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Open partnership: an inside look

In recent times, a number of relatively small, boutique-type firms have sprung up on the Russian market for legal services – firms created by specialists with professional experience working at larger companies. In just a few short years, these young firms have managed to gain recognition from their industry colleagues and claim a worthy spot on both international ratings and service directories. But what’s the secret to their success? What’s their approach to internal management? What distinguishes them from firms that have been operating in the legal-services sector for many years?..

We are continuing to publish our series of interviews with the partners of such young firms. The hero of the latest installment – Sergey Patrakeev, Partner of the Corporate and M&A practice at Lidings. Initially hired on as senior associate, Sergey’s impressive performance over his first year at the firm vaulted him to the position of counsel, and over the first three – to partner. What’s the secret behind such a meteoric career rise, and what do today’s young partners expect from modern partnership? Sergey sat down to tell us about all this and more on the eve of his speech at the IBA conference session entitled “Replacing the Irreplaceable: Management Change at Law Firms.”

Sergey Patrakeev

Partner of the Corporate and M&A Practice at the Moscow office of Lidings.

Previously worked as an attorney at Clifford Chance, Pavia e Ansaldo, Beiten Burkhardt, CMS Hasche Sigle, and at the head office of the Russian national telecommunications company Megafon.

Graduated from Kaliningrad State University with a major in jurisprudence, received his LL.M. degree at the University of Göttingen (Germany), earned his doctorate at the Max Planck Institute in Heidelberg (Germany). Highly-regarded expert in the Russian Life Sciences industry, boasts significant experience consulting leading pharmaceutical companies. Singled out on numerous occasions by the international ratings Chambers & Partners, IFLR 1000 and The Legal 500 EMEA as a leading specialist in the field of corporate law, well-versed on issues of pharmaceutical-industry regulation.

Sergey, you arrived at Lidings in 2011 in the position of senior associate, having already amassed professional experience working at a number of European law firms and one of the Magic Circle firms, and having served as in-house counsel for one of Russia’s Big Three mobile operators. What prompted you to make the career change, what nuances of working at Lidings first struck you as particularly distinct?

It truly would be fair to say that my career development has not taken a linear path: I’ve been able to try my hand at various forms of advancement within the legal profession. Through personal experience, I’ve had the chance to see how the role of consultant differs from that of in-house counsel.

What attracted me to Lidings, first and foremost, was their open and clearly-conveyed path to career advancement, as well as their mechanism for joining the firm’s partnership upon achievement of the performance indicators expected of candidates for the position of partner. Of course, the financial side of the equation also played its role: the linkage between an employee’s personal income and the firm’s financial indicators has been a powerful incentive for me.

Within one short year, you managed to rise to the position of in-house counsel, and by the beginning of 2014 – you had already become one of the firm’s partners. What was the driving force behind such remarkably-swift advancement?

I’m sure it won’t come as a revelation to anyone that partnership is predicated on the sum total of a number of different factors, including the mastery of a whole host of professional skills that tend to complement fundamental legal knowledge. My ascension to the ranks of partner was driven by the creation of a successful business case, which was in turn facilitated by the industrial specialization that I had developed in the field of pharmaceuticals, which happens to be one of the firm’s core practice areas. On top of that, the Russian market is currently experiencing the rapid expansion of legal regulation of the pharmaceutical industry. Over the few short years since my arrival at Lidings, its pharma client portfolio has seen a dramatic increase, and this has definitely had a positive impact on my advancement as the co-head of this particular practice area. Another key role in my progression has been played by the additional functionality of HR and business-process management – after all, any candidate for the position of partner is expected not only to handle client-related matters, but also to carry some of the administrative load in terms of firm management.

How did your duties and daily schedule change when you became partner?

The changes were really quite minimal – at least with respect to my daily work. When I received it, the status of partner was really a reflection of the current state of affairs – both in terms of professional skills and from the standpoint of marketing load. My further career development is mainly unfolding along the administrative track. For instance, I now spend a certain amount of time during the work week on partner meetings devoted not to ongoing client projects but to organizational and managerial issues, many of which are routine, but some of which involve matters that the firm is grappling with for the first time at this stage of its corporate development.

In connection with the sanctions, we’ve seen more and more junior and mid-level attorneys recently make the career shift from international law firms to Russian firms – something you did a few years ago. Please tell us, if you could, about the main challenges of adapting to such a new work environment.

I would hold off on formulating a general rule. The Moscow-based offices of law firms, whether Russian or international, are all very different across various criteria – in terms of staff numbers, for example. Or take another criterion: at some firms, the hierarchical pyramid is narrower at the top, while at others it’s exactly the reverse, with just one attorney for every 20 partners. So, adaptation challenges can arise in the case of any shift from one closed system to another. In my case, I would probably single out two characteristic differences that distinguish a Russian law firm from its international counterpart: less glamorous flair and more of a hands-on approach to the individual client.

