As of this morning, July 25, Harper Blynn’s new music video, “Loneliest Generation,” was #1 on the MTV “most-viewed for the day” rock chart (even though MTV misspelled “Loneliest”) (http://www.mtvmusic.com/artist/blynn_harper/videos/538436/loneliest_generation) It premiered four days earlier.
The band won’t stay #1 forever, but it’s a relief to learn that Justin Bieber, Katy Perry, and Lady Gaga haven’t pre-empted the field.
My son’s rock band, Harper Blynn, has a new music video premiering on MTV this week. Here’s the link: http://www.mtvmusic.com/artist/blynn_harper/videos/538436/lonliest_generation
After watching it, those of you who haven’t already clicked on this blog’s link to “The Belly’s Favorite Rock Band” (on the right side of the page) will do so.
Hey, have I steered you wrong yet?
Many biglaw leaders should take heed.
In last weekend’s edition of the Wall Street Journal, columnist Peggy Noonan lamented the loss of what she called “adult supervision.” (http://www.peggynoonan.com/article.php?article=531)
Commemorating the 50th annivesary of To Kill A Mockingbird, she recalls the “wise and grounded Atticus Finch, who understands the world and pursues justice anyway, and who can be relied upon.”
She then rattles off a list of world leaders whom she regards as young — President Obama is 48; British Prime Minister Cameron is 43; Canadian Prime Minister Stephen Harper (no relation) is 51. Noonan says they could benefit from the presence of wise advisers like the venerable Finch.
Of course, there’s an obvious problem with her analysis: Finch himself was about the age of the “young men” she now finds in need of wise older counsel. So she misses an essential point: Wisdom is neither the exclusive province of the old nor the assured destination of advancing age.
But Noonan states an important truth when she views the modern world and observes that “there’s kind of an emerging mentoring gap going on in America right now.” She sees it in “a generalized absence of the wise old politician/lawyer/leader/editor who helps the young along, who teaches them the ropes and ways and traditions of a craft.”
That is undoubtedly true for much of biglaw. Why?
There are exceptions within and among firms, but this development flows directly from the MBA-mentality that now dominates most large law firms. It forces leaders and everyone else to focus on short-term metrics — individual billings, billable hours, associate-partner leverage ratios.
The resulting behavior is predictable. Each individual’s drive to attain and preserve position in accordance with such metrics leaves little room (or time) for the personalized mentoring that turns good young lawyers into better older ones. There’s no metric for measuring the future contribution that mentoring makes to the current year’s average profits-per-equity-partner.
For firms adhering to the pervasive biglaw model, the absence of a mentoring metric makes all the difference. In Hildebrandt Baker Robbins’s 2010 Client Advisory to the legal profession, one of the pioneering consultants responsible for the proliferation of biglaw’s misguided metrics aimed at short-term profit-maximizing concludes, “There is a management adage that ‘what gets measured gets done.'” (http://www.hildebrandt.com/2010ClientAdvisory)
I would add this corollary: Throughout biglaw in particular and the world generally, that which lacks a metric gets ignored.
Unfortunately, some of those things are important.
As a change of pace — and to a different medium — today’s offering is “GEMS FROM THE DIAMOND,” my June 19 Convocation Address to Northwestern University’s Weinberg College of Arts & Sciences graduating class of 2010. It’s ten minutes long and available for online viewing. There are two options.
The first is on Northwestern’s You Tube Channel and replays the original webcast: http://www.youtube.com/watch?v=DP3Uhiol6Vs
The second includes a brief student introduction (Part I), followed by my speech as seen from the cheap seats (Part II): http://www.youtube.com/user/harperstevenj#p/u/1/jrMfosruCiA
Also on my You Tube channel containing the second version is a clip of a short reading from The Partnership at a recent book appearance. (http://www.youtube.com/user/harperstevenj#p/u/2/p5zOMn_-bAM)
Today’s pop-quiz:
Question #1: What do the following statements have in common?
“Indiscretion happens with alcohol, but people understand that. You usually have to knock a partner out cold for it to be a career-ending event.”
AND
“Two years ago, we had lunch with an interviewee who insisted on ordering top-shelf liquor. It was bad judgment.”
Answer: Both remarks came from hiring partners at different Am Law 100 firms as they recently offered tips to students and summer associates hoping to land full-time job offers.
Here’s the odd part: the interviewer posed only general questions — whether there were any “golden rules for summer associates” and whether any candidates “bombed” because of a faux pas. But the first and only responses related to alcohol etiquette.
That’s revealing and a bit strange. Alcohol abuse is a widespread challenge for the profession. So how do we square either partner’s remark with that growing epidemic? The first treats it as a joke; the second, well…
Let’s pause for a moment on the second. This partner’s condemnation of an interviewee who ordered “top-shelf liquor” at a recruiting lunch made me wonder: What did he order for himself — and, even more tellingly, what does he usually drink? According to the 2010 Am Law 100 listing, his firm’s average equity partner profits totaled $1.27 million last year. I’ll bet the student’s lunch companion didn’t consume much Ripple.
Question #2: What do the following two statements about summer associates have in common?
“I’m not sure that a very significant number of associates even want to be partners.”
AND
“By going to a smaller number [of summer associates] this year, we had the luxury of getting people who are really enthusiastic about being [at our firm].”
Answer: The comments came from the same person during the same interview. He’s a hiring partner at another Am Law 100 firm. After graduating from Harvard Law School in 1995, he took an increasingly common path to biglaw partnership: a judicial clerkship followed by several years as an assistant U. S. Attorney. He didn’t join the firm for which he now serves as gatekeeper until 2004. So after lateraling into his position of power six years ago, he’s already so familiar with the firm’s culture that he now decides who among new graduates gets a job there. That alone is interesting, isn’t it?
Even more fascinating, he’s evidently recruiting split-personality associates — those who “are really enthusiastic about being at the firm,” but don’t “want to be partners.”
Huh? When does the enthusiasm wear off? Do they have wealth-related allergies? (His firm’s 2010 Am Law listing reports average proftis per equity partner exceeding $2 million.)
I know what you’re thinking about such contradictory characterizations of those receiving offers: “A foolish consistency is the hobgoblin of little minds.” (Ralph Waldo Emerson, Self-Reliance)
Question #3: Were these partners coerced into their bizarre comments? If so, we all know how unreliable that information can be.
Answer: Regrettably, no. The remarks came in voluntary interviews that each gave in May and June to the The Careerist, an American Lawyer blog. I suspect that all three regarded the media attention as personal and professional promotional opportunities.
Bonus Question: Is all of biglaw this bizarre?
Answer: No. Here’s a counterpoint: “[Recruits] should ask searching questions. How practice has changed over the years and how you deal with the changing demands. And how hard it is to reconcile your life at work with the rest of your life…I don’t believe lawyers should bow to icons. I want them to look me in the eye and ask tough questions.”
Now that’s more like it.
So here’s a suggestion to all of you summer associates out there who thought getting a job offer was the tough part: Pay close attention to the senior attorneys who will become your mentors if you sign on. Listen to them more carefully than some listen to themselves.
While dining out recently, my wife and I noticed a young couple at a nearby table. Their respective BlackBerrys mesmerized them; they rarely looked up or at each other. Even the arrival of entrees barely interrupted technological trances. During the hour-and-a-half we were there, they spoke only a handful of sentences.
According to a recent front page NY Times article, there’s a scientific explanation for such unsociable behavior. Unfortunately, the report filled two interior pages of the paper, which meant that it wasn’t likely to sustain the attention of those most needing its insights. Yes, I’m looking at you, my fellow lawyers, but you’re not the only culprits.
Young adults face a special challenge. If BlackBerrys and text-messaging feel familiar to you millennials, could it be related to the fact that you had Gameboys as kids?
Here’s a summary of “Hooked on Gadgets, and Paying a Mental Price”:
1. Technology has reduced the need for direct human interaction. That produces important efficiencies, but it also inflicts collateral damage. For example, what was once considered family time has become parallel play on handheld devices. That’s what was happening with the couple seated near us at the restaurant. At another nearby table, a teenager and his younger sibling likewise lost themselves in their gadgets while preoccupied parents did likewise.
2. Multi-tasking is a myth for all but 3% of the population. The vast majority of us can do only one thing at a time reasonably well. Don’t blame me; that’s how the human mind operates.
