service. Many times service partners are seen as a potential target for reducing the ranks of the partnerships of firms. Tied to this practical issue is concern about collegiality within partnerships, and this tier of partners therefore may become viewed as second class.

But is this viewpoint useful or credible?

Useful? I would say no. Service partners can have tremendous value to a firm. However, it is not the same value as a rainmaker and therefore comp for service partners should not be treated in the same fashion. The BIG problem is that law firm compensation systems are not designed to recognize and reward these distinctive behaviors. Instead, built for the past, they reward all partners with the same general formula.

Greg, or as I like to call him, #1, made an excellent observation over coffee (yes – we sometimes eschew beer for coffee). Other owner/operator businesses pay their owner/executives a salary. This allows the business to compensate the owner as a worker at a market competitive salary. Meanwhile, the owner also enjoys the rewards of profit for being a shareholder. He asked me to explain why law firms don’t do that. I told him I may appear to be smart, but ….

The point taken from Greg’s comment is that firms should reward workers, be they owners or not, for being valuable workers. In this light a service partner is not a second class citizen. That would be like saying the VP of a company is second class since they are not a Senior VP. A VP may one day become a Senior VP. Or they may continue to serve as a VP. All the while being a valuable resource to the company.

The partnerships of large firms in many respects are becoming myths. You want a few key decision-makers to run the business, while being held accountable to the owners. You can’t have 200 or 300 owners having a say in how the firm operates day-to-day. So even though called partnerships, big firms are really businesses in need of focused, professional management. The thought of shareholders running a business is … not a good one.

Service partners in this environment are better deployed managing legal work, removing the expectation that they are also in a sales role. So no – service partners are not second class. They can bring a clearly defined level of value to a firm. But in the same consideration, their comp should be aligned to their value proposition. Labeling service partners as second class is unproductive and avoids the real issue of addressing compensation systems.

All this has lead to me creating a new catch-phrase: All roads lead to the partner compensation system. 

Of all the things that are broken at law firms, this is likely the most serious one with the greatest need of attention.

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1 comments:

Jerome Kowalski said...

We are now seeing a new model for law firms which turns the old pyramid structure on its head (http://kowalskiandassociatesblog.com/2012/02/21/leverage-is-back-the-return-of-the-pyramid-business-model-for-law-firms-with-a-twist/ ).

As for Dewey, the real lesson might very well be that highly compensated producers probably should not be partners but have a different type of contractual relationship with their firms (http://kowalskiandassociatesblog.com/2012/05/03/dewey-sex-lies-and-videotape/

 

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