Category Archives: “The Partnership”

MY OP-ED IN THE NY TIMES — AND A KINDLE BOOK PROMOTION

Posted on by
Reply

My August 25, 2015 New York Times op-ed on law student debt, law school moral hazard, and the dysfunctional legal education market appears here: “Too Many Law Students, Too Few Legal Jobs.”

In the winter 2015 issue of the American Bankruptcy Institute Law Review, I published a specific proposal for creating a law school accountability: “Bankruptcy and Bad Behavior – The Real Moral Hazard: Law Schools Exploiting Market Dysfunction.” 

Additionally, Amazon is running a promotion for my novel. From August 25 through August 29, you can download the Kindle version of The Partnership – A Novel.

 

 

THE BINGHAM CASE STUDY — PART I

Posted on by
7

“For the first time since I’ve been in this job, we have all the pieces we need to do our job.”

That was former Bingham McCutchen chairman Jay Zimmerman’s penultimate line in the September 2011 Harvard Law School Case Study of his firm.

Oops.

Harvard Law School Professor Ashish Nanda and a research fellow developed the study for classroom use. According to the abstract, it’s a textbook example of successful management. It demonstrates how a firm could evolve “from a ‘middle-of-the-downtown pack’ Boston law firm in the early 1990s to a preeminent international law firm by 2010.”

Oops, again.

Familiar Plaudits

At the time of Nanda’s study, the profession had already witnessed a string of recent big firm failures. He should have taken a closer look at them. In fact, only seven months before publication of the Harvard Study, Howrey LLP was in the highly publicized death throes of what was a preview Bingham’s unfortunate fate.

Bingham’s Zimmerman and Howrey’s last chairman, Robert Ruyak, had several things in common, including accolades for their leadership. Just as Nanda highlighted Zimmerman’s tenure in his study, two years before Howrey’s collapse, Legal Times honored Ruyak as one of the profession’s Visionaries. Along similar lines, less than a month after publication of the Harvard study, Dewey & LeBeouf’s unraveling began as partners learned in October 2011 that the firm was not meeting its revenue projections for the year. But Dewey chairman Steven Davis continued to receive leadership awards.

Perhaps such public acclaim for a senior partner is the big firm equivalent of the Sports Illustrated curse. Being on the cover of that magazine seems to assure disaster down the road. (According to one analyst, the SI curse isn’t the worst in sports history. That distinction belongs to the Chicago Cubs and the Billy Goat hex. But hey, anyone can have a bad century.)

Underlying Behavior

The Lawyer Bubble investigates Howrey, Dewey, and other recent failures of large law firms. The purpose is not to identify what distinguishes them from each other, but to expose common themes that contributed to their demise. With the next printing of the book, I’m going to add an afterword that includes Bingham.

If Nanda had considered those larger themes, he might have viewed Bingham’s evolution much differently from the conclusions set forth in his study. He certainly would have backed away from what he thought was the key development proving Bingham’s success, namely, aggressive growth through law firm mergers and lateral hiring. He might even have considered that such a strategy could contribute to Bingham’s subsequent failure — which it did.

To find those recent precedents, he need not have looked very far. Similar trends undermined Howrey, Dewey, and others dating back to Finley Kumble in 1988. As a profession, we don’t seem to learn much from our mistakes.

The MBA Mentality Strikes Again

What caused Professor Nanda to line up with those who had missed the fault lines that had undone similar firms embracing the “bigger is always better” approach? One answer could be that he’s not a lawyer.

Nanda has a Ph.D in economics from Harvard Business School, where he taught for 13 years before becoming a professor of practice, faculty director of executive education, and research director at the program on the legal profession at Harvard Law School. Before getting his doctorate, he spent five years at the Tata group of companies as an administrative services officer. He co-authored a case book on “Professional Services” and advises law firms and corporate inside counsel.

It’s obvious that Nanda is intelligent. But it seems equally clear that his business orientation focused him on the enticing short-term metrics that have become ubiquitous measures of success. They can also be traps for the unwary.

In Part II of this series, I’ll review some of those traps. Nanda fell into them. As a consequence, he missed clues that should have led him to pause before joining the Bingham cheerleading squad.

Meanwhile, through December 6, Amazon is offering a special deal on my novel, The Partnership: It’s FREE as an ebook download. I’m currently negotiating a sale of the film rights to the book.