3. When you try to multi-task, you become less efficient at juggling problems.
4. Multi-taskers are more sensitive to incoming information and, therefore, more easily distracted. But brains attempt to adapt. That can create problems, especially when the urge to remain plugged in assumes the attributes of an addiction. “The scary part,” notes Stanford professor of communications Clifford Nass, “is they can’t shut off their multi-tasking tendencies when they’re not multi-tasking.” Once the mind becomes attention deficit disordered (ADD), it gets bored more easily.
5. According to a recent poll, 30 percent of those under age 45 thought that cellphones, smart phones, and personal computers made it harder for them to focus.
All of this adds up to more stress — especially for lawyers and other professionals. So why do it? When economic historians revisit the stunning productivity gains of the 1990s and early 2000s, one big chunk will turn out to have been illusory. Specifically, technology facilitated the conversion of leisure time into working hours.
The legal profession epitomizes the phenomenon. In biglaw, productivity has become synonymous with billable hours, period. Don’t take my word for it. Here’s what legal consultant Hildebrandt Baker Robbins said in its 2010 Client Advisory to our profession:
“The high point of law firm productivity was in the late 1990’s, when average annual billable hours for associates in many firms were hitting 2,300 to 2,500.”
In other words, the billable hours imperative destroyed the wall separating work from everything else. Especially in large firms charging ever-increasing rates, clients understandably expected their attorneys to be on-call — 24/7. As client-billed time became a key metric for evaluating talent, senior partners demanded bigger sacrifices all the way down the food chain. (“Keep your hours up,” they urged — and still do.)
Laptops, cellphones, and BlackBerrys have been aiders and abettors. After all, who can credibly claim to have been unavailable for any longer than it takes to visit the bathroom?
So the next time you tell yourself that you’re taking time off, spend a moment contemplating what that really means. Meanwhile, if you’re seeking my insights over the upcoming long holiday weekend, perhaps you’ll consider one of my books.
They’ll have to suffice because this blog will be idle until July 9. I’m taking an old-fashioned vacation: no computer; no BlackBerry; no cellphone. (Well, okay, I’ll take my cellphone so other family members can reach me in case of emergency; no one else has the number.) Sounds just like your vacations, right?
My new novel, The Partnership, has led to some interesting conversations with other lawyers, especially biglaw partners.(http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1)
“Here’s the problem with young associates today: they’re lazy,” barked a middle-aged man at a recent dinner party that I attended. Soon thereafter, he revealed his occupation: partner in an Am Law 100 firm.
“They feel entitled. They want to make the big bucks, but they don’t want to put in the hours,” he continued indignantly.
Biglaw partners say that a lot. Many regard themselves as special in ways that few young people today ever can be. It’s a form of magical thinking that rationalizes hubris, bad behavior, and arbitrary decisions.
“It’s more complicated,” I suggested after confessing that I’d recently retired after 30 years in a big firm that he respected. “For the last three years, I’ve taught an undergraduate seminar that has given me a different perspective. Ultimately, my students inspired me to write my latest book.”
“How so?” he asked.
“As you know, law school has long been the last bastion of liberal arts majors who didn’t know what to do next. Once they got there, the pressure to get a high-paying job at a big firm began. But most students heading that way had no idea what their lives at such places would be like. When reality struck, many didn’t like it.”
He nodded.
“That’s one reason lawyers are among the most dissatisfied workers in our society. It’s also why, before the Great Recession, the five-year associate attrition rate from big firms exceeded 80%.”
“I didn’t realize it was that high,” he interjected.
“Contributing to all of this is the business model that has overtaken most large firms over the past 20 years,” I continued. “It requires associate and non-equity partner attrition to increase leverage ratios and enhance equity partner profits. Being a good lawyer doesn’t mean the firm will have room for you as an equity partner. The resulting behaviors have dramatically changed the culture of most big firms.”
“You’re right,” he said as he inadvertently moved to his own unhappy plight. “People don’t understand what it means to go from 1,600 to 1,800 to 2,000 billable hours a year. Once you become a partner, it’s even harder. You can’t bill all of the time you spend on client development, but those hours are just another form of work.”
“We agree,” I suggested. “The job turns out to be much different from what most undergraduates expect, insofar as they have any expectations at all. In fact, even as an equity partner, your firm’s increased billable hour requirements have changed your job while you held it, right?”
“True,” he admitted.
“So you’re a victim of the MBA mentality of misguided metrics, too. When reality clashes with young attorneys’ idealized expectations, you have a prescription for psychological disaster. Factor in a business model that myopically focuses on a few metrics — billings, billable hours, and leverage — and look at the result.”
The biglaw partner then revealed his secret: “My son is thinking about going to law school. I told him to stay away from big firms.”
“You’re not alone,” I assured him. “The most recent ABA study shows that 60% of attorneys practicing 10 years or more advise young people against a legal career. As a group, biglaw attorneys are the most dissatisfied; public sector lawyers are happier.”
The senior partner nodded. Long ago, he confessed, his career began in government.
“So we’re back where you started this conversation,” I suggested, “– associate motivation.”
“How so?”
“When an entering class of, say, 50 new associates figures out that only 10 of them will be around five years later and maybe two or three will eventually become equity partners some unknown number of years after that, how does it affect their behavior? How would it affect yours?”
“Partners would say I was lazy,” he laughed. “I think I’m going to enjoy your new book. I’ll get a copy for my son, too.”
My next post won’t appear for several days because I’m busy preparing for two events.
On Saturday, June 19 at 11:30 am, I’ll be delivering the Convocation Address to the Northwestern University Weinberg College of Arts & Sciences graduating class of 2010. Anyone interested can join the other 10,000 people in attendance at Welsh-Ryan Arena in Evanston, IL. No ticket required.
But you don’t have to be there to see it. The event will also be streaming online at http://www.wcas.northwestern.edu/convocation/. The topic of my ten-minute speech is “Gems from the Diamond.” After I finish, 1,000 graduates will receive their diplomas individually; you probably won’t mind missing that part.
Then, on Monday, June 21 at 7:00 pm, I’ll discuss and sign my new novel, The Partnership, at The Book Stall in Winnetka, IL (811 Elm Street). (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1)
So perhaps you’ll see me before you read whatever I have to say next.
You’re thrilled, and understandably so.
In an impossible job market, you came up a winner. The summer associate offer rate for all firms dropped to its lowest level since NALP started gathering such statistics 17 years ago. But you worked hard, got good grades, and listened to tips from hiring partners describing what they wanted in a new lawyer.
You scored big. In compensation, it’s a summer job like none you’ve ever had. Your most pressing concern is whether there will be a repeat of last year’s dip in the full-time job offer rate for summer associates — 69% compared to 90% in 2008. So now you’re heeding advice that ranges from proper attitude to correct attire. At least there is some encouraging summer associate etiquette news. According to one biglaw hiring partner, “indiscretion happens with alcohol, but people understand that. You usually have to knock a partner out cold for it to be a career-ending event.” Whew! That’s a relief.
Anticipating a favorable next step, you hope that your full-time job offer at the end of the summer is real. You don’t want to wind up like the more than 60% who planned to start their careers at large law firms immediately upon graduation this year, only to be deferred into 2011 and 2012. You can’t bear to think about some of your predecessors who received offers of full-time employment after their successful 2008 and 2009 summers, only to see them revoked outright a few months later.
You’re focused on making sure the firm likes you. There’s no time to consider other things — including whether you like the firm.
Here’s a suggestion: think about those other things now, even if only briefly.
At a recent Cubs game, I was talking with a fellow biglaw refugee. He’d practiced in a large law firm — not mine — for more than 25 years before retiring two years ago.
“What questions should today’s biglaw summer associates ask?” I began.
“It depends on what they want,” he suggested. “They probably fall into one of two categories. The first group consists of those wanting good training, needing a decent salary to pay off their student loans, and planning to do something else when that debt is gone. A second group wants to make a career at a big firm; they think they’re in for the long haul.”
“OK, so what should someone in the first group investigate?”
“That’s easy,” my friend responded. “Mentoring. How is the training? Will they have opportunities to develop skills that make them better lawyers?”
“How about the second group — the ones who think they want a large law firm career?”
“For them, it boils down to a simple question: who among the equity partners has a life that they’d want? If they can’t identify such a person, that’s a big problem. If they can, then they have to dig deeper.”
“Such as,” I pressed.
