Berjis Desai, the 58-year-old managing partner of J. Sagar Associates (JSA), is set to retire in 22 months. Desai joined the law firm in 2003 from Udwadia, Udeshi and Berjis, and, together with J. Sagar, started what he claims was a unique experiment, laying down the basic principles of how to run the firm. Unlike some of its rivals, where the largest chunks of equity are held by family members or founders, J. Sagar bars family members’ entry into the firm; so if two lawyers at the firm get married to each other, one must resign.

The firm, which now has 325 lawyers and 33 equity partners, is also facing several other challenges, including the exit of Akshay Chudasama, one of the firm’s top rainmakers. In an interview, Desai discusses the firm’s future, and the opportunities and challenges it will face along the way.

It was only very late in his life that he properly met the eponymous founder of the firm, Jyoti Sagar, despite having opposed each other as legal advisors during the hostile takeover of Indian Aluminium Co. Ltd by the Vedanta Group, said Desai.

In 2002, a common friend introduced them and it was a meeting of minds, remembers Desai. “We somehow realized instantly that (we had) more or less the (same) ideas and vision of what we wanted to do and experiment with—this really truly democratic structure where people retire and no relatives are allowed in the firm, and (there is) true merit, etc."

“It may have sounded utopian, but the fact is that the firm will complete 25 years next year."

Despite the firm’s staying power, buoyed by some “terrific years for the Indian economy" according to Desai, that silver jubilee could prove to be the most important time in the firm’s history and future. “The experiment according to me has definitely been a success so far, but we always knew that the real challenge to the viability of the structure will come when both Jyoti and I are not partners."

Sagar retired on 1 April 2013, giving up his partnership and remaining 7% equity stake in the firm he founded in 1991 (bit.ly/1I4YXnQ).

Desai will transition to become joint managing partner by no later than 1 January 2016, and retire completely on 1 April 2017.

The JSA experiment, says Desai, only really started in 2002 after he and Sagar met, following which Desai joined the small firm led by Sagar from Delhi with a few lawyers in Mumbai. Desai joined from Udwadia, Udeshi and Berjis with a team of 16, including retained partner Somasekhar Sundaresan.

Sundaresan is now one of the highest paid partners at the firm.

“I am proud to say (when we) started in 2003, the combined equity percentage of Jyoti and me was 66%. When Jyoti retired, (our) combined equity was 13%. And today, my equity is only 6%. So, at least (with) this experiment, whatever it is, we have not followed the route of bankrolling ourselves to the grave but to play with this experiment."

“Some of our junior partners, depending on their assessment and evaluation, have earned and are earning more money than me. So today, somebody like Som (Sundaresan) or Amit Kapur earn much more than me. I don’t think at any other firm this would be accepted."

Akshay Chudasama was the third highest revenue-maker at JSA according to Desai, and took home as much profit as Desai. Chudasama, together with four JSA non-equity partners in his team, on Monday joined the new Mumbai office of Shardul Amarchand Mangaldas, the firm set up by Shardul Shroff after the split of Amarchand and Mangaldas and Suresh A. Shroff and Co.

When the departure became public, it sent shockwaves through the firm, but Desai, who says Chudasama is a “close personal friend" who will be missed, downplays the impact of Chudasama’s departure on revenue and profit. “He was very dynamic, his enthusiasm was very infectious, he used to galvanize people. An excellent marketing guy, and excellent rainmaker, his networking was very good, all that will be missed."

JSA is fairly unusual in India. It’s unlike most of its six largest rivals, where the largest chunks of equity are held by family members (Shardul Amarchand Mangaldas and Cyril Amarchand Mangaldas), founders or promoters (AZB and Partners and Luthra and Luthra), or founding partners (Trilegal, though the younger equity partners on the Trilegal lockstep can, year-by-year, rise to be on par with their older colleagues). At Khaitan and Co., the large founding family still holds a significant but not disproportionate minority equity.

As such, unlike firms where the majority of client relationships are concentrated with the promoters or founders, firms such as JSA are at a bigger risk of rainmakers leaving and taking some of their business with them. On the flip side, JSA’s structure can also make it more resilient to such churn.

Getting partnership remuneration right is one of the most important things for any law firm, says Desai.

Partners’ remuneration at JSA is completely fixed for three years, based on a variety of factors over a preceding three-year period. Desai explains, “Every three years, the compensation committee resets the equity percentages, depending upon the data for the last three years. So, it’s a backward-looking system. How you performed between 1 April 2014 and 31 March 2017 will determine your new equity percentages starting from (1 April) 2018. That’ll be fixed for three years."

According to Desai, partnership remuneration at JSA is competitive and is made up of a variety of factors. The most weightage—40-45%—is given to the revenue a partner and his/her team generates.

Every partner will also get additional points related to how well their practice area, including other partners, contributed to the bottom line of the firm, and points for assisting in management, brand building and internal training as well as a “subjective evaluation for what we call JSA values", says Desai.

The remainder includes “virtually a full 360" appraisal, including self- and peer-assessment, and a determination by an elected compensation committee. “We are trying to eliminate subjectivity here, because the more there is subjectivity you have, the more people are disgruntled. Particularly in a set-up like this, where Jyoti and I both will not be there."

Associates also get 8% of whatever they bill themselves, and retained partners take 12% of their personal billings, but it is not an eat-what-you-kill model (where every partner operates as a silo for profit purposes, which has the advantage of rewarding star performers but can result in a lack of cohesion among a firm’s partners). The profit JSA can offer its partners are competitive, argues Desai, though the exact formula will be tweaked slightly in the coming months.