FYI

Posted on by
1

For anyone interested, the Chicago Tribune featured me in the Business Section of last Sunday’s edition (April 1, 2012). The article is “Ex-partner in Big law blogs it all” and  mentions my next book, THE LAWYER BUBBLE, which Perseus (Basic Books) will publish in 2013.

FED TO DEATH

Posted on by
Reply

Most of today’s big law leaders think they’ll be able to avoid traps that have destroyed great firms of the recent past. Are they that much smarter than their predecessors? Or are they oblivious to the lessons of history?

My article, “Fed to Death,” in the December issue of The American Lawyer, suggests that most respondents to the magazine’s annual survey of Am Law 200 firm leaders have have forgotten what true leadership is. Consider it my seasonal gift to those who need it most — and want it least.

Happy Holidays and thanks for your continuing attention to my musings. I’m especially grateful to the thousands who have kept my novel, The Partnership, on Amazon’s Kindle e-book Legal Thrillers Best-Seller list for the past six months.

IT’S THE MODEL

Posted on by
4

[Thanks, readers. My big law novel — The Partnership — has been on the Amazon e-book “Legal Thrillers Best-Seller List” for more than a month. Last weekend, it was #7. Also available for iPad, Nook, and in paperback.]

Returning from vacation means tackling a pile of accumulated newspapers in a single sitting. That sounds like a chore, but it allows the mind to connect news items that otherwise might seem completely unrelated.

Consider these three from the Wall Street Journal on August 1, 2, and 3.

In “With Oracle and Dodgers Waiting, Boies Not Ready to Retire,” the Journal  interviewed David Boies — 70-year-old former Cravath partner who started his own firm. He represented Al Gore in the 2000 election fight, plaintiffs challenging California’s law banning gay marriage, the NFL in its litigation with players, and a long string of high-profile litigants. Boies explains why more than half of his firm’s cases have a potential success fee:

“Hourly rate billing is bad for the client and I believe bad for the firm. It sets up a conflict between what’s good for the lawyer and what’s good for the client.”

Enter the client with the will to resist the hourly billing regime. On August 2, the WSJ‘s “Pricing Tactic Spooks Lawyers” describes clients countering high big law fees with on line reverse auctions that pit firms against each other in bidding for business. The result: cost reduction.

But economizing can be dangerous. An article in the next day’s WSJ should make every big firm attorney squirm. “Objection! Lawsuit Slams Temp Lawyers” reports that J-M Manufacturing is suing its former law firm, McDermott, Will & Emery LLP, claiming that the firm didn’t supervise adequately the work of contract attorneys from a third-party vendor. McDermott denies wrongdoing:

“J-M…keeps changing its story. Now [it]…claims that McDermott failed to supervise the contract lawyers that J-M retained….”

According to the article, J-M alleges that it paid McDermott attorneys rates as high as $925 an hour, compared to $61 an hour to the firm supplying the temps. In other words and regardless of who retained them, using contract lawyers helped shave J-M’s outside legal bills.

Here’s the common thread. In the first article, Boies just says what everyone knows: the billable hour regime is a nightmare. The second reflects ongoing client efforts to reduce resulting legal costs. The third identifies a potential peril for law firms that attempt to oblige: a malpractice suit — the ultimate conflict with a client.

I don’t know if McDermott did anything wrong, but clients should realize that putting the squeeze on outside lawyers is tricky. For example, cutting fees is one thing; expecting large firm equity partners to do the obvious — reduce their own stunning income levels to help the cause — is something else, and it isn’t happening.

Amid corporate belt-tightening that targeted outside legal costs, average equity partner profits for the Am Law 100 actually rose during the last two years. They’re now back to pre-Great Recession levels of $1.4 million a year and it’s a safe bet that next year’s profits will be even higher. If I were a client, I’d ask, “How did that happen?”

“It’s the successful model at work,” most firm leaders would say without reflection or hesitation. “Growing equity partner earnings are essential to retain and attract top talent. Firms have become more efficient, so it’s a win-win for clients and partners.”

Clients should consider the untoward implications of austerity measures that don’t dent equity partners’ pocketbooks. Increased efficiency? Operating with fewer secretaries and putting locks on supply room cabinets don’t account for the extraordinary profits wave that big law continues to ride.

