«The new doings»: partnership relations and their evolution

Rubric: Uncategorized

How partnership relations among Ukrainian law firms evolve — we have discussed, and Alexey Nasadyuk has recorded («Legal Practice» № 16-852). I thank him for that, and colleagues — for an interesting, lively and sincere discussion!

Law firms’ partners are sometimes called their main assets; and a partnership formula – a basis for sustainability. In this case, both, in international grandees and in local law firms, partnership systems undergo a significant change, even a complete reloading. The recent years’ tendencies in the development of law firms’ partnerships have been the subject for a moderated discussion within an X Forum of the Ukraine Lawyers’ Association «Development of Legal Services in Ukraine-2014». Eugene Kubko (Senior Partner of the International Association «Squire Sanders — Salkom»), Nikolay Stetsenko (Managing Partner of Avellum Partners Law Firm) and Armen Khachaturyan (Senior Partner of Asters Law Firm) took part in the discussion;  the moderator was  Iryna Nikitina, an independent business consultant.

«The matured» partnerships are looking for new recipes with proven ingredients; the younger ones are boldly experimenting with new components in the distribution of partnership roles», — said Ms. Nikitina, having outlined the parameters for discussion.

Armen Khachaturyan’s speech set the tone for the discussion. Coincidentally, a month earlier in the «Asters» there were major changes in the partnership — five senior lawyers and advisers were promoted to the status of partners. The promotion was accompanied by the inevitable revision of approaches to forming partnerships and even by the revision of partnership formula, which, according to Mr. Khachaturyan, had shifted from the classic lockstep towards the merit based.

The reloading of partnership relations, according to Armen Khachaturyan, could be a result of evolution processes (in-firm upraising of partners), as well as, revolutionary processes and democratization of partnership.

Often it is associated with the expansion of partnership. «Firms need partners and leaders. Everything must not be concentrated on a few key figures. Any development should occur not only qualitatively, but also quantitatively», — said the speaker. In addition, he spoke about the transformation of inter-partnership,which implies a certain revision of distribution of administrative and legal functions and profit; study of synergy effect, which should occur during partnership reloading; and also study of psychological aspects of a renewed partnership.

Nikolay Stetsenko’s presentation was followed by a lively discussion of the systems for distribution of profits and responsibilities between partners. Mr. Stetsenko exemplified his own company’s partnership model, in which all partners are equal. According to him, this partnership formula is a kind of lockstep, used by law firms — parts of the Magic Circle, with the difference that in «Avellum Partners», which celebrates its fifth anniversary this year, there is only one level of partnership. Mr. Stetsenko had also informed about the dangers of the partnership formula «eat-what-you-kill», which increases the competition between the partners and could potentially unbalance the partnership.

Profit distribution system is inextricably linked to another actual partnership issue – namely, reality of partnership status, especially, for young partners. It is not a secret, in many cases the partner’s status is formal, and, in fact, such a «partner» is limited as in decision-making, as in participation in the distribution of profits, being the so-called salary partner. And in some LFs this situation persists for years. For Nikolay Stetsenko it is unacceptable, as he emphasized, only a lawyer, with the complete partnership functional, should be considered a partner. Oleg Makarov, Managing Partner of «Vasil Kisil and Partners», commenting on the issue, said that for a «business card» partnership it is acceptable as a temporary transition phase, which makes it possible to adapt a young partner to a new status. It was informed that the vast majority of lawyers, appointed by the firm’s partners in 2012, passed through this adjustment period quite quickly, and now they are full partners. At the same time, Mr. Makarov emphasized that young partners were actually limited to only one question — when decision were made about them.

Valery Papakul, partner of «Stepanovski, Papakul and Partners» (Minsk, Belarus), in his turn, spoke about their applied model of decision making – «checks and balances»:  out of five firm’s partners only two «name» partner have two votes each, i.e., a decision can be adopted, if it is supported by, at least, one of the «name» partners. Iryna Nikitina called this formula as a classic example of «a tailored-for-yourself suit» partnership.

Armen Khachaturyan, speaking about the full and formal partnership, drew attention to two aspects: readiness of partners-owners to expand their range; and, to proper understanding of equality. As an example, he cited the UN General Assembly — formally all states are equal, but no one would argue that the «weight», for example, of the UK is equal in opportunities with some Pacific island nation. Likewise, in partnership — each partner has its own unique characteristics and propensities, determined by its role in partnership.

Mr. Khachaturyan was sure that everything can be solved by compromise, internal contract, there is no perfect partner. «Being a pioneer in the market — it does not mean establishing a company at the beginning, when the market is just being formed. Being a pioneer — means continually show an example», — said the moderator, giving a floor to Eugene Kubko, who had analyzed the transformation of partnerships in the globalizing world. As you know, last fall, an International Association of Law Firms «Salkom» and «Squire Sanders» was created. «We do not give credit to the globalization, or perhaps just think less about it, but we should not turn a blind eye on that. Trends are that there will appear associations like ours. International law firms having their own specific experience in standards of working with client and internal rules (including the principles of partnership), will be forced to work with local law firms, and as one team», — said Mr. Kubko.

Cooperation between two firms was formalized after many years of successful collaboration and was a logical response to the challenges of time and customer inquiries have mutually reinforced both law firms; while leaving them a certain amount of autonomy and self-identity.

In the Ukrainian legal market this association has no analogues, and it is not as common in the world. Mr. Kubko had also shared his vision of philosophy and values of ​​partnership. He had noted, in particular, that partnership is the subject to certain laws, based on performance goals. If the LF’s goal is to make a profit, then, the whole partnership is focused on achieving this goal, explained Mr. Kubko, having added that the firms, aimed at making profit, often become very successful, but after achieving that, the firm’s problems begin.

What is more, crises arise in law firms at regular intervals (6-7 years). Task, or even talent of firm’s partners, is to orient and understand: what is needed, how it should work, and what should be the targeted direction of the partnership. Mr. Kubko also recommended not treating partnership only as business: «Partnership — this is life. We spend a significant part of our time in the office, and one cannot consider the work, partnership, solely as means of making money».