“Such as, how did the senior attorney do it? Is he or she an oddity? Did the partner succeed under a biglaw model that no longer exists? Most large firms don’t resemble what you and I joined 30 years ago. Your new book says it all.”
“And to get at that issue,” I added, “they should search for answers to these questions:
1. Excluding laterals, how many new equity partners did the firm make this year?
2. How many years did it take them to get there?
3. What was the size of their original associate class?
4. What happened to everyone else?
If the chances of capturing the brass ring are about the same as winning the lottery, at least they know the ground rules. The answers will reveal the culture and working environment of the place.”
“Yep,” he said. “And whether it’s conducive to a happy life. Your new book covers that one, too.”
But some aspects of life seem destined to remain unsatisfying; an hour later, the Cubs lost — again.
Getting old is tough. But not nearly as tough as being young these days.
Recently, the National Law Journal reported that an Am Law top 20 firm adopted a new policy allowing partners two addtional years before they must “begin giving business to younger colleagues.” Instead of 65, they’ll now have to start that process at 67. (http://www.law.com/jsp/article.jsp?id=1202458271311)
Meanwhile, a prominent 63-year-old white-collar defense attorney left his big firm of 16 years to avoid its mandatory retirement age (65). He declined his old firm’s offer of a two-year exemption that would have given him until 67. (http://legaltimes.typepad.com/blt/2010/05/mark-tuohey-leaves-vinson-elkins-for-brown-rudnick-cites-retirement-policy.html)
And the June ABA Journal includes the following admonition from the organization’s president:
“In August 2007, the ABA adopted a policy rejecting mandatory age-based retirement policies. The recommendation urging this advance is worth considering and adoption by all legal employers.”
Yes, she’s a 60-something baby boomer in a big firm, too.
What’s going on? Forget lip-service paid to the old age-discrimination argument against forced departure of equity partners. That sword of Damocles has floated over the profession forever, yet somehow current big firm leaders replaced their predecessors.
So why the big outcry now? The current chorus reflects an unintended consequence of a flawed biglaw business model: resistance to intergenerational transition. But extending check-out time is a bad move for the firm that does it, the younger attorneys working there, and aging baby boomers unwilling to contemplate life after the law.
Aging rainmakers have books of business that make them indispensable to many large firms. Why? Throughout biglaw, simplistic metrics (billings, billable hours, and leverage) have determined individual partners’ annual compensation with an eye toward maximizing short-term average profits-per-partner that appear in Am Law‘s annual rankings.
It’s become bad long-term news for the firm. In such a culture, partners have every incentive to retain client responsibilities and none to mentor proteges or promote intergenerational transition. As they age, the old-timers hoard their marbles and threaten to take them elsewhere. Does that sound like a prescription for long-term institutional stability?
What about younger lawyers hoping to inherit clients? Many will find themselves in the position of the wealthy parents’ child awaiting a large bequest. By the time it comes, the kid will be in his 50s. Meanwhile, blockage wreaks havoc all the way down the food chain.
How about the aging attorneys themselves? Encouraging them to deny their own mortality isn’t helpful. Sorry, but once you’re over 65, you may be young at heart, but to the rest of the world, your colorists and/or your combovers aren’t persuasive.
Here’s the painful truth: we baby boomers are not that special. Think you’re indispensable? Put your hand in a pail of water, pull it out, and look at the size of the hole you leave. That’s how indispensable you are. Do you remember any of your own mentors fondly? Well, someday that’s what you’ll be to others — if you truly succeed in the ways that matter most.
Those who have followed this blog from the beginning know that its first series of posts, “PUZZLE PIECES — Parts 1 through 12” (now archived in “CONNECTING THE DOTS”), dramatizes the problem of aging partners who hang on too long. (https://thebellyofthebeast.wordpress.com/category/connecting-the-dots/) Special ciriticism goes to those who have also inculcated their firms with a business school mentality of misguided metrics. Such baby boomers are now positioning themselves to extract one final pound of flesh on the way to dotage.
Are these aging leaders who retain literal death grips on their billings positive role models for successors? If the firms themselves don’t survive them, it won’t matter, will it?
[UPDATE: On January 1, 2011, Northwestern’s former dean, David Van Zandt, became president of The New School in New York.]
Virtually all law school deans — with the notable exception of Northwestern’s David Van Zandt — have urged prospective law students to ignore U.S. News rankings because they’re methodologically flawed, susceptible to manipulation, and counterproductive to sound student decision-making. None of that seems to bother students, most of whom regard them as authoritative.
I introduced Van Zandt’s outlier position in an earlier post. (https://thebellyofthebeast.wordpress.com/2010/04/16/the-us-news-rankings-are-out/). More can be said about how his business school mentality hurts the school and its students, but not today. Right now, I’m more interested in two recent articles on U.S. News rankings.
First, Mercer University recently named its new dean. That’s not a particularly newsworthy item, especially for an undistinguished school. But the National Law Journal thought otherwise. Presumably, its May 27 headline explained why:
“‘U.S. News’ antagonist lands deanship at Mercer University.” http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202458884379&US_News_antagonist_lands_deanship_at_Mercer_University&hbxlogin=1
So that’s what made Gary Simson’s new job noteworthy? He was a U.S. News antagonist? But that describes every law school dean in the country — except Van Zandt.
Simson had been dean of the Case Western Reserve Law School for 18 months when, in summer 2008, he urged law schools to boycott the U.S. News rankings because deans pandered to them. (http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202423187148)
Dean Van Zandt quickly proved the point. A few months after Simson’s call to arms, the ABA Journal exposed Northwestern’s aggressive recruitment of prospective second-year students whom that school had rejected a year earlier. (http://www.abajournal.com/magazine/article/transfers_bolster_elite_schools/) As transfers, their LSATs wouldn’t count in the U.S. News rankings, but their tuition dollars would go directly to the school’s bottom line.
Nobody asked students in the original 238-person class what they thought of that win-win solution for the business school mentality of misguided metrics. Their class grew by almost 20% in 2006-2007. Ironically, Northwestern’s U.S. News ranking has fallen for each of the last three years — from 9th to 11th.
Unfortunately, Dean Simson was already a wounded warrior when he took up the rankings crusade. He’d generated criticism from faculty, alumni, and donors for a variety of reasons, including Case’s low state bar passage rates (75% for Case first-time takers in February 2008 compared to 95% for Cleveland State’s). In October 2008 — just before another round of bar passage results was released — the university’s president announced that Simson “had agreed to resign.” (http://blog.cleveland.com/metro/2008/10/case_western_reserve_law_schoo.html) So much for the boycott messenger and his message.
Yet now, two years later, Simson’s antagonism toward U.S. News rankings has become his claim to fame. Could skepticism about the rankings be attracting new followers and redeeming old ones?
That leads to the second article, also in the NLJ. The Society of American Law Teachers (SALT) has urged law schools to stop providing U.S. News with incoming students’ LSAT scores. SALT asserts that the pressure on admissions deans to get students with top scores compromises efforts to achieve campus diversity. (http://www.law.com/jsp/article.jsp?id=1202458731270)
It’s a noble gesture, but little more. Starving U.S. News of LSAT scores means only that the magazine will have to get such information from the ABA and the Law School Admission Council, both of which report LSATs at individual schools.
Still, recent noise about the dangers of using flawed rankings criteria as decisive metrics is encouraging. The volume should increase in October when U.S. News releases its newest compilation: rankings of the best law firms.
On that one, U.S. News may have awakened a slumbering giant. In February, the ABA House of Delegates adopted a resolution to investigate the proposed law firm rankings and, while they’re at it, take a close look at law school ranking methods, too.
Perhaps someday wise leaders of our profession will grasp the destructive impact of the rankings game — from law schools to big firms (based on their average-equity-profits-per-partner metric) — and it will all end. But I doubt it.
After all, metrics make life’s decisions so much easier, don’t they? Indeed, they eliminate the need to think at all!
Thirty years ago, New York was a scary place for me — mostly because I’d never been there. Midwestern curiousity led me to interview with Cravath, Swaine & Moore’s on-campus representative.
I’d heard that its road to success was the toughest. Rumors circulated that it hired twenty new attorneys for every one or two it might promote to equity partner eight or more years later. Not surprisingly, most of my fellow Harvard students regarded Cravath as the quintessential competitive sweatshop — a characteristic that many of my peers actually found attractive.