Here’s another explanation. The prevailing model requires increases in billable hours — big law’s distorted definition of productivity — to offset fee reductions that clients demand. Concerned about attorney fatigue that compromises morale and work product? Too bad; the model ignores it.

Clients can and should seek lower big law fees, but they should be careful what they wish for, scrutinize what they get, and wonder why equity partners’ eye-popping profits keep growing along the way. The prevailing model rewards big law equity partners handsomely, but that doesn’t necessarily mean it’s working for their clients or anyone else.

 

JIMMY HOFFA

Posted on by
Reply

It’s an anniversary, but there’s won’t be any celebration. On July 30, 1975, Jimmy Hoffa disappeared from a suburban Detroit restaurant parking lot. Thirty-six years later, he continues to fascinate even those who hadn’t been born when he vanished.

For me, Hoffa’s story is personal because his life intersected with my father’s. The 1960 collision between the two headstrong men — a 31-year-old trucker vs. the one of the world’s most powerful labor leaders — became the subject of my first book, Crossing Hoffa – A Teamster’s Story. Among other honors, it earned Chicago Tribune‘s award as one of the “Best Books of the Year.” Beginner’s luck.

I’ll be gone for the next two-and-a-half weeks, but if you’ve already digested The Partnership (available for Kindle, iPad and Nook, as well as in paperback) and are looking for a true crime thriller to occupy time otherwise devoted to my musings, consider Crossing Hoffa for your beach bag, Kindle, iPad, or Nook. Just a thought.

I’ll have another post during the week of August 15.

THE U OF C’s BIG LEAP FORWARD

Posted on by
8

My thanks to the standing room-only crowd that turned out to hear about my new legal thriller, The Partnership, at the Virginia Festival of the Book in Charlottesville. That delightful town is, of course, the home of a great university that includes a law school worthy of Thomas Jefferson’s pride.

While I was there, it occurred to me that when law schools get it wrong, they deserve the scorn that comes with a public spotlight. When they get it right, they should bask in its warm glow. The University of Chicago Law School recently got it right. Really right.

It’s ironic.  The home of the Chicago School — where free market self-interest reigns and the economic analysis of the law has been an article of faith for a long time — has adopted a loan repayment program that sends students this powerful message:

There’s more to life after law school than pursuing big law’s elusive financial brass rings. If you take the large firm path, do so because it’s what you want, not because you have no other financial options.

This must shock deans who have pandered to the large law firm constituencies that hire some graduates for the best-paying starting associate jobs. Former Northwestern Dean David Van Zandt made himself the most visible and ardent proponent of that approach. The U of C’s new program doesn’t ignore big law as a potential employer of its graduates. In fact, it led all other schools in the NLJ 250‘s most recent list of big firms’ “go-to schools.” But it now tells the country’s top students that even if they don’t want big law, the U of C still still wants them — so much that it will pay their way.

It’s unique. For example, Harvard has a respectable Low-Income Protection Program. In 2008, it went a step farther and announced a plan forgiving third-year tuition in return for five years of post-graduate public service, but overwhelming student demand made it a casualty of the financial crisis. In its place, Harvard now provides limited funds to encourage public interest work on a case-by-case basis. Other schools, including Northwestern, have loan forgiveness programs, too, but none appears to be as good as the University of Chicago’s new one.

A single line from its website description says it all:

“This means that a graduate who engages in qualifying work for 10 years, earns less than the salary cap, and maintains enrollment in the federal Income-Based Repayment Program, will receive a FREE University of Chicago Law School education!”

“Qualifying work” is public interest broadly defined as “the full-time practice of law, or in a position normally requiring a law degree, in a non-profit organization or government office, other than legal academia.” It includes judicial clerkships.

The “salary cap” is $80,000 and doesn’t include spousal income. That combination seems to beat Harvard, Yale, and Stanford. (Caveat: The differences across school programs can be significant and prospective students should consider their own circumstances, run the numbers, and determine which one produces the best individual result.)

The program is a reasoned response to practical realities. First, big law cannot accommodate all top law school graduates, even if deans try to put them there and all want to go.

Second, the burden of law school debt shapes career decisions that lead too many lawyers to dissatisfying careers and unhappy lives, especially in large firms.

