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12 October 2016

Mounting pressure causes law firms to demote partners

Shearman & Sterling move to demote under-performing partners would once have been unthinkable, but today's tough legal market has made it a reality at a number of firms.

By Victoria Basham

Andriy Popov

The New York law firm recently announced it intends to cull the ranks of lawyers who share in its profits by demoting some to a lower-paid rung of its hierarchy.

Client pressure and competition

The Wall Street Journal reports that the move, unthinkable a generation ago, has become a reality of modern-day legal practice, as law firms faced with mounting client pressure to keep costs down and industry competition to increase profits now asses who is worthy for the top rungs of the partnership. Those who don’t bill enough hours or bring in enough business are quietly asked to leave or demoted from the so-called equity tier.

The American Lawyer surveyed law firm leaders late last year and found that 56 per cent planned to take away equity from partners in the coming year, and 67 per cent planned to ask partners to leave.

‘Pervasive’ trimming

Legal consultant Peter Zeughauser said that the US’ top 100 law firms have seen ‘pervasive’ trimming of partner over the past 18 months. He added that there are a lot of firm that have ‘seriously underperforming’ partners, meaning those billing in the range of 1,100 hours for the year, compared with equity partners’ norms of upward of 1,650 hours.

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