Not me. I went elsewhere because, in those good old days, there was an elsewhere to go. Cravath is probably not much different from what it was back then. It’s just that most of the biglaw world has followed its example. As other top-50 firms tightened equity partner admission requirements, Cravath just kept doing what it had always done.
Why did firms emulate Cravath? Law student lore made it the best by some undisclosed criteria. In retrospect, I think money had a role. Even back in 1980, it was one of a very few firms where advancement to equity partner meant wealth that was immense, at least for a lawyer.
According to the first ever listing of the Am Law 50 in 1985, Cravath ranked 2nd in profits per partner with $635,000. For those behind it, the descent was steep: the #10 firm was under $400,000; #30 was $255,000; #50 was $170,000.
Cravath blazed a trail to riches that now accompany those who reach biglaw’s summit: average equity partner profits for the entire Am Law 100 exceeded $1.26 million last year.
But Cravath remains different. Most of biglaw moved to two-tier partnerships and eat-what-you-kill systems where a few key metrics — billings, billable hours, and leverage ratios — now determine individual equity partner compensation. Cravath’s single-tier model has reportedly remained lock-step: admission to its partnership means fixed financial rewards over an entire career without regard to individual books of business.
I don’t know if Cravath’s lawyers as a group are any happier than attorneys in other big firms. But the firm is now courting its Generation X’ers. According to the Wall Street Journal, partners in their late-30s and early-40s have “taken a more pro-active approach, building new relationships and handling much of the work that historically would have been taken on by partners in their 50s.” (WSJ, May 28, 2010, C3)
Referring to Cravath’s deferential culture in which young partners traditionally forwarded big deals to older colleagues, the article notes that senior partners have nurtured the new environment that gives younger lawyers earlier name recognition.
Why has it worked so far?
“The older attorneys didn’t mind, partly because the pay they received didn’t get cut as a result,” the Journal observes.
In other words, lock-step allows elders to step out of the spotlight without hits to their pocketbooks.
In the current biglaw world, Cravath’s experiment is risky. Will young partners remain loyal or use their newly gained client power to pursue financial self-interest elsewhere? Will Cravath be forced to modify or abandon lock-step so that it can retain young partners controlling clients and billings?
I don’t know. Equally significant, I suspect those most directly affected by what the article characterizes as a “sea change at one of the best-known and most conservative of white-shoe law firms” don’t know, either.
And what does it mean for new associates trying to understand how this affects the firm’s culture and their own career prospects?
Ah, the things I didn’t think to consider when I was a second-year law student looking for a job about which I knew almost nothing.
Fortunately, students are wiser now, right?
As this year’s college seniors graduate, relentless pessimism about their fate abounds. I’m a glass half-full kind of guy, but it’s starting to get to me.
On May 15, the Wall Street Journal offered “A Lament for the Class of 2010.” After reciting the dreadful statistics — 17% of those age 20 to 24 don’t have a job and 2 million college graduates are unemployed — the author discussed the intense competition that new graduates face in seeking jobs as “waitresses, pizza delivery men, file clerks, bouncers, trainee busboys, assistant baristas, and interns at bodegas.”
A May 16 New York Times article provided a more dismal assessment. “Plan B: Skip College” gave graduates the bad news that they might have wasted their time and money on the degrees they’re now receiving. Great. Now you tell them.
Another Times article on May 29 described the unhappy plight of a 2005 NYU graduate who is $100,000 in debt and has few prospects.
And of course, everyone knows about the abuse heaped on the next generation of workers searching for a toe-hold on opportunity through the 21st century version of slave labor: unpaid internships.
Enough, already.
It’s true that many of the nation’s best and brightest are now receiving student loan repayment schedules along with their degrees. Even those who lack educational debt will feel the burden of an economy that deprives them of the psychological satisfaction that comes with a decent job.
Where’s the good news?
Today’s new graduates are rethinking traditionally safe career tracks that aren’t so safe anymore. The legal profession is an example.
In the 1960s, law school was a sanctuary. Deferments from compulsory military service meant three more years of academia instead of rice paddies and bullets in Vietnam. That was a pretty good deal.
When the draft ended, law school offered another kind of sanctuary — it was the last bastion of the liberal arts major who didn’t know what to do next. But it was an acceptable default solution. For a reasonable price, it offered the status of a profession and the realistic prospect of a fulfilling career.
Not anymore. Those looking to weather the current economic storm find that law school is an expensive place to seek shelter. Even worse, its earlier promises of future rewards — not only financial security, but also a satisfying career — have become suspect. In fact, many face a Hobson’s choice: surveys consistently show that today’s unhappiest lawyers work in big firms that pay the most.
That’s actually good news for the next generation of would-be attorneys. The sudden unreliability of the law as a safe path provides an opportunity to regroup. For those who are adequately informed about the experience and remain certain that it’s for them, the law is a sensible choice.
But for the rest, using law school as an excuse for three years of procrastination could be a costly mistake. With crushing debt loads, even many of those who get high-paying legal jobs will find a harsh reality that conflicts with their expectations and aspirations. From there, it’s a short trip to the ranks of unhappy, dissatisfied lawyers. We already have too many of those because the light didn’t dawn on them until they’d passed self-imposed points of no return.
So, recent graduates, as difficult as it may be, consider yourselves lucky. You’ll eventually find yourselves among the most creative, entrpreneurial generation in history because circumstances forced you to think outside the usual boxes as you pursued your passions.
I look forward to seeing the fruits of your efforts.
My recent interview on the Legal Broadcast Network is up and running at: http://thelegalbroadcastnetwork.squarespace.com/the-lbn-blog/2010/5/25/author-steven-harper-the-partnership.html
They acknowledge it’s a tough sell.
The co-chairman of a large, well-respected law firm has teamed with the former senior vice president and general counsel of General Electric to write an article that appeared in the May issue of The American Lawyer. The title says it all: “Noblesse Oblige: Firms must teach the younger generation what it means to be a true professional.” (http://www.law.harvard.edu/programs/plp/pdf/Noblesse_Oblige.pdf)
Here’s the first paragraph.
“Law firms have been moving from loosely managed associations of professionals to disciplined business organizations for more than a generation. This shift has caused an erosion of professional values (lawyers’ traditional commitment to enhancing society) and has increased the focus on economic return (firms’ relentless quest for escalating profits per partner).”
So how did that happen? Why doesn’t the younger generation already know what it means to be a true professional? Who have been their role models?
Better not to ask. Like me, the authors are members of the baby boomer generation that, as a group, bears responsiblity for a culture that some of us hope younger attorneys can change. In other words, do as we now say, not as too many of us did and still do.
Their suggestions start with the toughest job of all: persuading firm partners to move away from “inward-looking economics (more hours, more leverage, more profits, regardless of value)….”
For example, consider the concept of “productivity” — a bill of goods that self-styled legal consultants have sold to willing biglaw buyers for the past two decades. Increasing productivity has become a nice way of saying: “Get your billable hours up.” In the Great Recession, it has translated into layoffs so that survivors worked harder.
The authors’ approach would revolutionize most firms’ fundamental cultures. The resulting benefits would flow to partners, associates, the unrepresented, and the community.
But it all begins with a willingness to jettison the business school mentality of misguided metrics that has made profits per partner biglaw’s pervasive measuring stick — in substantial part because it has made most biglaw equity partners wealthy beyond their wildest law school dreams.
How will equity partners respond to the news that they’ll have to earn less now for the promise of longer-term non-economic gains to the profession and, I dare say, to their own improved psychological well-being?
Sophocles wrote in Antigone, “No one loves the messenger who brings bad news.”
Shakespeare’s formulations — subsequently condensed to “don’t kill the messenger” — were likewise on point: “Though it be honest, it is never good to bring bad news” (Antony and Cleopatra) and “Yet the first bringer of unwelcome news Hath but a losing office.” (Henry IV, Part 2.)
And when it comes to a willingness to hear unpleasant news about average equity partner profits, those of us familiar with the profession know too well the pervasive presence of biglaw’s equivalents to Alice in Wonderland’s Queen of Hearts:
“Off with their heads!”
Why is Yale an outlier? Last year, only 35% of its graduates started their careers in large firms. An equal number accepted judicial clerkships; many will eventually join biglaw for a while. Still, Yale has a longstanding pattern of trailing peer institutions that, until this year, routinely placed more than half of their graduating classes directly into big firms.
