IN the face of a spiralling economy, more law firms may shift to an incorporated model in which shares are handed out as rewards and the management team can “get on and manage”, a managing principal has suggested.
Firms are struggling with how to deal with the problem of promotion to partnership as there is less money to go around in a global economic downturn, recently appointed managing principal at Parramatta law firm Coleman & Greig, Peter Stewart, told The New Lawyer.
He predicts firms will reassess their structure to better deal with the business in the financial crisis. “More law firms will be going this way.”
The traditional partnership model confuses the managing partner role with the day to day running of the office, he said. Still green in his new role, he said: “I will be differentiating between that role and the strategic, overarching role required of a managing principal.”
This includes having strategy as well as the financial management skills to steer the firm through the current financial crisis, he said. And for this, he suggests, you need more than the skills to be a managing partner, but business skills as well.
The firm’s top man predicts firms will increasingly develop a structure similar to those of a corporation, instead of sharing wealth and ownership between a few partners at the top. “We’re businesses, we’re not benevolent institutions,” said Stewart.
The thrust of incorporation is to deal with one of the problems a firm faces in that really competent, professional staff are all desperate to be partners. “So firms create tiers of seniority to retain staff. We have associates and senior associates because there is no room at partnership level,” he said. “We have shareholders.”
This creates the problem that all partners want to have a say in the way an organisation is managed, said Stewart.
“It’s a lot easier to offer shares to up-and-coming solicitors, from whatever basis one decides to offer them, in order to maximise staff retention. They get a piece of the pie, it may be a small piece of the pie, but are not automatically thrust into the day-to-day management. The management team can still get on and manage,” he said.