Third, the upcoming generation of prospective attorneys wants options other than large firms. To be sure, many lawyers find that such places are a good fit for their personalities and ambitions. But in recent years, such individuals have become a shrinking minority of the people heading in that direction. The profession should encourage attorneys who will become unhappy in such institutions to avoid them in the first place. Imagine a big law world populated exclusively with lawyers who wanted to be there.

Finally, the program is a reminder that the law is a great calling. Law schools aren’t big law assembly lines, grinding out graduates for firms where nobility too often yields to a business school mentality that prizes misguided metrics — billings, billable hours, leverage ratios, and average partner profits — above all else. The best law schools are uniquely positioned to level a playing field that now tilts students toward large firms.

Whatever else they accomplish, the U of C’s actions bring important attention to student alternatives that sometimes get lost in the myopic focus on big law. Now that’s leadership.

HOWREY’S LESSONS: A NATIONAL CONVERSATION

Posted on by
3

My latest “Commendable Comments” award goes to a non-lawyer, the Washington Post’s Pulitzer prize-winning columnist Steven Pearlstein.

Since I started my blog a year ago, two of my most popular articles have been “Howrey’s Lessons” and “Howrey’s Lessons — Part II.” Versions recently ran on Am Law Daily, where they also attracted widespread attention.

I don’t know if Pearlstein was among the thousands who saw my analysis of Howrey’s end and its relationship to ubiquitous big law trends, but his March 20 column reinforces my themes. If I hadn’t been attending the Virginia Festival of the Book in Charlottesville to discuss The Partnership, I might have missed it. I’m glad I didn’t.

Both of my Howrey articles focused on a central point: What matters most are not the things that make the once venerable institution different from other large firms. Rather, the true significance of its death lies in what makes the firm similar to many, many others. Intelligent lawyers who specialize in distinguishing adverse precedent prefer to think otherwise; they do so at their peril.

Noting as I had that, as recently as 2008, the DC-oriented Legal Times hailed Howrey’s final chairman, Robert Ruyak, as one of 30 “visionaries,” Pearlstein describes how quickly the world turned. In the end, I found Ruyak’s litany of claimed contributors to the firm’s demise — clients demanding contingency fee arrangements; conflict problems that made European growth problematic; and the rise of competitive electronic discovery vendors — unpersuasive; I explained why in “Howrey’s Lessons — Part II.” Pearlstein is more charitable in accepting such excuses at face value. That’s understandable because he’s never worked in a large firm.

But on the big picture, his assessment echoes my earlier observations:

1. Howrey’s global expansion through lateral hiring created a firm of free agents who lacked the deep loyalties that once characterized the firm. That phenomenon wasn’t unique to Howrey.

2. Pearlstein notes that profits per partner has become “not only the key determinant of how much partners take home, but it is the metric by which the very competitive and ambitious people in the legal business keep score.” My regular readers know that the business school mentality of misguided metrics — billings, billable hours, and leverage ratios aimed at increasing partners’ short-term profits — has transformed a once noble profession in unfortunate ways.

3.  Pearlstein observes that when Howrey’s average partner profits took a downward turn, the partnership — which wasn’t really a partnership in the way most people understand that concept — found that its “bonds of loyalty [were] not strong enough to hold Howrey together.” In “Howrey’s Lessons,” I put it this way: “[W]hen cash becomes king, partnership bonds remain only as tight as the glue that next year’s predicted equity partner profits provide….”

Likewise, Pearlstein’s overall conclusion is identical to mine: The most troubling aspect of Howrey’s death is that “the industry seems to have learned nothing from such episodes.”  He closes with an acknowledgement of the widespread problem of partner and associate dissatisfaction that the prevailing big law culture has exacerbated.

On only one point would I offer this limited qualification to Pearlstein’s survey of the legal blogosphere concerning Howrey. He suggests that the media (press and blogs) offer “the same uncritical acceptance of…a world in which firms are held together by nothing more than a collective determination to increase profit per partner.” Respectfully, I offer my ongoing commentary over the past year as a consistent voice in challenging the prevailing big law model.

When an intelligent, sophisticated observer such as Steven Pearlstein takes a seemingly isolated issue involving lawyers — that is, Howrey’s disintegration — and uses his national platform to shine a welcome light on a deeper professional problem, it becomes that much more difficult for big law leaders to ignore. They’ll continue to turn a blind eye to the incubating crisis, but perhaps they’ll rest just a little bit less easily in doing so.