One explanation is Yale’s public service tradition. Recently, I stumbled onto another: the school encourages candor about associate life in biglaw.
For many reasons — including the quest for perceived status, the urgency of educational loan repayment schedules, and the promise of future riches — most graduates seek initial employment in big firms with stated minimum annual billable hour requirements. Unfortunately, students view such numbers as abstractions.
They don’t pause to consider what it means to say that 2,000 hours has replaced 1,800 as a critical evaluation metric. (A 1958 ABA pamphlet suggested 1,300 as an appropriate yearly goal. Seriously. That would qualify as part-time, non-partner track employment today.)
Yale publishes a brochure that breathes life into the numbers. “The Truth About The Billable Hour” outlines hypothetical workdays and should be required reading for any prospective lawyer.(http://www.law.yale.edu/documents/pdf/CDO_Public/cdo-billable_hour.pdf)
When commuting, lunch, and bathroom breaks get included, the concept of billing 2,000 client hours assumes new meaning. It also provides perspective on legal consultant Hildebrandt Baker Robbins’s observation in its 2010 Client Advisory to our profession:
“The high point of law firm productivity was in the late 1990s, when average annual billable hours for associates in many firms were hitting 2,300 to 2,500.”
Astronomical billable hours are what Hildebrandt and others in its cottage industry told us was “productivity.” So guess what happened after they advised firms to increase it?
According to Hildebrandt in 2010: “The negative growth in productivity, even during the ‘boom’ years preceding the current downturn when demand was growing at a healthy rate, was driven to some extent by associate pushback on the unsustainable billable hour requirements at many firms.”
“Associate pushback” is a euphemism for skyrocketing attrition rates. Before the Great Recession, average associate attrition from the nation’s largest firms in 2007 had risen to 70% of that year’s new hires. (NALP published the data in its 2008 “Update on Associate Attrition.”) No one cares about that crisis level of turnover now because the demand for new graduates has collapsed and those who have jobs aren’t going anywhere soon — at least, voluntarily.
But if recent surveys are accurate, relatively few of the newly employed winners will find career satisfaction in their current firms. So what will happen after they finish repaying their school loans?
Like earlier crises confronting the profession, we’ll probably ignore that one when we get to it, too.
No, the title of this post doesn’t refer to Tuesday’s primary election results in a handful of states, although they confirm what I’ve thought for a while. Voters are anti-incumbent, not just anti-Democratic or anti-Obama. That’s one reason Rand Paul trounced Mitch McConnell’s guy in Kentucky. But this is not a space for ideological diatribe or political spin.
Rather, today’s caption refers to personal referenda of sorts.
First, the Belly’s audience is growing.
The American Lawyer is now running some of my posts. On May 10, Am Law Daily published “The MBA Mentality Rethinks Itself?” (http://amlawdaily.typepad.com/amlawdaily/2010/05/harper1.html) I’m grateful to editors willing to air a controversial voice.
Second — and speaking of controversy — my new legal thriller, The Partnership, (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1), is selling well and generating strong reactions.
Big firm attorneys have offered these responses:
“Great read…It’s a very fair and accurate representation of large law firms. This is how we operate.”
“I enjoyed reading your novel — and was reminded how things changed over the years…and hardly for the better.”
“Great stuff…highly enjoyable.”
In contrast, non-lawyers have said:
“Now I have a more informed concept of ‘billable hours.’ Wow!”
“Your book has disturbed me. Greatly. Do lawyers really behave this way?”
Quite a juxtaposition, isn’t it? Lay persons become shocked and outraged at attorney attitudes that most lawyers themselves take for granted.
“How can we change people, so they look at things differently — without a myopic view that maximizes short-term profits at the expense of other things that matter?” the last commentator asked.
Here’s what I told him:
1. You can’t. The trends that trouble you are too imbedded; the resulting financial rewards flowing to the few are too great. Perhaps more significantly, the things that disturb you most — including undue reliance on misguided short-term metrics — aren’t unique to the legal profession. Big firm lawyers use billings, billable hours, leverage ratios, and profits per equity partner. Ask journalists, doctors, college professors, and others to describe the metrics by which they’re held accountable. Then ask them if they regard themselves as members of a profession or participants in a business enterprise.
2. Sometimes you can hold up a mirror to a person who then doesn’t like the image that appears. A book can try to do that, but it’s hard to dislodge internal rationalizations that justify a lifetime of unfortunate behavior.
3. Real hope resides with the next generation. Our kids and grandchildren will have to decide that they want things to be different. That’s what we baby boomers did, only to discover that different didn’t always mean better.
Unfortunately, without mentors and models of success that can compete with the MBA-mentality of misguided metrics now dominating too many big law firms and other once-noble professions, our progeny face a daunting task.
Now you understand the twin thoughts appearing immediately following The Partnership‘s inside title page:
“Sunlight is the best disinfectant” and “Forewarned is forearmed.”
Kevin Spacey regards late actor Jack Lemmon as a key influence in his life. He often quotes Lemmon’s famous remark:
“If you’re lucky enough to have done well, then it’s your responsibility to send the elevator back down.”
I thought about those comments as I read this year’s Am Law 100 listings and then took another look at last year’s. Rather than sending the elevator back down, most biglaw leaders seem to be pulling the ladder up.
A year ago, the editors of American Lawyer observed that since 1999, the number of non-equity partners in Am Law 100 firms increased threefold. But the equity ranks rose by only one-third. For context, that was a decade when demand for all legal services surged and large firms in particular experienced explosive growth in revenues, headcount, and profitability.
In other words, there was more room everywhere — except at the top, apparently.
The May 2010 issue of American Lawyer noted that as gross revenues for the Am Law 100 fell, average equity partner profits for the group actually increased to over $1.26 million. How did that happen?
Answer: A multi-pronged attack.
First, firms increased productivity — which is another way of saying that some associates lost their jobs so the survivors could bill more hours. Remember Black Thursday in mid-February 2009 — a second St. Valentine’s Day massacre?
Second, they reduced staff, slashed summer programs, deferred or withdrew previous offers to new hires, and cut other expenses.
Finally and less publicly, some firms quietly moved equity partners to income status while putting the brakes on new entrants to the equity ranks. As a result, the number of non-equity partners rose again in 2009. That bulge in the biglaw python now comprises almost 40% of all Am Law 100 law firm partners.
Where will they go?
Maybe someday the biglaw benefactors bankrolling the National Association for Law Placement (NALP) will allow that organization systematically to gather tracking data that will tell us, just as it does for associates. You might think that all of the free market proselytizers in large firms would embrace more transparency on a topic of such central importance to law students trying to make career decisions.
Think again. NALP tried, but the organization ceased collection efforts in December 2009 because firms balked at providing it. In April, a prominent group of judges, professors, and attorneys wrote a letter criticizing NALP’s capitulation. In response, its executive director offered assurances that the board would consider the issue on April 26.
Now what?
A May 12 article in the Wall Street Journal made me wince.
Among those interviewed in “Speeding College to Save $10,000” is a student who chose a small liberal arts college in Indiana because it “had a new program that would let her speed to a bachelor’s degree in just three years, saving her family $10,000.”
Her motives are understandable. College has become expensive and law school even more so. By the time they’ve finished their formal education, many law graduates find themselves chained to the equivalent of a home mortgage — but without the house.
So the solution seems obvious: unnecessary years of school are a luxury. Isn’t it better to save the expense and get on with whatever you want to do with your life? Why not accelerate your way through law school, too?
Then came a disturbing revelation:
“[S]he will have to take two courses online this summer in addition to working her usual job at a greeting-card shop…”
Online courses? At a small liberal arts college? What sort of experience is she buying with her tuition dollars? Is all of higher education destined to become the University of Phoenix?
But here’s the line in the article that really made me squirm:
“[She] wants to go to law school, and is eager to get there a year sooner… ‘this is where I want to be,’ she says. The three-year program ‘is working out perfectly for me.'”
What makes her so confident at age nineteen that a fast track to a legal career is “where she wants to be”? I hope I’m wrong, but here’s my guess: She read To Kill a Mockingbird in high school (only a year or two ago) and she finds most episodes of Law and Order engaging.
I hope she and others like her learn more about where they’re headed before incurring enormous law school debt to finance their journeys. Unfortunately, accelerated educational paths squeeze out precious time for contemplating such distractions.
