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The partnership drought

The partnership drought

It takes longer to make partner, and there’s more competition to get there, in the Land of the Long White Cloud, writes lawyer Stephen Leavy.THE TRADITIONAL corporate law firm partnership mo

It takes longer to make partner, and theres more competition to get there, in the Land of the Long White Cloud, writes lawyer Stephen Leavy.

THE TRADITIONAL corporate law firm partnership model was relatively simple. You served your time, and if you were technically able, good with clients, and able to develop business, you became a partner. This might take only a few years, or it might take seven or eight, but you knew you would get there. But something has changed in the New Zealand corporate legal market.

The wait to become a partner has become longer, and longer, and longer. Indeed, in some firms it is in danger of becoming never-ending. Senior lawyers of the highest calibre, who in previous generations would have walked through the partnership door, are finding it firmly closed. It seems the large firms are stuck in a partnership drought with no oasis on the horizon.

Is this really the case and, if so, how did it come to this? Perhaps more importantly, what are senior associates in the firms themselves doing about it?

The evolution of the New Zealand corporate legal market in the 1970s, 1980s and, to a lesser extent 1990s saw what would today be described as medium-sized firms merging and consolidating into ever-larger firms.

Much of this activity reflected the huge upturn in legal work resulting from the 1984 election of the Lange Labour government and the major economic restructuring and deregulation that followed. The top corporate firms rode a wave of growth in the 1980s and 1990s, and their partnerships grew ever larger.

Law firm Russell McVeagh offers just one example. The firm traces its origins back to the founding of JB Russell’s firm in 1863. From 1863 to 1978, the firm admitted 40 partners. In just the next 12 years, from 1978 to 1990, it admitted another 40. The average length of time between qualification and making partner for this group of 40 was five years. It was a similar story at the other large firms.

One partner who was made up during those times recalls “there was a huge amount of consolidation and activity going on. There was more work than firms could cope with, and so if you were a young lawyer coming through, there were terrific opportunities. Many of the firms thought their partnerships were going to get even larger than they actually did”.

This new generation of partners also recognised their practices could be made more profitable through the adoption of the leverage model. Namely, increasing the number of solicitors per partner.

Russell McVeagh in 1979 had 21 partners and 27 professional staff. Today, it has 38 partners, 4 consultants, and over 200 professional staff. All the large firms now utilise a leverage model that differs markedly from the flatter structures of law firms 30 years ago.

This huge expansion of the number of partners has now substantially slowed as the firms have in many ways outgrown the market for their services in corporate New Zealand. The large-scale privatisation of New Zealand’s economy was a one-off event. The huge expansion in legal work in the run-up to the 1987 Crash, and the litigation boom that followed, have also passed.

Many of the large firms now routinely make up only one or two partners each year. In 2006, Bell Gully made up two new partners and eight senior associates, while Buddle Findlay made up just one partner, but promoted nine lawyers to senior associate.

At the same time, the adoption of the leverage model has seen the number of professional staff rapidly increase. The factors noted above seem to have created an army of corporate lawyers in their 30s, without the title of partner after their name. A review of the websites of a selection of the national firms reveals the following numbers: Bell Gully, 37 senior associates; Buddle Findlay, 25 senior associates; Chapman Tripp, 22 principals; Duncan Cotterill, 18 associates; Kensington Swan, 17 senior associates; Minter Ellison Rudd Watts, 13 senior associates; Russell McVeagh, 12 associates; Simpson Grierson, 55 senior associates.

Taking Chapman Tripp as an example, the average number of years since qualification for a Chapman Tripp principal is eleven and a half years. The figures are not dissimilar in the other large firms.

So, it would seem that in the last 15 years the length of time it takes to even get close to partnership in the national corporate firms has doubled. The number of colleagues senior lawyers have to compete with to make partner has also expanded. Add to this a market for legal services in New Zealand that is stagnant at best, leading to little organic growth in the large firms, and you get a partnership drought.

One of the 55 senior associates at Simpson Grierson was, until last year, Thomas Biss. Thomas left the firm in 2005 and moved to Whangarei with his family to join local firm Henderson Reeves Connell Rishworth. Thomas and his family made this decision because they decided that if “I wanted to be available to see the kids as they grow, and have more time to relax and have fun, then it was time to leave the big firms”.

Thomas had a family connection to Henderson Reeves Connell Rishworth, and says “there was a great opportunity to come here, work in a well-established and successful firm, but also an opportunity to build my own practice and reputation. The hours are easier, and even working the same hours I only have a 10-minute bike ride to work, compared to an hour-long commute in Auckland. That’s an extra 10 hours a week there.”

Stephen Leavy is a qualified lawyer and Principal of Executive Search firm Hobson Leavy.

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