It’s not going to come as a huge shock to our readership of jaded veterans to hear this but the 2014 promotion rounds from the UK’s top law firms have confirmed that the striking revival in business confidence over the last 12 months has made pretty much no improvement in partnership prospects.
Yes – my back-of-the-envelope calculations are that the Magic Circle plus Herbert Smith Freehills, Norton Rose Fulbright, Hogan Lovells and Ashurst have added only 193 individuals to the club despite fielding between them partnerships of well over 5,000. The 2014 promotions round at these firms is equivalent on average to less than 4% of their partnerships – well below the replacement rate needed to sustain their ranks.
And the odds are particularly poor in London, with barely over a third of the promotions in the Square Mile (and under a third if you remove the great outlier Slaughter and May from the equation).
And remember most of those making partner will not have trained with the firm thanks to the huge expansion of associate recruitment and lateral hiring. Research Legal Business conducted last year found only 40% of the 2013 promotion rounds at the UK’s 25 largest law firms had joined the firm at intake level.
While Magic Circle promotions are marginally up on last year, these numbers – and the promotion rounds at smaller firms – indicate that the UK profession continues to elevate partners in the anaemic levels that have prevailed since the market reset of 2008-09.
This raises the question of how much longer this can continue before City firms test their own career model to destruction and the trusty partnership track just stops doing what it’s supposed to. As we noted recently, there is a mounting body of research over the last decade confirming the fading power of partnership as a motivational tool as it becomes ever more remote. With junior or fixed-share partners now usually expected to put in substantial capital due to tax changes, the likelihood is that growing numbers of associates will focus their career energies elsewhere. Good news for in-house and New Law providers.
This also highlights the inter-generational tension that law firms have been poor at managing since the banking crisis hit. The lockstep-derived models that still dominate in the City by default keep trending towards a top-heavy and inflexible configuration. While major law firms have a far better track record than most industries in terms of long-term thinking and stewardship, it’s still not always apparent that the older generation of partners is in tune with demographic shifts and the changing perspective of associates and junior partners.
Based on previous form, the firms will handle this staffing issue as usual – they’ll push their luck too far and be forced to expensively over-compensate when the market recovery fully kicks in and the talent starts walking in droves. Oh well, at least they are promoting a few more women. It’s almost like those 30% targets worked.