Male dominance of law firm ownership soon to become more balanced

Women are set to ‘break the glass ceiling’ into legal firm partnership in far greater numbers in the near future, according to a recent survey of Auckland law firms.

The bi-annual Moore Markhams legal financial performance survey report has just been released and its author, accountant and business advisor Sam Bassett, says that while the number of women as full equity partners is still imbalanced, the growth in firms incorporating non-equity partners has seen a far more even mix of males and females.

“While the equity partnership ratio of 75 percent male to 25 percent female seems to confirm that legal firm ownership is still a man’s world, the split of 52 percent male to 47 percent female non equity partners (NEPs) indicates that this is set to change in the immediate future,” Bassett says.

Firms have been embracing NEPs significantly more over the past three to four years and Bassett says the survey results indicate that firms that are doing so are becoming more successful in terms of profitability.

“Younger partners bring with them fresh energy and new determination to succeed, and often a new way of doing things,” Bassett says.

“Young solicitors in their late 20s or so need very little in terms of overheads costs. They don’t need much secretarial assistance, they do their own research, and as touch typists they take their own instructions and process their own notes. This has direct impact on staffing costs, which in turn improves profitability.”

The top five firms ranked by profitability per equity partner had two or three equity partners and four had one to three NEPs. Eight of the top 10 performing firms employed NEPs.

NEPs are generally secured through a lock-step commitment that provides surety for succession planning.

“Firms that have committed early to this lock-step commitment are reaping the rewards of an overall increase in equity partner earnings and growth in the firm.

“It’s a structure that allows firms to retain good young performers who can see a tangible way to gain a slice of the action through full equity ownership in a relatively short time. It stops them from scampering off to another firm chasing extra salary or moving to a commercial business. For the equity partners it provides a clearer path to a remunerated retirement, often at an earlier age than in the past.”

Another consistent feature in ongoing success for firms was the engagement of practice managers. Over 75 percent of the participants employ one, and all top 10 performing firms do so.

“Practice managers increase firm efficiency by focusing on operations and freeing partners to focus on business growth, which again has a direct impact on profitability,” says Bassett.

An initiative of a legal industry business development unit of the chartered accountancy group, the regular Moore Markhams survey (previously Moore Stephens Markhams), conducted in the Auckland marketplace, covers topics such as practice profitability, efficiency, work type, hours, salary comparisons, and professional indemnity insurance.
 
The survey report and accompanying data is available for a fee of $575 (Incl GST) and copies can be sourced from Sam Bassett.