In this Texas Lawyer article, MS Legal Search founder explains that smaller partnership classes should not affect firms’ long-term viability.
BigTex Firms Make Fewer Partners for Second Year in a Row
By Jeanne Graham and Brenda Sapino Jeffreys
Texas Lawyer
March 30, 2009
For the second year in a row, the largest Texas firms elected few new partners in Texas.
At first blush, that 10 percent drop following a 20 percent decline in 2008 sounds reasonable, considering the nation’s financial crisis, the precipitous drop in the stock market and the price of a barrel of crude oil, and recent BigTex lawyer and staff layoffs.
But lawyers at many of the firms say the troubled economy had little bearing on the shrinking ranks of new partners. For the most part, the number of partner promotions is squarely a function of the number of lawyers up for partnership and whether they meet the firms’ qualifications, the lawyers say.
“You don’t look at current economic situations as much as the long-term strength of the firm,” says Joseph Dilg, managing parter of 775-lawyer Vinson & Elkins in Houston, which elected five new Texas partners in 2009.
That’s even the case at 278-lawyer Winstead of Dallas. The firm confirmed earlier this month that it laid off an unspecified number of lawyer and staff for economic reasons and canceled its summer associate program. But it promoted eight Texas associates to shareholder in 2009, compared to only one the previous year.
“Some of them are just ready, and they’ve made terrific contributions to the law firm. We have subjective criteria that include just very, very good lawyers who are binding clients to teh firm, that are involved in all of the types of activities we want them involved in, and are first-chair lawyers. We have the hopes they will continue to contribute,” says Denis Braham, chairman and chief executive officer of the firm.
Even though there was a business- as-usual aspect to the new partner and shareholder promotions this year at BigTex firms – 22 of Texas’ 25 largest firms elected 99 new partners – related charts reveal some interesting nuggets of information:
•Dallas firm Locke Lord Bissell & Liddell elected four new minority partners in Texas in 2009, more than any other firm on the list, and the firm has elected at least one new minority partner in Texas for each of the past four years.
• The largest number of new partners in 2009 graduated from the University of Texas School of Law, and litigation is the No. 1 practice area for new partners.
• The partnership track at the BigTex firms that responded to Texas Lawyer ‘s annual New Partners Survey ranges from 7.5 to 11.5 years since graduation, a time range that’s consistent with last year. The six large firms that elect associates to partner after only seven years of experience include Dallas firms Jackson Walker, Strasburger & Price, Thompson, Coe, Cousins & Irons, Thompson & Knight and Winstead; and Austin-based Brown McCarroll. [See related charts: New partners in 2009, practice areas, law schools, graduation years and partnership tracks for new Texas partners.]
The 22 large firms in the charts are listed on Texas Lawyer ‘s “The Texas 100” poster published on April 28, 2008. The 22 firms elected 10 percent fewer Texas lawyers to partnership for this year when compared with the 110 lawyers elected by the same firms for 2008. Three of the 25 firms — Gardere Wynne Sewell, Hunton & Williams, and Munsch Hardt Kopf & Harr — announce 2009 partners or shareholders after presstime on March 26. Twelve of the firms elected fewer partners in 2009 than they did the previous year, while eight firms elected more partners and two firms elected the same number.
While the uncertain economy may not have had an overwhelming effect on the number of Texas lawyers elected partner for 2009, it did affect one aspect of the evaluation process at Jackson Walker of Dallas, says T. Michael Wilson, managing partner of the 343-lawyer firm. Typically, an associate must have demonstrated a continuing ability to bill 1,950 hours or more per year, he says, but some of the associates who were up for partner this year “fell below that mark” due to the economic collapse last fall, Wilson says.
“These were associates who had been with us for seven-and-a half years, and for seven years delivered partner-track solid performance, and then through no fault of their own, they got hit by the bus last fall like everybody else, with a downturn in hours,” he says.
Wilson says the firm made an exception for those associates and waived the minimum hours usually required for partnership. “It just seemed fundamentally unfair to us, for someone to have got to the goal line, and not be elected to partnership because of what happened in October, November and December,” he says.