The law is and will remain a noble profession in which many thrive. But others have pursued such degrees without any real understanding of what awaits them. When reality clashes with expectations, disappointment and unhappiness follow.
The profession and those seeking to enter it would benefit from providing prospective lawyers better information about their likely jobs before locking themselves onto that track. But it’s a daunting assignment.
Especially when you’re young, bad things usually happen to someone else, right?
There are no other lawyers in my family. One of my sons has a rock band, Harper Blynn, that just released its new album, The Loneliest Generation. (http://www.myspace.com/harperblynn)
It’s an anthem for young adults, but it also engages my Beatles-era baby boomer mind. The album’s first track — 25 Years — resonates on many levels. Fortuitously, it also marks the end of a time span that began with the first ever Am Law listing of the nation’s largest firms.
In its 1985 inaugural appearance, there were only 51 Am Law firms. (A tie required expanding the first group from its intended 50.) For a while, the annual lists were of passing interest, mostly to the profession’s voyeurs. But eventually, the rankings assumed a status that revolutionized the profession — in a very big way.
Once upon a time, how much money a person made wasn’t the subject of polite conversation. At least in the large law firm world, Am Law changed all of that. It didn’t happen overnight, but it happened.
For many firms, a key metric became definitive: average equity partner profits. Wrapped in illusory objectivity, decisions became easier:
“The numbers don’t lie.”
As firm leaders themselves became armed with MBAs, more business school-type metrics and jargon began to displace meaningful discussion about quality lawyering:
“What are your billable hours?”
“What’s the leverage ratio of non-equity lawyers working on the matter?”
“What client billings comprise the ‘business case’ for promoting an attorney to equity partner?”
And now the rhetoric is simpler as the transformation from profession to bottom-line business has become complete:
“A dollar of revenue is a dollar of revenue, period.”
“I’m just trying to run a business.”
Along the way, attorneys at many firms found the road to equity partnership longer and less certain. But things played out well for the winners, although retaining that status became more challenging, too. In 1990, average equity partner profits for the Am Law 100 were $565,000. Last year, in the midst of economic recession, they were still over $1.26 million.
How did all of this affect the culture of many firms? There’s no convenient metric for measuring that impact, but try this one:
In surveys identifying those who are the unhappiest and least satisfied workers in any occupation, lawyers — especially those in big firms — consistently lead the pack. It’s a race no one wants to win.
Which takes me to the chorus of Harper Blynn’s 25 Years:
“You don’t have to go the lonely way —
— That wrecks your heart with sorrow and leaves your mind in disarray —
Don’t pretend that you don’t know –
— Twenty-five years….and nothin’ to show.”
Business school deans searching for professional models that will restore ethical legitimacy to MBA programs and principles aren’t the only ones second-guessing their earlier impacts.
At last week’s annual meeting of the Seventh Circuit Bar Association, Hildebrandt Baker Robbins participated in a panel discussion as a representative of the cottage industry it spawned: law firm management consulting. A 2010 Client Advisory on the legal profession’s immediate past and predicted future included this line:
“In our view, one of the serious misues of metrics in the past few years has been the overreliance on profits per equity partner as the defining index of a firm’s value and quality.”
Great. Now you tell us. Or I should say, now you change your mind. Or do you?
As the 1990-1991 recession decimated a much smaller version of what is now called biglaw, the National Law Journal’s annual survey of the largest 250 firms in 1991 quoted Bradford Hildebrandt, who in 1975 founded the company bearing his name:
“In most firms, current management has never operated within a recession and didn’t know how to deal with it…”
So who could save us from ourselves? Hildebrandt Inc. became one of the leading players in bringing business school principles and MBA-type metrics into law firm management.
By 1996, Mr. Hildebrandt himself had analyzed our situation and offered this assessment in that year’s NLJ 250 issue:
“The real problem of the 1980s was the lax admissions standards of associates of all firms to partnership. The way to fix that now is to make it harder to become a partner. The associate track is longer and more difficult, and you have a very big movement to two-tiered structured partnership.”
Did most big firms heed his advice? And how. It was an easy sale based on the promise of higher equity partner profits. That was the definitive metric, wasn’t it?
Now Hildebrandt offers a new metric to replace profits per equity partner as the key measure of overall firm performance: profit per employee.
What’s the new goal?
“Greater efficiency in the delivery of legal services,” the Advisory asserts.
Does the new guiding metric embody a more extreme version of an approach that has dominated most big firms for the past 20 years? Perhaps. But some proposals for individual partner evaluation hint at the need for a mid-course correction. Instead of billable hours, Hildebrandt suggests client satisfaction ratings. Rather than leverage, employee satisfaction ratings would matter.
Confused? Hildebrandt knows just the consulting firm to help implement these complex and seemingly contradictory metrics:
“As always, we stand ready to assist our clients in negotiating through these new and uncertain waters.”
Thanks so much for all of your help.
One of my former undergraduate students sent me a link to a WSJ.com article on the dismal job market for graduating law students. (http://online.wsj.com/article/SB10001424052748704866204575224350917718446.html)
Of course, the focus is where it always is: on reduced hiring at the nation’s largest firms.
This is not news to most of us in the profession. Big firms started laying off associates in big numbers shortly after the financial collapse in the fall of 2008. Last year, the Am Law 100 saw its first year-over-year reduction in attorney headcount since 1993. (http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202448340864&Lessons_of_The_Am_Law_&hbxlogin=1)
Large firms always get the editorial lead on this subject, in part because that’s where most top students in the best law schools seek to begin their careers. Why they flock in that direction is a complicated question. Herd behavior accounts for some of it, but one factor has assumed overwhelming power in their decision-making calculus: When law degrees come with six-figure student loan debt, financial reality pushes graduates toward biglaw, which shows them the money.
Here’s the hitch. Few know what awaits them if they land one of those increasingly elusive starting positions. For some, the fit works. But for too many, the surprise turns out to be unpleasant.
In its 2007 “Pulse of the Profession” survey, the ABA found that big firm attorneys were unhappier with their careers than any lawyer group. Only 44% gave a positive response to the statement: “I am satisfied with my career.” (http://www.abajournal.com/magazine/article/pulse_of_the_legal_professionunhappiest)
In contrast, lawyers working in the public sector reported an overall satisfaction rate of 68%.
Getting a public sector law job isn’t easy, either. But it’s curious that the nation’s largest firms continue to dominate the discussion, even though the biggest 250 firms employ fewer than 15% of all attorneys. When you consider associate and non-equity partner attrition rates from those places, the myopia becomes even more puzzling. Very few graduates who begin their careers in such places will stay for more than a few years.
So for current and prospective law students (and attorneys who have lost their jobs), short-term unemployment could become a catalyst for reassessment that leads to longer-term personal rewards.
But I also understand human nature. In the end, the shiny brass ring will continue to blind many people. American Lawyer recently reported that as headcount and average gross revenues declined in 2009 for the Am Law 100, average equity profits per partner increased — to $1.26 million.
How, you might ask, could that happen and what does it mean for those on the inside? I have my own views; they’re in my new novel, The Partnership. (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1)
Yesterday, the Harvard Business School named its new dean.
According to the Wall Street Journal (May 5, 2010, p. B9), Professor Nitin Nohria says “his focus will be on business ethics, a cause he has long championed, particularly during the financial crisis. He has also been a vocal critic of management education and the leaders it produces.”
What does that have to do with the legal topics that usually occupy this space?
As the Great Recession deepened, Nohria and a colleague wrote that management should become a profession, complete with a code of ethics similar to that for lawyers. (“It’s Time To Make Management a True Profession,” Harvard Business Review, October 2008) Nohria wants to move business leaders away from a myopic focus on maximizing shareholder value toward a broader social vision of their roles as institutional custodians and citizens. Looking to the legal profession as a model, he hopes to restore legitmacy lost over the last decade.
Maybe he has Atticus Finch in mind. Sadly, Finch is a fictional character. It’s too late for the most lucrative and influential segment of the profession to help him.
The tide has already taken most of biglaw out to sea in the direction he seeks to reverse. Following their corporate clients’ examples, firm leaders have embraced an MBA-mentality. Increasingly over the past 20 years, large law firm managers themselves have MBAs and have relied on business-school metrics — billable hours, leverage ratios, and profits-per-partner — to dictate decisions that shape the culture of such places.
