Question:

I am the managing partner of a small boutique litigation firm in Southern, California. There are two equity partners in the firm and five associates. Two of our associates have been with us for 8 and 15 years respectively and are critical to the success of our practice. We do not want to lose them, so we are considering making them non-equity partners and giving them the title of partner. We are not ready for equity partners at this time. All associates in the firm are paid a salary and a discretionary bonus. How can we make their promotion to partner meaningful and successful?

Response: 

Promoting your first associate to a non-equity partner is a significant step and should not be taken without giving it serious thought and it’s long term implications for the firm in terms of overall career advancement for not just your present two associates but also other associates in the firm as well as others that may join the firm in the future.

Non-equity-partnership should be one step in an overall attorney career advancement program (partner track) that recognizes leadership and professional accomplishment while creating expectations for increased responsibility, client development, and firm management. Your attorney career advancement program should be consistent and fair.

Several of my clients are developing career advancement programs that incorporate a competency-based approach that  outlines specifically what is takes to be successful and advance from associate to non-equity partner and from non-equity partner to equity partner. Rather than leaving the formula for success in the minds of the equity partners, a competency model gives each attorney in the firm an understanding of how he or she will need to perform in order to be perceived as progressing, and ultimately, as successful. Competency models offer transparency and clarity. The model outlines specific behavioral observations as the primary source of performance information. Benefits are as follows:

Associates are presented with clear information on expectations for their level of experience and a road map of what is expected as they progress. Specific expectations are laid out for progression to non-equity partner as opposed to a specific timeline.

Non-equity partners are presented with clear information on expectations for their level of experience and a road map of what is expected as they progress. Specific expectations are laid out for progression to equity-partner as opposed to a specific timeline.

Equity partners and senior lawyers benefit from a consistent description of performance standards that allow them to access performance, assign work effectively, and offer more meaningful career guidance.

The firm has a consistent methodology for making compensation decisions.

Concerning Non-Equity Partnership, the Firm Should Consider the Following:

Give Some Thought and Define Why the Firm Will Have Non-Equity Partners

The firm should clearly define the purpose of the non-equity partner role. Consider questions such as:

  • Is it primarily a recognition of legal excellence?
  • Is it a transition stage before equity partnership?
  • Is it intended as a permanent career position?
  • Does it help recruit and retain top talent?
  • Does it provide leverage for client succession?

Develop Performance Criteria and Incorporate in Your Attorney Career Advancement Program (Partner Track)

Associates should understand the firm’s expectations before they are eligible for consideration.

Typical criteria might include:

  • Years of practice required for consideration
  • Consistently high-quality legal work
  • Strong client service
  • Positive evaluations
  • Integrity and professionalism
  • Demonstrated leadership
  • Business development efforts
  • Contribution to firm culture
  • Mentoring junior lawyers
  • Financial performance and productivity

Evaluate Associate Performance

Promotion should reflect more time worked at the firm.

You should consider whether the associate:

  • Handles sophisticated matters independently.
  • Exercises sound judgment.
  • Is trusted by clients.
  • Receives work from partners without significant supervision.
  • Is recognized as a subject-matter resource.
  • Produces consistently excellent work product.

Consider Whether the Associate Develops or Has the Ability to Develop and Bring in Business.

Consider Leadership Contributions

Partnership involves leadership beyond practicing law.

Are associates involved in:

  • Mentoring associates
  • Training lawyers
  • Managing matters efficiently
  • Committee participation
  • Recruiting lawyers and staff
  • Staff management

Review Financial Performance

Relevant performance criteria:

  • Billable hours
  • Billing and Collection Realization
  • Effective Rates
  • Collections
  • Profitability of matters

Client Satisfaction 

  • Internal Client Satisfaction Surveys
  • Google Reviews

Determine Role in Firm Management

  • Can non-equity partners vote?
  • Can they serve on committees?
  • Can they supervise associates?
  • Can they sign engagement letters?
  • Are they eligible for management positions?
  • Are they included in strategic planning?

Consider Developing Non-Equity Partner Compensation System

The firm should consider a different compensation system for non-equity partners. Approaches might consider the following:

  • Fixed salary
  • Salary plus performance bonus
  • Formula-based compensation
  • Delegation bonus to based on matter responsibility collections in addition to working attorney collections.
  • Merit-based annual adjustments
  • Incentives tied to business development
  • Leadership bonuses

Consider Additional Perks 

  • Consider providing them with additional perks.
  • Additional life insurance.
  • Country or other club membership.
  • Firm paid automobile.
  • Gas card.
  • Firm credit card.

Conduct a Comprehensive Performance Review

An effective evaluation typically includes:

  • Practice group leader assessment
  • Managing partner evaluation
  • Peer input
  • Client feedback (where appropriate)
  • Financial analysis
  • Review of leadership contributions
  • Partnership committee recommendation
  • Final partner vote

A structured process promotes fairness and consistency.

Announce Non-Equity Partner Promotions Internally and Externally

  • Issue press releases announcing their promotion to partner to the local media.
  • Mail out announcements announcing their promotion to partner to clients, past clients, other lawyers and law firms, judges, referral sources, and family and friends of the new partners.
  • List them as partners on the firm’s website, letterhead, and other promotional materials.
  • Announce the promotion internally.
  • Notify key clients personally.
  • Update marketing materials.
  • Celebrate the achievement within the firm.

Common Pitfalls with Non-Equity Partnership Programs

  • Promoting solely based on time at the firm.
  • Inconsistency
  • Failing to define expectations after promotion.
  • Confusing non-equity partnership with equity partnership.
  • Ignoring leadership and business development capabilities.
  • Providing the title without meaningful responsibilities.
  • Failing to give constructive feedback to unsuccessful candidates.

A thoughtful attorney career advancement program (partner track) improves the odds of success for both the attorney and the law firm. It recognizes professional achievement while ensuring that new non-equity partners support the firm’s long-term success.

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John W. Olmstead, MBA, Ph.D, CMC

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