The 2025 Am Law 100 survey results are out and they show dramatic changes in how BigLaw is structured and operated. These changes are so transformative that the reasonable expectations of lawyers, based on the previous reality, may be unfulfilled. Those lawyers may end up believing that the promises made to them in law school and as junior lawyers have been broken.
According to Jae Um, ALM’s Chief Growth Officer and Head of Knowledge*:
“For most of its existence, the social compacts at the heart of the law firm were straightforward: time and talent were rewarded with partnership, and partnership was for life. Internally, loyalty, stability, and shared governance defined the culture. Externally, the name, clientele, and prestige of the firm remained inextricably intertwined.“These once-durable compacts have fallen into non-binding backstory, the stuff of nostalgia. Now, firms now operate with different protocols across every layer and facet of the organization.”
The new reality may require a change in the promises firms make to junior lawyers joining their firms both out of law school and laterally.
Will there be equity in their futures?
One of the big changes in the structure of BigLaw is that, in 2024, the number of non-equity partners outstripped the number of equity partners for the first time. Only about a dozen of the AMLaw100 firms still have a single-tier partnership. In firms with multi-level partnerships, admission to the equity tier is strictly limited to the biggest rainmakers in order to maximize the profits per equity partner.
No longer does many years of hard work producing prodigious hours of excellent legal work guarantee a shot at equity partnership. “For associates, promotion tracks have splintered behind a fog of opacity. Client teams, secondment roles, contract lawyers, and AI-enabled workflows further complicate what it means to build a career within a firm.” Last year’s new non-equity partners came both from internal promotion and lateral hiring.
How does this affect compensation?
BigLaw is a very long way from the lockstep system of the past. “Compensation has completely fragmented, with wide pay bands even among peer firms, performance bonuses tied to varied metrics, and lateral offers regularly used to reset compensation by means of exceptions.”
Equity partners are earning more than three times what their non-equity colleagues are earning on average, according to the MLA 2024 Partner Compensation Survey. Furthermore, firms are less shy about de-equitizing partners, redistributing partnership points, or reducing compensation if a partner’s production is less than anticipated. Partners now expect some volatility in their compensation over time, with the real possibility of moving up or down in any given year rather than in an unbroken upward trajectory. Recent statistics show that 10-30% of BigLaw partners’ compensation decreases in any given year. Also, if a particular partner’s compensation is reduced for one or two years, it doesn’t necessarily mean that the partner is out of favor and needs to leave the firm.
How is lateral partner movement affecting compensation?
“Today, the pure lockstep firm is an endangered species, and the walls of partnership in every Am Law 100 firm are more porous than ever before.” The revolving door of rainmaking partner movement with their outsized and ever-increasing compensation packages, including guarantees and performance incentives, has irreparably damaged the lockstep model.
To compete in the lateral market, rather than distributing all (or almost all) profits to the partners as was typical in the past, firms hang onto cash. They need “dry powder” on hand for the generous compensation packages required to land partners and groups when the opportunities arise, the timing of which usually is unexpected. Firms also use some of that withheld cash as a partner discretionary bonus pool to reward individual partners for unexpectedly good years.
What will law firms look like structurally? What’s happened to leverage?
The pyramid-shaped law firm with a base consisting of large associate classes, topped by smaller layers of fewer senior counsel and non-equity partners, with even fewer equity partners at the very top, is becoming a thing of the past. “The pyramid structure carries an implicit expectation of continued growth. Beyond the number of bodies within the firm, the pyramid requires either an engine to command steady and growing demand to keep those bodies and brains occupied—or the management discipline to move junior talent up or out.”
Over the past few years, technology/AI and lateral movement have contributed to the accelerated change in leverage models. We now see barrel, hourglass, or diamond shaped firm structures. (No particular shape determines the success of the firm, however.) Consequently, “titles mean less and less—and every firm must clarify responsibilities and rewards for every tier of the organization.”
What does it mean to be a partner, anyway?
As firms continue to grow, it becomes nearly impossible to achieve consensus among the expanding number of partners. Decision-making power is necessarily becoming increasingly concentrated in a smaller percentage of the managing structure rather than in the partnership as a whole. And, with de-equitization and escalating partner and group lateral movement, equity partnership no longer is “for life.” With little opportunity for equity or management input and the revolving door among partners, the historical meaning of BigLaw partnership holds little weight.
Is it time for a new social contract?
Despite these tectonic shifts, as a matter of professional development and building and maintaining a pipeline of talent and firm growth, it remains necessary to send the message to associates that it indeed is possible to achieve equity partnership in the firm and that partnership means something of value. But the message must reflect the new reality, which will continue to change, and seemingly at ever-increasing speed.
* All quotes in this post are from “Power Ranking the Am Law 100: Edge of Chaos” by Jae Um.
