Fewer Associates Promoted To Partner In Downturn

By Shannon Henson

Law360, New York (November 11, 2009) -- The recession has prompted some large firms to be more conservative about promoting associates to partner in 2009, according to legal industry observers.

It's hard to generalize how law firms are making promotional decisions this year, but the classes seem to be smaller so far, consultants said.

And the emerging trend of smaller partner classes may be one of the long-term impacts of the downturn, they said.

“I think changes at the associate level and staffing alternatives will stay in force,” Toni Whittier of Whittier Legal Consulting said. “Even before the recession, firms were naming fewer partners. The trend will probably be reinforced by what happens this year.”

A number of law firms have publicized the election of partners in the past couple of weeks. For example, Sullivan & Cromwell LLP announced that it named five attorneys as partners, and Cleary Gottlieb Steen & Hamilton LLP said it had elected four new partners and four new counsel.

Latham & Watkins LLP elected 23 attorneys to the partnership last week, said Rick Bress, a partner and the chair of the firm's associates committee. The new partners practice in a number of areas, including corporate, litigation and tax, and are working in offices all over the world.

The promotions, he said, were a “nice show of confidence” in the future of the firm. Bress said the class was smaller than it was last year, but not appreciably so.

Latham & Watkins applied the same standard to partnership as it had in prior years, said Bress, who declined to say whether the associates were promoted as nonequity or equity partners.

“I didn't really see any effect of the recession on this class,” he said. However, in the future, “there may be people who find it more challenging to get the experiences needed in a slow economy. So, we may have to make more allowances in future years to give people more time if they need it.”

Whittier said that while the recession may have some impact on the decision-making process for partnership, firms would also be looking at long-term factors including the influence an attorney could have on a coveted practice area.

However, she said, an associate's business development skills would probably be weighed more heavily than in past years.

“In some cases, it may be a prerequisite for joining the partnership,” Whittier said.

Those associates who are passed over or who are asked to wait for partnership won't likely jump ship given the economic realities of the industry, experts said.

“There aren't very many places for associates to go, and there's a pretty ready supply of replacement talent,” said Lisa Smith, vice president of the law firm consultancy Hildebrandt International.

Jerry Kowalski, founder of legal industry consultancy Kowalski & Associates, disagreed with the contention that firms will be more conservative about promoting associates in the downturn, however.

“Promoting people is a public proclamation that the firm is doing well and that the senior associates see what a bright future the firm has,” Kowalski said. “There's a big positive PR punch.”

He also said that promoting associates can have a positive impact on a law firm's balance sheet because it eliminates an associate's salary expense.

And the difference in compensation for a senior associate and nonequity partner can be “razor thin” in some cases, he said.

If a lawyer is elected equity partner, a firm would also likely get an infusion of cash, which can be a big bonus in the recession, Kowalski said.

Prior to the downturn, law firms were elevating fewer attorneys to fill the equity ranks, said Frank Michael D'Amore, founder of Attorney Career Catalysts LLC.

The trend has generally held true in the recession with the exception of those firms that need capitalization from new equity partners, D'Amore said.

“After the recession, I think we'll continue to see the nonequity ranks swell as the equity ranks remain static or decline,” he said.

Some consultants also questioned whether partnership would be attractive to young attorneys in the future.

Kowalski said he would recommend that some associates turn down such opportunities this year.

“But for the psychological joy of telling Mommy and Daddy and your peers and walking around with your chest stuck out announcing that you are a partner, this year might be the year associates might want to say, 'Why not defer?” Kowalski said.

“The economics of firms would dictate that in many instances associates should say, 'Let's hold off and see where we are at the end of next year,'” he said.