Aside from financial incentive, what other factors would you say are decisive to an experienced attorney when making the decision to move from one firm to another?

There may be all sorts of motivational incentive. Certainly, factors such as firm reputation, client pool, and prospects for serious caliber improvement are all important. For the senior attorney or partner, also critical is the level of marketing support he can expect to be able to rely on during the process of practice development and client attraction. The employee should feel the firm’s readiness to invest in him; in our case, at issue is the work of the firm’s entire workforce, which is there to assist the attorney in his ongoing career growth and elevate his status within the broader professional community.

Also of tremendous significance is the infrastructure offered by the prospective employer. For example, the move of the Lidings office to Moscow City was the impetus for a qualitative leap in terms of development that solidified our status as an attractive employer. The firm’s creation of an atmosphere conducive to easy and effective business operations is equally valued by clients and employees alike.

How does the institution of partnership operate at Lidings?

We’ve had the lockstep system up and running for a few years now. It’s a system that launched virtually all of the law firms currently representing the market’s major, well-established players. Unfortunately, not all of these players have managed to maintain adherence to the system, but we continue to view it as a critical key to success. In essence, only lockstep is capable of sustaining a “living” partnership structure at an organization and effectively regulating relationships between partners, insofar as it represents a flexible approach to project work. You might even say that it’s a system geared towards fostering workforce loyalty.

The opponents of such an approach point to the risk of the dampening of the staff’s competitive incentive as one of its potential drawbacks, but we’ve managed to solve this problem by introducing an additional criterion: for partners up to grade 50, the incentive side, above and beyond lockstep, also includes a 20% bonus for the new projects they bring in (origination) and a 10% bonus for project management. If we’re talking about new partners arriving from other firms with their own business cases, reaching a certain grade also depends on the partner’s annual financial indicator. Performance evaluation is conducted on the basis of the first year’s cooperation results. Partners advancing within the firm are included in the system starting from grade 20, where the additional 20% for self-generated projects and 10% for management makes it possible to earn an income commensurate with that of higher-grade partners. Every year, everyone is advanced along in grade by a full 10 points (with today’s maximum score on the lockstep scale equal to 100).

What distinguishes the corporate culture at Lidings? What is the decision-making system like inside the firm?

More than anything else, Lidings stands out in terms of its openness to new people, ideas and practices. We’re not afraid to try other approaches or start something from the ground up. By the same token, we don’t force this model on each and every new employee. As a result, we’ve been able to build a team where everyone feels encouraged (and able) to express and champion their own ideas without worrying that it might run counter to the “general party line.” This is particularly helpful in terms of client work, the personal growth of our employees and maintaining a healthy overall psychological climate.

When it comes to decision-making, we’re guided by two overarching principles: openness and subsidiarity, the latter of which is important because far from every decision made within the firm requires a partner’s sanction. Everyone, at their own level, makes the decisions that fall within their scope of authority – with the understanding that they are accountable for these same decisions. The principle of openness basically means that everyone at the firm has a clear understanding of who is responsible for what. Moreover, all important decisions undergo a stage of discussion at the respective level: partnership decisions at the partner level, project-team decisions at the project-team level.

Is there any linkage between the profit-distribution and decision-making system, on the one hand, and the size of the company on the other? To what extent is your management model applicable to a much larger or smaller firm?

As far as the decision-making process is concerned, we’re already developing according to a doctrine that could accurately be referred to as a self-regulating system. It’s the same doctrine that’s been a great practical success at larger companies as well, and for this very reason, I don’t think we’ll be looking for any other decision-making model under implementation of the scenario we’ve mapped out for the firm’s further development.

With respect to profit distribution, lockstep is also the preferred approach at firms of different sizes. Consequently, the profit-distribution system depends not on the size of the organization but on the priorities of its founders. At Lidings, we’re geared towards motivating partnership candidates precisely through the prospect of direct participation in the profit generation and distribution process, as opposed to the simple lure of a raise.

Do the various ramifications of economic crisis have an impact on the institution of partnership? Must it somehow adapt in connection with the challenging political and economic situation currently confronting Russia?

Lidings partners really aren’t involved in the broader political or macroeconomic situation. We simply do our job – providing top-rate legal services. Of course, it’s always tempting to use the economic-crisis excuse to explain away in-house shortcomings or the adoption of unpopular measures, but that’s certainly not the issue in our case. We acknowledge the impact of the crisis, sure – but we also continue to scour it for the prospect of new opportunities.

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Open Partnership: 
an inside look