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”.
Firms are struggling with how to deal with the problem of promotion to partnership as there is less money to go around generally, recently appointed managing principal at Parramatta law firm Coleman & Greig, Peter Stewart, told The New Lawyer. He said firms will be reassessing their structure to better deal with the business in the financial crisis. “More law firms will be going this way,” he said.
The traditional partnership model confuses the managing partner role with the day to day running of the office, said Mr Stewart, who was appointed last month as the firm’s managing principal.
“I will be differentiating between [the managing partner role] and the strategic, overarching role required of a managing principal.” This includes having vision and strategy as well as the financial management skills to steer the firm through the current financial crisis.
Firms will increasingly develop a structure similar to those of a corporation, he said, instead of sharing wealth and ownership between a few partners at the top. “We’re businesses, we’re not benevolent institutions.”
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.
This creates the problem that all partners want to have a say in the way an organisation is managed, said Mr Stewart.
“We have shareholders. 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 they are not automatically thrust in the day-to-day management,” he said.
"the traditioanl partnerhsip model has for some time had some shortcomings. It's not just in these times, even in the good times, a lot of the issues to do with succession planning, the question of creating value and properly manage my practice," said John Chisholm.
"Those firms that have incorpoated and gone done th corporate model, part of the reason is to make their managemmnt strucure more defined. They tend to be progresssive firms anyway."