Hybrid partnerships becoming more popular at law firms with pricey buy-ins
Recruiters told Law.com that many law firms have gradations of hybrid partners who receive 10% to 40% of their compensation from their equity partnership share. Image from Shutterstock.
Hybrid partnerships are becoming more popular, particularly at law firms where the cost of becoming a full equity partner has increased significantly over the last few years.
Hybrid partners are partial equity partners who receive some income from equity and some from a fixed paycheck, Law.com explains.
The practice “certainly helps partners feel like they have skin in the game with the firm,” said Erin Sears, vice president of the partner practice at the Garrison legal search firm, in an interview with Law.com.
Recruiters told Law.com that many firms have gradations of hybrid partners who receive 10% to 40% of their compensation from their equity partnership share. The practice allows hybrid partners to grow the share of their equity income over time.
One firm that has adopted a hybrid system is Sidley Austin, which told Law.com earlier this year that its partner compensation system is based on percentages of equity, rather than a system divided between equity and nonequity partners.
Firms with hybrid partnerships don’t fit neatly into American Lawyer categories when the publication asks whether they have a single-tier partnership or a partnership with two tiers—one for equity partners and one for income partners. Under American Lawyer definitions, equity partners must receive at least half their income from equity. Nonequity partners receive more than half their income on a fixed basis.
That definition may explain why some firms identify two tiers of partners in the American Lawyer survey but are listed with just one equity tier by the National Association for Law Placement. Having partial equity partners who make less than half their income from equity helps “maximize the metric of profits per equity partner, calculated as a firm’s net income divided by the total count of equity partners,” Law.com explains.
Above the Law made a similar point in a 2014 column reporting on “a new game that law firms play.” If every partner who had even a small equity share were considered an equity partner, profits per partner would be lower. Keeping hybrid partners below 50% equity allows a firm to move up in the rankings for profits per partner.
It would be more accurate to identify three partnership tiers starting with income partners, then hybrid partners and then full equity partners, said Dan Binstock, a partner recruiter with Garrison, in an interview with Law.com.
“Nonequity encompasses too many different contexts right now and is too vague a term,” he said.
