Switching to Two-Tier? Right or Wrong, Be Candid

Some reader emails are more provocative than others, and today we have one from the first category.  Actually, we have this from a few days ago and I've been sitting on it while I contemplated how to handle it. 

The sender, writing "on his own time" from a cloaked email account, expressly gave me permission to "do with this what you would like," but also insisted on anonymity based on his ongoing association with an AmLaw 200 firm—indeed, I couldn't reveal his identity if I wanted to since I'm as much in the dark as you, dear readers.

While posting something from an unidentified and unidentifiable source gives me pause, I decided to put excerpts from it up, with my commentary interleaved, since I think it reflects a powerful—though I hope minority—point of view. 

And they're off!

The email refers to my recent post on going two-tier, "Will The Real Rationale Please Stand Up?" and it is essentially an argument that:

"the partnership is an economic beast, and it responds primarily - even exclusively - to economic motives. Regardless of the ex post facto rationalizations that are put into place, I am deeply skeptical of any "human" motivations for something which is most easily characterized as an economic decision."

Our correspondent adduces as evidence the case of a large Texas-based firm:  "The switch from 1-tier to 2-tier partnerships is frequently secret until it is sprung upon the associates - or even the new "partners."" And while he admits that "of course the factors demonstrated in these exchanges may not be replicated elsewhere, we all know that the singular of data is anecdote."

Now it starts to get juicy, and if nothing else this reveals the passions below the surface:

"Several law students who had been summer associates this year noted the contradictory stories told them over the summer by several prominent people in the firm: 'What most people here know... is that they told us clerks a totally different story over the summer. In the partnership retreat they told us that the culture there would never allow a non-equity track. It had been proposed and soundly rejected, never going to happen, no way.  [This from the head of the Dallas office and the recruiting partner.] [...]

"As far as I'm concerned, [the firm] is dishonest and should be avoided."

Assuming these comments honestly reflect the way summer associates felt they had been dealt with, is it simply indefensible for the firm to have acted with apparent dishonesty in their approach to the change?    I think our correspondent gets it about right:   "While it is highly likely that the managing partners were in some way constrained from revealing the impending switch, we all know that there are many ways to give a satisfactory non-responsive answer."

Once the change was out in the open, however, the interesting question becomes how the firm characterized the rationale for it internally.  Again I quote:

"If the reason for the change was, as indicated in the poll, to "retain valuable associates", to "additionally evaluate" people, or to provide for an "alternate lifestyle," any one of those things could have been marketed as the reason for the change.

"While some would be unhappy with the change, others would rationally choose the "lifestyle," or be happy with the additional chance(s) for equity status which the tier-2 status provided. Notice that none of the themes listed above were given any billing at all. This would suggest that those themes are either inapplicable in this case, or that those who are in the trenches would not find them credible."

Whether or not the firm can be accused of botching its efforts to get the word out with a positive thrust, it certainly reaped criticism for the switch. 

But our correspondent makes a more intriguing point, and it relates to "the fact that the non-equity partnership was made universal."

On the premise that "rational action - economics - is about choice, [then] it is believable that some people would opt for tier 2 status for a variety of reasons, be they personal, a lack of other opportunities, a way of preserving some relationships, etc. However, you cannot make a change mandatory and then defend it on the basis that some people might have rationally made that choice."

He believes that the universal, mandatory imposition of the non-equity interregnum prior to consideration for full equity status "indicates that the PPP rationale is correct: People were angry because the "cost" of partnership suddenly went up. [The firm] pulled a bait-and-switch."

Finally, he concludes with another admitted anecdote about an associate at the same firm who landed "a major new client" while still two years away from partnership.  The firm reacted with a "surprise announcement" that they were shortening the partnership track by one year, whereupon the lucky associate made partner six months later (and is still at the firm, apparently).  Quietly, the track was moved back to eight years a bit later.  Obviously, the firm benefited economically from "capturing" the associate with the big client; but shall we draw from such behavior an inference of venality? 

For my money, the most serious charge that can be leveled at such a firm—and stick—is one of hypocrisy and willing denial of or refusal to be remotely self-aware.

But the problem is, in dealing with a partnership where trust is the sine qua non, "hypocrisy" and "denial" can be career-ending injuries.  And certainly our Texas firm has poisoned its own well, at least in the eyes of those quoted here.  While I don't want to invest 100% credibility in anonymous complaints about changes deleterious to the complainer (and some people will of course complain even about salubrious changes—they just can't stand change), this firm is certainly playing with fire not to have a candid, engaged, thoughtful, respectful dialogue internally about such a pivotal decision as introducing a non-equity tier.

Switch or don't switch; just don't prevaricate or contradict yourself.