Pearlstein’s prize is a copy of The Partnership, which I will send him this week. I’m confident that, as an interested outsider, he’ll find it fascinating.

LOCATION, LOCATION, LOCATION?

Posted on by
8

In “Greed Atop the Pyramids,” I observed that the internal spread between the top and the bottom within large firm equity partnerships has grown dramatically in recent years. No one feels sorry for those at the low end, but the compensation for many top partners has reached staggering heights. My title suggested an explanation.

K&L Gates Chairman Peter Kalis — whom I’ve never met — has offered another reason: It’s not greed; it’s geography. His photograph appeared with The Wall Street Journal article on Jamie Wareham, “The $5 Million Dollar Man.” According to the Journal, at K&L Gates “top partners earn up to nine times as much as other partners. Pay spreads widen as firms become more geographically diverse, operating in cities with varying costs of living, said Peter Kalis, chairman of K&L Gates. The firm’s pay spread rose from about 5-to-1 to as much as 9-to-1 in the past decade as it expanded. ‘Houses cost less in Pittsburgh than they do in London,’ Mr. Kalis said.”

Let’s consider that proposition. It’s certainly true that London is more expensive than New York, and New York is more expensive than Pittsburgh. It’s also true that some firms consider cost-of-living differences when setting compensation; some apply formulaic across-the-board geographical adjustments. But the issue involves the top of a widening range, not the relative cost of comparable talent across offices.

Here’s how to test the hypothesis that geography accounts for this relatively new phenomenon: Are all of a firm’s top equity partners located in the city of the firm’s most expensive office? I doubt it. Or try it from the other side: Are any of the biggest paydays going to partners working in less expensive cities? Almost certainly.

I don’t know how much Kalis makes, but he might even be a useful example. His K&L Gates website biography page shows a commendable involvement in a number of Pittsburgh-area civic organizations. In addition to his Pittsburgh office, the page also lists a New York phone number, but his only bar admission is Pennsylvania. He’s certainly not headquartered in the most expensive cities where K&L Gates has offices — Tokyo, Moscow, Hong Kong, Singapore, Beijing, London, or Paris. My hunch is that, as Chairman and Global Managing Partner, he’s not at the low end of his firm’s equity partner compensation range, either. So why the superficially appealing but ultimately unpersuasive “houses are cheaper in Pittsburgh” line to explain away a pervasive big law trend?

Perhaps it’s because reality is sometimes harsh and unflattering. Citing a former pay consultant for law firms, the Journal article noted, “A majority of big law firms have begun reducing the compensation level of 10% to 30% of their partners each year, partly to free up more money to award top producers.”

I don’t know if that has happened at K&L Gates, but other law firm management consultants have suggested that the need to attract and retain rainmakers in a volatile market has widened the top-to-bottom equity partner range in many firms:

“Before the recession, [the top-to-bottom equity partner compensation ratio] was typically five-to-one in many firms. Very often today, we’re seeing that spread at 10-to-1, even 12-to-1.”

Finally, the Journal article itself provides additional evidence that something other than geography is at work: “A small number of elite firms, such as Simpson Thacher & Bartlett LLP and Cravath, Swaine & Moore LLP, still hew to narrower compensation bands, ranging from 3-to-1 to 4-to-1, typically paying the most to those with the longest service….”

Cravath has a London office. Simpson Thacher has offices in Beijing, Hong Kong, London, Los Angeles, New York, Palo Alto, Sao Paolo, Tokyo, and Washington, DC. Yet they have avoided the surging top-to-bottom equity partnership pay gaps that Kalis attributes to geography.

To understand what has really happened recently inside big firms — and why — read The Partnership.

There is, indeed, greed atop the pyramids — even in Pittsburgh.

THANKS

Posted on by
Reply

Other than baseball, football, and well-tried cases, I’m not a fan of most contests. But I don’t mind this one because it suggests that my musings have struck a resonant chord.

For those who want to participate, I’ve added a link on the right sidebar of this blog. (If you aren’t already registered on the ABA site, you’ll have to do that before voting. There’s a “Register” link on the landing page. It’s easy — and you don’t have to be a lawyer. In fact, you don’t even have to like lawyers.)