Among the large firms, Jackson Walker elected the greatest number to partnership — 14, a 75 percent increase compared to the number of partners elected in 2008. The firm has an unusually high number of new partners because the group includes seven lawyers who joined the firm laterally in 2008 or 2007 as senior counsel with seven‐plus years of experience, Wilson says.
Firms posting large declines in the number of new Texas partners in 2009 include Baker Botts, which named six this year compared to 12 in 2008, and Bracewell & Giuliani, which elected two for 2009, a 77.8 percent decrease from the nine new Texas partners elected last year.
Bracewell managing partner Mark C. Evans says the firm had fewer lawyers up for partnership review in Texas this year and notes that the firm elected five new partners for 2009 in New York.
At Baker Botts, Stephen Massad, chairman of the firm’s admissions information committee, says, “I don’t think there is any significance you can attach to that number.” Massad, a partner in Houston, says the number of new partners varies from year to year.
From the Outside
Legal recruiters are dependent on the ebb and flow of hiring in the legal industry, so they often have an early perspective on industry trends. Five recruiters working the Texas market say several variables can determine the size of a partnership class when compared with the previous year’s class, but they suggest the slowing economy did impact 2009 partnership elections to some degree.
“Many factors play into why a firm or group of firms would elect fewer partners in any one year,” says Lee Allbritton, a founding partner in Amicus Search group in Austin. “It could be the firm is trying to preserve leverage and profits per partner, and making more partners tends to dilute that. It could mean that there frankly weren’t as many candidates in a given year. It could be that an inordinate number of candidates were in practice areas that have been weak in recent years so their numbers did not justify promotion to partnership.”
Smaller partnership classes make business sense in a slower economy, says Elaine Makris Williams, founder of MS Legal Search in Houston. “There is less business and fewer deals, so there is less work and therefore fewer profits. You don’t want to invite people into the partnership when there is less money to go around.”
But Makris says decreasing the size of a new partner class for one year will not have a long-term impact on a firm. “So many firms have structured their partnership class to allow more flexibility,” she says. Lawyers may be at their seventh, eighth or ninth year, but not be invited into the partnership for another year depending on the lawyer’s business, the firm’s business, the economy and the lawyer’s billable hours, Makris says. “So it is not unusual to have someone considered and then reconsidered for partnership,” she says.
Stephen Mims, executive director in Houston, Dallas and Austin for Prescott, says he doesn’t expect firms to suffer over the long haul from a decline in new partner promotions this year and last. “It depends on the business level of the firm, the level of practice, the kind of clients they have. It could mean they are scaling their leadership structure to fit that model,” he says.
Mims says the economy may have more of an effect in 2009 on new partner elections if slow areas of business don’t rebound. Firms will be more selective, he says, although not necessarily make fewer new partners.
“They will not take a chance on someone who is not ready to be a partner in the true sense of the word,” he says.
It’s too early to know whether the decline in the number of lawyers elected to partnership in Texas is a trend, says Linda R. Katz, a recruiter with Pye Legal Group in Houston. “It stands to reason that if firms are struggling they will make smaller classes of partners. Whether this is a permanent or temporary trend, time will tell.”
Fewer Minority Partners
Minorities comprise 8.1 percent of the new Texas partners at Texas’ largest firms, down from 18 percent of those elected in 2008. As of Dec. 31, 2008, minorities comprise 15 percent of the 75,085 in-state lawyers licensed by the State Bar of Texas, according to Bar spokeswoman Kim Davey. Minority lawyers made up 8.9 percent and 12.8 percent of the new partners at 23 of the state’s 25 largest firms in 2007 and 2006, respectively.
Locke Lord elected four new Texas minority partners — the largest number of minority partners among the big firms that responded to the survey. Unlike most of the large firms, Locke Lord consistently has added at least one minority to the firm’s partnership for the past few years.
“Diversity has been on our agenda in this firm for a long time,” says Jerry Clements, chairwoman of the 693-lawyer firm that has 404 lawyers in Texas. “[W]e’ve had a diversity committee at this firm since 1991, a quite bit earlier than most firms started finding it being in vogue to have diversity committees. As a result of that early focus on diversity, we are continuing to reap the wonderful benefits of having given it attention early on. To that extent, I think we are ahead of the curve.
