The Story
UK commercial law firms have long been run as partnerships. Partners band together, sharing the benefits and risks of running a law firm.
These partnerships resemble a pyramid. At the bottom, you have a large number of juniors. As you move up the structure, the number of lawyers decreases, while the pay and seniority increases. The incentive is that you work your way up to become one of few limited equity partners who participate in the profits of a law firm.
However, recent trends have been challenging what it means to be a true partnership, which leads to the question: are partnerships a suitable structure for the law firms of the future?
Impact on Businesses and Law firms
The business of law firms has changed over the last decade. Clients have pushed back on excessive legal fees and taken more work in-house.
Some law firms now transfer high-volume process work to alternative legal service providers and use technology to deliver more cost-effective legal services. Others have opted to change their structure entirely, becoming an Alternative Business Structure to access outside investment.
As profitable US law firms swooped into London, some top UK law firms have adjusted the way they pay partners. Instead of the pure lockstep model (where pay increases according to partner seniority), merit-based pay is increasingly a consideration.
The employee market is also different. Partners move around firms far more than they used to, and a shot at the equity partnership isn’t enough to attracts juniors. Attracting and retaining talent is one of the biggest challenges right now.
All these changes have disrupted the traditional pyramid structure of a law firm. While the partnership isn’t going anywhere yet, law firms must consider how to adapt their structure to cope with the modern world.
By Jaysen Sutton
