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Law Firm Partnerships and the Retention of Women Lawyers

The retention of women in private practice continues to be a challenge. Although women now form the majority of graduates from law school, they leave the profession at much higher rates than men. The BC Law Society reports that 36 per cent of women leave the profession in their first five years in practice compared to 22 per cent of men.

Over the years, many women lawyers have tried to convince law firms to adopt broader alternate work arrangements or entry requirements into partnership but have found law firms very difficult to change. When change has not happened as quickly or as broadly as women want or need, they have left private practice for in-house positions or left the profession entirely. The challenge for women is that partnerships are not corporations. The partnership structure, especially it’s financial structure, makes accommodating different workplace arrangements very difficult to sell to partners who must see a personal financial benefit to the change.

The first hurdle is the decision-making structure of most partnerships. It is often necessary to obtain a consensus where either all partners or two-thirds of the partners agree to any changes in the workplace. In many firms, one powerful partner can block any change. When a partner sees any increase in employee benefits or costing of a workplace change as coming directly out of the partner’s pocket, they can be resistant to contributing to any program that does not have a direct financial benefit to their individual practice regardless of the benefits to the firm.

Corporations typically do not require all of the management team or a majority of their employees to agree to workplace changes. They make their decisions on what will help the long-term competitiveness of the entire organization. Improvements to workplace policies that will help with recruitment, retention, morale or productivity and further increase corporate profits are an easier sell to management. Since individual compensation (with the exception of bonuses) is based on corporate performance and not simply on the revenues generated by one person, workplace improvements are more easily supported and financed.

In a partnership, it is typically the senior partners who control all decision-making. If a partner is heading towards retirement in a few years, he or she has little invested in the on-going profitability of the law firm once they leave. As long as they are paid out their partnership buy-in and their accounts receivable when they leave the firm, partners have no on-going financial interest in the firm’s future. This can make it difficult to get the senior partners to vote for anything that will not benefit them in the short term prior to retirement.

In a corporation, retiring employees may draw a pension and health benefits or own shares in the company that all form part of their retirement income. It is in management’s interests to have the corporation adopt policies that will keep it competitive and financially viable far into the future and long after those employees have left the organization. Those policies increasingly are focused on recruitment and retention strategies where flexible work arrangements play an important role.

The partnership model in larger firms is based on the continuous rotation of associates at junior levels of call. Some work must be performed by more junior lawyers at lower hourly rates in order to keep the cost to the client at reasonable levels. Since most larger law firms cannot absorb all associates into the partnership, the majority of associates will be let go so that they can be replaced with less expensive more junior lawyers. Corporations do not charge out on an individual hourly basis, so they do not need to replenish their junior staff. The retention of good junior employees who may never be promoted into management is necessary for corporations to survive.

Partners in the larger firms not only expect this constant turnover, they are dependent on it. This means they are less motivated to keep all their associates, including their female associates. Associates can always be replaced by other bright, capable law school grads. While there is a high cost to a firm when associates, especially senior associates, leave without becoming a partner, the law firms often view this cost as the price of doing business.

There are many other reasons that make law firms reluctant to embrace workplace policies to retain more women. However, the fundamental financial structure of partnerships where each partner is responsible for generating their own revenue makes accommodating women a more difficult challenge than in the corporate world.

One of the attractions for many lawyers of working for a corporation as an in-house counsel is not just the release from billing targets and business development but also the release from the pressures of the up or out partnership model. While corporations can have their own politics, heavy workloads, downsizings and poor workplace practices, they can also have the financial ability or competitive pressures to adopt more flexible workplace options that women and many younger male lawyers now crave.

The challenge for law firm partnerships is to find ways to attract and retain bright, capable lawyers who need flexible workplace arrangements in order to survive in today’s demanding world. It can be done without sacrificing partnership incomes or profits but it requires convincing partners that there is something in it for them.

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Comments

  1. Very insightful. This post makes a compelling argument that better employment conditions should be added to the lengthy list of potential advantages of public corporation law firms.

    Of course it’s difficult to test the theory until someone tries it on the ground. In most other business sectors, an innovator could test this hypothesis by adopting a corporate structure, and reaping the competitive benefits If Robertson is correct.

    Too bad Ontario’s Law Society Act s. 61.0.1(4) and analagous legislation elsewhere prohibits legal services to be offered by a public corporation. This might be yet another example of excessive regulation in the legal services sector suppressing innovation and competition.

  2. Excellent, thoughtful post. The partnership versus corporation distinction, in particular, is enlightening – I had not heard the issue framed this way before. Thanks!

  3. This is definitely an interesting topic. Your article seems to focus on women who work in large or medium firms, but if i remember correctly a vast majority of law graduates end up working in small firms with less than 10 people or as sole practitioners. Female lawyers working alone or in small firms face a number of challenges that women in larger firms wouldn’t have (and vice versa). One issue that new female lawyers who work alone or with one or two other new lawyers might have is difficulty connecting with more senior lawyers. This can be especially problematic when starting out, and can be problematic as time goes on and sole practitioner lawyers want to start a family and take time off, but don’t feel that they can do so because there is absolutely no support for them as small business owners. This is a serious problem and complicated problem. Of all the women that I was close friends with in law school i can think of only 1 out of 5 who is still in private practice three years after graduation.

    @Noel Semple: the idea to open law firms up to public investment is a terrible one in my opinion (if that’s what you were suggesting). As you may know, the first firm to go public was an australian firm that did its IPO in 2007. The push for going public came from the firm’s need to get cash to expand. If i remember correctly, British firms can now be traded publicly as well. When the law came into effect allowing British firms to sell stocks to the public there was considerable protest by members of the legal profession. The problem is that there is an inherent conflict between lawyers having an ethical obligation to the administration of justice and lawyers having to put the needs of their clients, and profits, first. I am very happy that Canadian law firms can’t be traded publicly. Besides, after what happened to economies around the world thanks to bank deregulation, we really should know better than to believe that our profession could become a free market industry without becoming tainted.