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As business leaders across the nation begin to explore employee ownership structures, one principal reflects on whether such an approach would be applicable to law firms.
Speaking on a recent episode of The Boutique Lawyer Show, Melanie Heffernan, the principal of South East Lawyers, addressed the feasibility of implementing an employee ownership structure within the legal profession.
Heffernan indicated that this “cutting-edge” structure is still in the beginning stages of adoption within Australia, noting that, to date, there are “only two businesses operating in this type of employee ownership structure”.
However, she shared that this model is “prevalent across the world” and well established in countries like the UK, Canada, the USA, and India.
Heffernan explained that employee ownership represents a “different way” of business operations and the distribution of profits, wherein profits are allocated among a broader range of stakeholders instead of exclusively confined to “just the management team or the ownership team”.
The implementation of this model, Heffernan expressed, has “amazing potential” and allows the “average employees” to enhance their skills for the benefit of both “the team and also themselves”.
While such a model offers significant advantages for businesses, Heffernan indicated that its successful implementation within law firms necessitates a strategic approach to recruitment.
“You have to have the right people in your business to make this sort of change [in implementing the employee ownership model] because it is such a change from how we generally operate business in Australia,” she said.
Heffernan shared that this is the case as this structure demands a workforce that is not just content with a nine-to-five job but is passionate about “improving themselves and being involved in business operations”.
She recognised that such a structure may not be suitable for all law firms, as it has the potential to “breed dissension within the business if people are not pulling their weight”.
Beyond recruitment efforts, Heffernan posits that if the government introduces the “right taxation strategies”, it would enhance the appeal of law firms to implement an employee ownership structure within their practice.
However, the challenge of introducing employee ownership, Heffernan explained, is encompassed by the deeply “ingrained” hierarchy that exists in law firms.
“It would take some really bold law firms to implement this structure for themselves because it really is ingrained in the legal industry that partners are at this level, law clerks are at this level, and receptionists are at this level. That hierarchy is very difficult to displace,” she said.
Heffernan explained that for many lawyers, the concept of sharing profits with staff may appear counterintuitive. Nevertheless, she posits that some firm owners will transcend this perspective and acknowledge the advantageous outcomes that such an approach can yield for a business.
“A lot of lawyers will look at it through the paradigm of, well, why would I share my profit with my staff when I could have it for myself? But there, hopefully, will be some forward-thinking people who look at it and say, well, actually for the betterment of the practice, and it might be more profitable if people buy into this concept in a collective sense,” she said.
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