Business of Law

'Scarlet Letter of Permanent Non-Equity Status' Hurts Law Firm and So-Called Partner, Columnist Says

An American Lawyer (sub. req.) article this month discussed the potential benefits to all concerned of shifting from an up-or-out law firm partnership model to one in which the growing ranks of non-equity partners would be recognized as a permanent cadre of skilled practitioners.

But Steven J. Harper, a former BigLaw partner who currently teaches as an adjunct law professor at Northwestern University, questions the conclusions the article draws in a column today in the Am Law Daily.

Will corporations more readily pay higher billable rates for a so-called partner, as opposed to an associate? Not likely, he writes, since clients are increasingly looked at the rate being charged versus the task being performed, regardless of who actually does the work.

And Harper questions as well the argument that a corps of permanent non-equity partners would save the firm significant training expenses, by providing an alternative to the $250,000 to $300,000 some say it costs to bring an associate to a point where he or she is a moneymaker for the law firm, after three or four years.

The actual numbers crunch more favorably for the law firm, he suggests. But even if they don’t, any short-term economic gain from relying more on non-equity partners would be offset by other factors, Harper argues. Among them are what he calls “the scarlet letter of permanent non-equity status.”

While a cadre of non-equity partners might make sense on paper, creating a permanent subclass to generate short-term dollars in the long run is offset by the plummet in morale that will inevitably permeate their working lives and the firm’s operations, Harper writes.

“It’s understandable. Throughout their lives they succeeded at everything they tried—outstanding college record, good grades at a top law school. They’re intelligent and ambitious, otherwise firms wouldn’t have hired them in the first place. But then, after years of hard work they learn that they will never reach the next level. Only magical thinking can wish away the demoralizing impact of that message.”

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