How that happened and the unfortunate behavior that adherence to such deceptively objective metrics can produce are subjects for another day (and the novel I just published — The Partnership.
For now, the point is this: If Dean Nohria is looking for a new model of something that is a profession, rather than a collection of bottom-line businesses where MBA-type metrics set the tone, he’ll have to look elsewhere.
Does anyone have any candidates?
Sometimes timing is everything.
Last week, in “Skinning Cats in Different Ways,” I wrote about the efforts of the state legislature to undermine the University of Maryland’s law school clinic. The clinic’s environmental lawsuit against Perdue Farms and some of its chicken suppliers prompted Jim Perdue himself to visit Annapolis and plead the case for preserving important state financial interests.
Now, as a gigantic oil slick oozes its way toward the nation’s Gulf coast, the National Law Journal reports that a Louisiana legislator has offered a suggestion even more draconian than the one eventually abandoned in Maryland.(http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202457607971&Battleground_over_law_school_clinics_moves_to_Louisiana)
Senator Robert Adley (R-Benton — a 3,000-member community in a remote corner of northwestern Louisiana and far from the Gulf of Mexico) wants the state to prohibit law clinics at public and private colleges receiving state money from suing government agencies, individuals, and businesses for financial damages.
Apparently, Tulane is the target of this legislative attack that would include LSU. When a Baton Rouge reporter sought comment last month, the president of the Louisiana Chemical Association said that hurting LSU was not the bill’s intent:
“I know of no beefs with any of the other schools and we are not trying to impede their use of law clinics to give law students broad practical experience prior to graduation…Tulane’s environmental law clinic has consistently brought suits against industries and Louisiana state agencies and takes credit on its Web site for preventing hundreds of millions of dollars from coming to Louisiana.” ((http://www.2theadvocate.com/news/90065107.html?showAll=y&c=y)
A third-year LSU law student quoted in the article made the point with elegant simplicity:
“At first blush, it seems like a way for corporations to prevent themselves from getting sued. If you’re not doing something wrong, then why are you worried?”
She’s right. Law clinics aren’t roving bands of policymakers in search of causes they can use to remake the world. They pursue legal claims that might not otherwise see the light of day. They succeed because judges and juries determine that the defendants against whom they prevail have violated the law.
Here’s a better suggestion for Senator Adley: Just identify every current law or regulation that your corporate constituents don’t like and propose repealing all of them. It’s far more transparent. After all, what’s the point of enacting rules to pursue policies and protect rights if you’re simultaneously barring law clinics from enforcing them on behalf of those who lack the means, independence, or fortitude to do so?
Sunday’s lead article in the Business section of the May 2 NY Times brought to mind a passage in my forthcoming novel, The Partnership. It’s a legal thriller set against a power struggle at a fictional firm that has embraced biglaw’s twenty-year transformation from a profession to a bottom-line business.
First, the passage from my book, which will be available later this month:
“The crash of 2008 stalled a great run for most large firm equity partners. A year earlier, Michelman & Samson’s average partner profits had grown to almost $3 million. The reasons were obvious: the ratio of all attorneys to equity partners — a number that managers called leverage — doubled from three to six in only ten years. The firm tripled in size to more than two thousand attorneys in a dozen offices around the world. Average hours climbed as yearly billing rate increases far outstripped inflation. Trees, it seemed, really did grow to the sky.
“Michelman & Samson’s balanced portfolio of client work had historically provided protection against the vagaries of the business cycle…For some reason that mystified the firm’s Executive Committee, diversification wasn’t working as well this time. The lucrative corporate venture capital practice had led the firm’s fortunes upward, and it experienced the leading edge of the coming collapse. The transactional pipeline dried up first…The restructuring group picked up some of the slack, but not enough to maintain the historic profits of earlier times. Even worse, the uproar over executive compensation threatened to spill over into bankruptcy courts….”
Which brings me to the Sunday Times article. (http://www.nytimes.com/2010/05/02/business/02workout.html?) Throughout the current Great Recession, some lucrative pockets of biglaw have fared pretty well. For example, overall average equity partner profits of the Am Law 100 (released last Thursday) actually rose slightly in 2009 — even though gross revenue, headcount, and revenue per lawyer fell.
Is the leverage-billable hours model that produces such results sustainable? I don’t know, but it faces a new assault. Kenneth Feinberg, the Washington lawyer who serves as the “pay czar” for banks receiving tax dollars, received another assignment last June. The court in the Lehman bankruptcy appointed him to monitor attorneys’ fees in the case.
“Unemployment is over 9 percent, and to be paying first-year associates $500 an hour angers the public,” the Times quotes him. “People read about all of this and say that lawyers and the legal system are one more example of Wall Street out of control.”
The 77-year-old dean of the bankruptcy bar, Harvey Miller, responded with a spirited defense of the $164 million that his firm reportedly has incurred as Lehman’s lead counsel since its 2008 bankruptcy filing:
“If you had cancer and you were going into an operation, while you were lying on the table, would you look at the surgeon and say, ‘I’d like a 10 percent discount…This is not a public, charitable event.'”
Miller sat on his firm’s management committee for 25 years. Where should I begin an analysis of what his remarks reveal about my once noble profession?
Here’s one place: American Lawyer reported last week that the average equity partner profits of Miller’s firm — Weil Gotshal — increased to more than $2.3 million in 2009; their percentage of equity partners declined.
Here’s another: how many doctors make more than $1,000 an hour?
Here’s yet another: the Times noted that Miller’s firm also received $16 million in connection with the General Motors bankruptcy. Weren’t “public” taxpayer dollars involved in that one?
More thoughtful biglaw law attorneys declined to take the bait and refused comment to the Times.
Harvey won’t enjoy my novel.
For those who think that important lawsuits are won only in courtrooms, look at what’s happening in Maryland.
In March, the University of Maryland’s law clinic filed suit on behalf of an evironmental group against Perdue Farms — one of the state’s largest employers — and an 80,000 poultry farm. The complaint alleges illegal discharge of pollution into rivers feeding the Chesapeake Bay. So far, it sounds like just another case, right?
Wrong. Two weeks later, the Maryland Senate passed a budget amendment that would have required the university’s law clinic to disclose its clients, expenditures, and other information about its cases for the past two years — including pending matters. If it refused, the university would lose $500,000 in state funding.
Any lawyer in private practice will confirm the chilling effect that such inroads into sacred confidentiality obligations would have on them and their clients. One can imagine the uproar that would follow if someone asked a corporate client to disclose how it was spending its money to prosecute a claim or defend itself.
After considering even stricter measures and bigger monetary penalties, the Maryland House of Delegates approved the Senate bill’s disclosure requirement, but removed the funding cut.
According to the NYTimes, a Perdue spokesman said that the company had done no lobbying in support of the legislation, but its chairman, Jim Perdue, went to Annapolis in early March to tell lawmakers that cases like the clinic’s posed “one of the largest threats to the family farm in the last 50 years.” (http://www.nytimes.com/gwire/2010/04/08/08greenwire-law-students-role-in-farm-pollution-suit-anger-96381.html).
Apparently, legal aid clinics face similar challenges to their independence in Louisiana, Michigan, and elsewhere.
Those supporting the requirements argued that state tax dollars shouldn’t be used to undermine important economic interests, one of which is a big employer.
If the issue is a state’s financial interests, I suppose similar objections could apply to legal aid clinics that defend the accused. After all, the state is paying to convict them, right?
Maybe we should go beyond law school clinics and eliminate state-subsidized public defender programs. too.
Or maybe the real problem is the ability of private players to control an entire state’s legislative process.
Tuesday night’s Nova episode on PBS –“Mind Over Money” (April 27) — waded into the continuing debate over what went wrong to produce the recent economic collapse. Coincidentally, Goldman Sachs executives spent the day explaining themselves to the Senate Subcommittee on Investigations. Meanwhile, biglaw leaders around the world anxiously await the April 29 release of this year’s Am Law 100 rankings.
Maybe these things are related.
Nova interviewed scientific researchers who think they’ve identified the human brain’s unique response to money. MRIs show that it activates deep recesses in the mind — areas that evolutionists believe we share with the earliest forms of life, such as lizards.
