Pitcher Partners’ 2020 Legal Survey sought views on a range of factors related to legal firms including equity and retention, remuneration, gender and more, revealing rising risks for firms.
Equity and retention
The majority of respondents (83%) of our Legal Partner Survey were equity partners. As in 2019, 16% of the equity partners who responded were female. Non-equity partners were more evenly representative of gender.
The vast majority of partners (91%) are planning to stay at the firm they are currently at, with no partners of more than 15 years planning to leave. Unsurprisingly, many more equity partners (92%) are planning to stay than non-equity (67%) partners.
1/3 of non-equity partners are likely to leave
If one third of non-equity partners are happy to move firms, and if finding and recruiting talent is so difficult, what is being done to change this? Non-equity partners are less happy with the level of decision making which could be one lever that could be used to change this. Or, if firms are happy to see non-equity partners leave, why are they being offered partnership in the first place?
Interestingly, more female non-equity partners (40%) are planning to move firms than male non-equity partners (29%), perhaps indicating that women still feel the positions, conditions and recognition they want may not be available in their current firm.
Female partners more often worked in firms with less partners and in younger or start-up firms supporting the assumption opportunities may not be being presented at more traditional firms.
Goodwill
The predicted demise of goodwill partnerships appears to have materialised with 72% not purchasing goodwill when they entered the partnership. Correspondingly, the majority of partners (62%) do not expect to be paid goodwill when they leave the practice.
Interestingly, 16% of partners who did not purchase goodwill expect to be paid for it when they leave the practice. Amongst the minority (26%) who expect to receive goodwill, only 11% of those are women, perhaps reflecting that women who responded worked in younger or start-up firms.
Retirement ages
Perhaps reflecting the preference of the owners to have complete autonomy, the vast majority of firms (83%) do not have a compulsory retirement age. For those few firms that do, the ages were 60, 65, 67 and 70. Interestingly, more partners thought there should be a compulsory retirement age (25%) than not have one (13%), with most respondents nominating 65 as their preferred retirement age.
We have seen from previous surveys that most firms do not have documented succession plans and 35% do not have strategic plans. Is this lack of planning and commitment to a compulsory retirement age indicating that older partners are not ready to or can’t let go?
Remuneration and gender
There was not a majority remuneration model, with the top three models being equal profit share (36%), performance only (27%) and then lock step with performance adjustment (19%). The remaining models were all variations of these, with the corporate model of salary and dividends only 2% of respondents.
Most respondents (81%) are happy with the remuneration model in place at their firms. Equity holders are much happier (89%) with the remuneration model, again to be expected as presumably they had a hand in the remuneration model chosen.
Less women were happy (75%) with the remuneration model than men (84%), but also more unsure (8%).
- 9% less women were happy with the renumeration model than men
The responses relating to their own remuneration were not very different with most (82%) happy. Again, equity holders (82%) and males were happier (82%) than nonequity holders (67%) and women (75%).
Amongst the respondents who provided answers covering reasons for being happy or unhappy with their remuneration, the issue most commonly mentioned was fairness. So, regardless of the remuneration model chosen, partners’ perception of its fairness is paramount. Some of the key reasons partners outlined that they’re happy or unhappy with their remuneration structure are outlined in the table below.
This article was published in Pitcher Partners’ 2020 Legal Survey. To access the full report, click here.