Newly minted litigation partner Jesus Garcia says he was attracted to what is now Locke Lord because of an environment that encouraged a level playing field for all associates. Garcia, a 2000 graduate of the University of Houston Law Center, had been a 1L and 2L summer associate at Liddell, Sapp, Zivley, Hill & LaBoon. (In January 1999, Houston’s Liddell, Sapp merged with Dallas’ Locke Purnell Rain Harrell to form Locke Liddell & Sapp. In October 2007, Locke Liddell & Sapp merged with Chicago’s Lord, Bissell & Brook to form Locke Lord.)
Garcia says he was a summer associate with two other large Houston firms, which he declines to name, but selected Locke Lord as the best place to begin his full-time legal career because he got the sense it would treat minority laywers fairly.
“There wasn’t going to be any favoritism to anyone that started as a brand-new lawyer. I was going to be afforded the same opportunity that everyone else was going to be afforded in my class. That is all you can for as a baby lawyer when you’re first getting started,” he says.
Then and Now
Today, compared to as many as 30 years ago, Texas firms have a longer partnership track and a much greater expectation that new partners have the ability to bring in business.
But other than that, there’s not much of a difference in the expectations for making partner, says Lawrence Hicks Jr., administrative partner in Thompson & Knight, who made partner in 1976 after five years at his firm.
He says the primary difference is the longer track, which is necessary because associates take longer to develop their skills. For instance, it’s harder for today’s trial lawyers to get courtroom experience, and deals are much larger than in the 1970s, so it’s more difficult for a young transactional lawyer to run a deal.
Dilg, V&E’s managing partner who made partner in 1983, says firms expect their new partners to have the potential to bring in business and manage clients, but that wasn’t high on the list 25 years ago when firms had many more institutional clients.
Charles “Chip” Babcock says he was the 39th lawyer to join Jackson Walker in 1978. Babcock graduated from Boston University School of Law in 1976 and then worked for two years as a judicial clerk for Judge Robert Porter of the U.S. District Court for the Northern District of Texas. With credit for his judicial clerkship, Babcock made partner five years after joining the firm. Babcock offices in Houston and Dallas.
The biggest change in being a new partner today versus the 1970s is the competition to develop new business, Babcock says. “I think business generation was important, but not nearly as important as it is today,” he says.
“I think that back in the 1970s in Dallas the city was under‐lawyered, if you can possibly believe there was such a time.” There was more than enough legal business for everybody, he says. “Nobody ever worried if the phone would ring because the phone always rang,” he says.
Newly elected Jackson Walker partner Daniel Scardino, a 2001 graduate of Tulane Law School in New Orleans, already has experienced the ups and downs created by changing business cycles.
The firm hired Scardino after his summer associate stint in 2000, during the peak of the Internet bubble, he says. “They hired me to do IP transactions and technology deals,” Scardino says. “When I showed up in the fall of 2001, there wasn’t much of that work. I quickly took on some IP litigation matters, with help from senior litigators, and found my way around the courtroom and found that I enjoyed it.”
Despite the current global economic downturn, Scardino says he expects to continue to grow his practice because of the IP work in Austin. He also does entertainment and media law, which is countercyclical, he says. “During economic slowdowns people spend more money on entertainment, such as going to movies and buying music,” he says. “So we’re seeing more entertainment types of deals coming to the firm — acquisitions, content changes, and people interested in backing movies and television productions.”
Scardino was invited to join the partnership about seven years after graduating from law school. He says he builds his business through networking; using existing clients to find new clients, helping other attorneys in his office who may have clients with IP matters, and getting involved in community activities. He has been a board member or adviser to several local entertainment‐oriented nonprofits such as Public Access Community Television and the Austin Music Foundation.
But more importantly, to generate business a lawyer has to stay abreast of industry changes that impact clients and has to stay current on case law that develops in his practice area, he says. “The most important thing, I think, is being on top of your game as a lawyer.”