“You have to pay a premium for the umbrella under which you work, the idea for which you work. Even if (one is) a star player, if he’s told to go out and perform and to run a firm, he will realize how difficult it is, he will recognize that. He may be a star player but he requires the umbrella of the firm, the brand equity of the firm, the people and resources and everything," he says.

“The day people realize they don’t require the umbrella of the firm and can start on their own a boutique firm or a boutique practice, obviously they will walk.

“This is the core challenge of how (to integrate) your individual aspirations and institution building. It is easy for Jyoti or for me to say, yes we genuinely want to build an institution and we want to leave a legacy behind, to be remembered, that yes, this was created as an experiment. But on a day-to-day basis, for the younger folks to realize, to place (this) over their individual ambitions and aspirations, it’s difficult for them, but that’s the whole thrill of the experiment."

JSA’s system has an inherent meritocracy and democracy, and variations thereof are the standard at international law and professional services firms that boast hundreds of partners. But culturally, it may not be the perfect fit, worries Desai.

“The Indian mindset, at times I feel, is happier to follow a dominant individual. Whether it’s a family, or whether it’s a dominant individual, they somehow feel happy to follow a father figure, whom either they trust or they love or they fear.

“But the idea of your own equal coming to power and going past you, I think Indians have still not accepted that idea, that somebody who was your peer until the other day, or junior, will become the managing partner.

“I think—again I can say without any doubt—as far as Indian law firms go, no one is closer to this experiment or model than us and, therefore, the challenge is obviously the greatest.

“If this Rubicon is crossed and this challenge is overcome, I see an absolutely terrific future for the firm. (With respect to) any dominant individuals in other firms, biology doesn’t respect individuals—one day people are going to perish and with them, the firm crumbles very fast.

“A firm with so many star players and with an institutionalized thing, the key man risk is of course minimized. But then there are other risks," says Desai.

People within JSA and without are concerned about the key man risk of life without him and Sagar, admits Desai. “Any change always causes some concern; what happens is that the main concern in everybody’s mind—I know this sounds terribly immodest—is what will happen in 2017, because then they see in their minds a void or a vacuum.

“So we have to come up with a credible structure. In the initial stages, it will not give 100% the same comfort, it would be silly to say (that), it won’t. But even if it gives 70% the same comfort to people—even managing partners—the critical word is trust. People should genuinely trust that he will do what is right, not only in terms of money, not do things like for his own ego, or his own aspirations, though there is nothing illegitimate about it that a person thinks about his own career and all."

“The next five years, or even maybe three years—from 2017 to 2020 are critical. If you successfully meet that challenge, I’m pretty sure that this will be a great institution, that will survive for several years."

Sagar has still been attending executive committee meetings from time to time, but he and Desai are both “gradually trying to recede into the background and let people make their decisions about various things", says Desai.

“All I’m going to do in 2017—for those two or three years critically—(will be to function) as a friend or philosopher guide, for no financial or monetary gain, but just because they are my friends and this is my institution, so to say. I will obviously lend a helping hand if there’s any crisis or any major issue, but not in day-to-day management."

Finding a successor who can shoulder that burden and be accepted by the rest of the partnership will be key.

The managing partner role at JSA is not particularly powerful within the firm’s constitution, says Desai, being largely a figurehead to convene the executive committee (excom) of four elected members—Mumbai-based Dina Wadia, Delhi-based Amit Kapur, Bengaluru’s Murali Ananthasivan and formerly Chudasama, who has now temporarily been replaced by Sundaresan until the election in October.

The excom is where the real power at JSA lies, though the managing partner tag, prestige and symbolism are still important to the firm. The first ever elected managing partner at the firm could therefore risk dividing the partnership along lines of politics and loyalty.

But Desai hopes that politics won’t be a problem, in part helped by secret balloting that is standard at JSA for equity partnership decisions. “As far as the managing partner is concerned, ideally, we’d like a consensus to emerge, whether it’s a single managing partner or a joint managing partner. There’s also a view that there should be a collegiate model, like a very strong excom, because at the end of the day, you do require a very strong leader.

“Or that the excom becomes very strong that you don’t require a managing partner at all—something similar to what you see in Trilegal—where there are more or less equal stature (founding equity) partners, which is not so over here. And in a much larger set-up (here)—I think it’s for the partnership to decide, and we are deliberating on it in a very structured way.

“But I think what is most likely to emerge is either a single managing partner, or two joint managing partners, and a more empowered excom."

Whoever, if anyone, does get the job won’t have an easy time of it. Desai says he regularly spends 70% of his time on management (which he jokes rose to around 90% when handling the short-lived crisis sparked by Chudasama’s departure).

While Desai says he would definitely exercise his vote as an equity partner, the “last thing I would like to do is influence people’s mind how they should vote" and adds that all of the three or four partners likely to be in the fray are trusted by the other partners, which is the most important criterion for the job.

Desai says he believes that he and Sagar laid down a solid foundation on that front. “There could have been many inefficiencies, many mistakes, many blunders, but nobody can accuse us of being hypocrites or not having walked the talk. We have walked the talk. There is no doubt on that and we have continued to walk the talk."

Whether and for how long the next generation will keep walking that talk, avoiding the infighting and turf wars that can easily infect law firm partnerships, will now be the million dollar question.

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