Once engaged, those impulses become as powerful as any addiction and as strong as the instincts for sex and survival. They dominate our actions in ways that explain why, for example, people hold on to losing stocks too long and new participants in an auction experiment routinely bid more than $20 for a twenty-dollar bill. It’s not just that the efficient markets model of economic rationality fails; affirmatively irrational behavior takes over.
If these researchers are correct, money itself triggers something that can combine with competition and ego to produce a dangerous mix. When a subconscious reaction to dollar signs overrides rational thought, the resulting decisions can be — shall we say — problematic.
What’s the connection to Goldman Sachs and the Am Law 100? I’m not suggesting that obviously intelligent people at GS did anything illegal. Judges and juries will make that determination someday. Nor am I criticizing leaders of large or small law firms who pay attention to revenues and costs because they need to make a living, just like everybody else. The practice of law has never been an eleemosynary endeavor and never will be.
Still, the research shines an interesting light on the intersection of human behavior and free market capitalism. Just as stratospheric quarterly profits propelled Goldman to develop novel vehicles that continued to feed its insatiable profits beast, perhaps the fixation on annual Am Law rankings triggers an inner impulse in biglaw leaders that even they themselves don’t realize. When a money-laden thought — like average equity profits per partner — becomes a definitive decisional metric that defines professional standing and institutional culture, does reason become a casualty?
If so, what’s the antidote?
Perhaps it doesn’t matter. There’s not much incentive to recover from a socially acceptable addiction that defines who too many of us are.
While we’re waiting for NALP to reveal what it decided on April 26 — when it was supposed to grapple with the problem of getting biglaw firms to provide career tracking information on their non-equity partners (see my April 21 post: “Will Anyone Notice on April 27?”) — consider another recent NALP move…
Twenty-eight days sounds like a lot of time, doesn’t it?
On February 26, 2010, NALP announced a new provisional guideline. Beginning in August 2010, students receiving summer or permanent job offers from new prospective employers will have 28 days to respond. Yea or nay…up or down…fish or cut bait…
You get the idea.
NALP ignored the elephants in the room: law firms follow no uniform timetable in extending offers and, even worse, an accepted offer can turn out to be bogus when the employer later withdraws or defers it. When that happens, the victim is without recourse.
In other words, the ongoing capitulation to biglaw’s demands continues. In 2008, NALP adopted the prior rule giving students 45 days to ponder the decision that could shape their futures. Most big firms thought that was too long. Before that, students had until December 1. Before NALP existed, they had as much time as an individual firm gave them — which was usually a lot.
Do you detect a one-sidedness to the trend? Law firms have always retained flexibility to make rolling offers at their pleasure and to revoke them at will. Who’s looking out for the students?
Not NALP:
“Member feedback…has indicated that a shorter period will still allow students sufficient time to choose among competing offers.” (http://www.nalp.org/provisionaltimingguidelines2010)
Ah, “member feedback.” Who provides that? Not students or anyone committed to their best interests, that’s for sure.
NALP’s board consists of biglaw representatives and law school career development officers seeking to maximize their graduates’ placements in large law firms. That means the big firms wield commanding voices.
The new guideline is an example. Biglaw scuttled NALP’s recommendation to move “the current recruiting model away from rolling response deadlines to a model based on ‘offer kickoff dates,’ the specific dates before which offers could not be made,” followed by a universal 14-day response period. That wasn’t perfect, but at least it would have allowed students to know all of their options before locking in their final answers.
Under the new rule, they’ll never know what might have been. Then again, based on biglaw’s associate attrition rates immediately preceding the Great Recession, the vast majority of new hires won’t remain with their first employers for more than three years anyway.
Whether students should rush like lemmings to the sea toward biglaw opportunities is a question that most students don’t consider, but they should. Shortening the response time won’t help them or the profession’s growing problem of attorney career dissatisfaction.
After piling up enormous law school debts as new job offers dwindle, are any of you prospective biglaw associates feeling squeezed again?
Another 5-4 decision from the U.S. Supreme Court.
Civil rights advocates are unhappy with last week’s opinion limiting attorneys’ fees awards in federal cases where the losing defendant pays the winner’s lawyers. (Perdue v. Kenny A (http://www.supremecourt.gov/opinions/09pdf/08-970.pdf))
They shouldn’t be the only ones.
The plaintiffs’ attorneys in the case represented children in Georgia’s foster-care program. It took 30,000 hours of lawyer time over eight years before the state finally surrendered in a consent decree that revamped the entire system. The winners sought a bonus beyond what lawyers call the “lodestar” — an amount equal to the hours devoted to the case multiplied by the hourly rates prevailing in the community.
The trial judge praised plaintiffs’ counsel as the best advocates he’d seen in 27 years on the bench. So he enhanced their fee award to produce an average attorney hourly rate of $435. The Supreme Court threw it out.
Justice Alito wrote for the majority that included the usual conservative alignment — Justices Thomas, Scalia, Kennedy, Chief Justice Roberts, and himself. They sent the case back with more than a suggestion that an average rate of $249 was adequate. Never mind that it was below the statewide average for all Georgia lawyers — as Justice Breyer noted in a dissent joined by Justices Stevens, Ginsburg, and Sotomayor. (Breyer op. at pp. 9-10)
I know what you’re thinking: Why feel sorry for the lawyers? Isn’t $249/hour a lot of money? Sure, but as Justice Breyer observed, it pales in comparison to the rates that corporate clients routinely pay large firms where $249 won’t buy an hour with a second-year associate. Chief Justice Roberts’ rate when he left private practice to join the Court was probably three times that amount.
Which takes us to footnote 8. Alito was incredulous at the prospect of allowing the higher fee award: the winning attorneys “would earn as much as attorneys at some of the richest law firms in the country.”
Excuse me? Is that a bad thing? Are outstanding civil rights lawyers suing on behalf of children and the oppressed less valuable to our society than biglaw senior partners? If he were still around, Clarence Darrow might have some thoughts on that one.
Media coverage since the SEC initiated its controversial enforcement action against Goldman on April 16 has reminded me of a conversation I had a few years ago with one of my kids’ twenty-something friends.
Immediately after college, he took an entry level position at Goldman. At the time, he properly regarded his offer as the ultimate reward for a distinguished record coupled with extraordinary personal charm. He didn’t know whether GS was the beginning of an investment banking career, but he hadn’t ruled it out. The pay was good and his student loan repayment program beckoned. (Sound familiar to any recent law school grads out there?)
At first, his enthusiasm was infectious:
“I’m getting pretty interesting assignments, including travel to attend presentations with more senior people. I’m working long hours, but the money is good. It’s nice to repay my loans and save a little money.”
Two years later, he was still working 16-hour days and his BlackBerry felt like a very long leash — or a choke-collar — that he could never remove.
“Here’s the real problem,” he told me. “When I look up at the successful people above me, I can’t find anyone whose life I’d want. The pressure, stress, and long hours never end. That’s a problem.”
I told him he had his eye on the right ball: look up the food chain and decide whether anyone leads the life you envision for yourself. When he completed repaying his student loans a year later, he quit to pursue a completely different line of work. He’s making less money, but his life is better.
Maybe his story doesn’t matter because he never belonged in investment banking in the first place. Then again, maybe his story — and his observations — are not unique to Goldman or investment banking or even biglaw. Like many talented young people who would have benefitted their organizations in the long-run, short-run reality drove them away.
Who will get this message to the top of such institutions? A recent NY Times article reveals the challenge, especially to any firm that is wildly successful in its financial mission of maximizing short-term profits:
“Even insiders acknowledge that Mr. [Lloyd] Blankfein [Goldman’s CEO], a former trader, has remade Goldman Sachs. He has built a giant powered by formidable trading operations rather than by bankers who give advice to corporate clients and help them raise money. In the past, Goldman was often run by two senior executives; one from trading and one from banking. Under Mr. Blankfein, the traders have consolidated their power.” (http://www.nytimes.com/2010/04/20/business/20blankfein.html?pagewanted=1)
Is it a problem? Here’s the rest of the NY Times quotation that caught my eye:
“Mr. Blankfein has surrounded himself with like-minded executives — ‘Lloyd loyalists,’ as they are known — plucked from the trading ranks….”
Are such lieutenants less likely to tell the emperor the truth about his new clothes when he needs to hear it? It’s a question that many biglaw firm leaders might ponder as they strive to maximize profits per partner at the expense of other values that are less easily quantified. Maybe a biglaw episode of Undercover Boss would help.
The Belly of the Beast 