Anyway, as actors often say, “Just being nominated is sufficient reward.”

Except I really mean it. Here’s the ABA’s press release:

“THE BELLY OF THE BEAST” CHOSEN AS ONE OF THE ABA JOURNAL’S BLAWG 100

(CHICAGO, IL – NOVEMBER 30) – Editors of the ABA Journal today announced they have selected “The Belly of the Beast” as one of the top 100 best law blogs by lawyers, for lawyers. 

Now readers are being asked to vote on their favorites in each of the 4th Annual Blawg 100’s 12 categories. To vote, go to

http://www.abajournal.com/blawg100/2010/imho

Voting ends at close of business on Dec. 30, 2010.

“The Belly of the Beast” is written by Steven J. Harper, adjunct professor at Northwestern University’s School of Law and Weinberg College of Arts & Sciences, author of The Partnership and other books, contributor to The American Lawyer, and recent retiree after 30 years at Kirkland & Ellis LLP.

More lawyers than ever are blogging as evidenced by the more than 3,000 legal blogs in our online directory. And they’re writing about ever more specialized niches of the profession. That’s why this year’s edition of the Blawg 100 highlights more practice specific blogs than ever before.

***

Don’t worry. I won’t let it go to my head.

ABOUT THOSE BIGLAW ASSOCIATE SATISFACTION SURVEYS….

Posted on by
4

The 2010 American Lawyer survey reports the lowest overall level of associate satisfaction since 2004.

The firms faring poorly will take comfort in standard disclaimers: response rates are low and negatively biased; survey questions are flawed; the poll captures attitudes from a generation of young attorneys who feel entitled. We all know the list. Lawyers specialize in explaining away bad facts and sometimes the critique is valid.

But before lower-ranked firms throw these results into a sea of self-serving rationalizations, they should consider the criteria by which others did quite well: relations with partners and other associates, interest in and satisfaction level of the work, training and guidance, policy on billable hours, management openness about firm strategies and partnership chances, the firm’s attitude toward pro bono work, compensation and benefits, and the respondents’ inclination to stay at their firms for at least two more years.

Now correlate each factor to the metrics that dominate today’s Biglaw business models — billings, billable hours, and associate/partner leverage ratios, all of which produce equity partner profits. For too many, the relationship is inverse. The absence of a metric by which firms hold partners accountable for associate satisfaction means that it gets ignored.

What’s the solution? Pay them more money? They won’t object, but according to a recent survey published in the Proceedings of the National Academy of Sciences, additional income beyond $75,000 a year doesn’t increase happiness. (http://www.pnas.org/content/early/2010/08/27/1011492107.full.pdf+html?sid=61f259ad-92a2-470f-b218-23537d8e2972)

How about just telling them to suck it up and push through to a better day? Doesn’t time cure all ills? Another NAS study suggests that our sense of global well-being is U-shaped. We start at a high point around age 18, move down until 50, and take a major upward turn until 85. (http://www.pnas.org/content/107/22/9985.abstract?sid=61f259ad-92a2-470f-b218-23537d8e2972) This comes from a 2008 telephone survey asking 340,000 people how they felt on the day the researchers called them. No attempt was made to control for health, employment, marital status, or anything else. It’s just a cross-sectional slice of the population at a moment in time. In short, draw conclusions at your peril.

Still, it’s interesting to compare these results with recent evidence about the happiness life-cycle of many Biglaw attorneys.

There no need for melodrama or hyperbole. Many lawyers of all ages have fulfilling careers and lead satisfying lives. Generalizations are always treacherous. Within and among firms, there are always exceptions to whatever is typical or predominant.

But the big picture can be informative. In the ABA’s 2007 survey of the profession, about 60% of attorneys in practice fewer than 5 years said they would recommend a legal career to a young person. That’s not exactly a ringing endorsement; however, it’s better than more senior attorneys’ views. For those practicing more than 10 years, it dropped to 40%.

Of course, “more than 10 years” covers lawyers from 35 to 90. So it’s difficult to know if the data support a U-shaped theory. They lend some credence to the notion that there’s a steep slide for people in their 20s, 30s, and 40s. But is there an uptick when attorneys hit the mid-century mark? That’s not clear — and it seems like a long wait.

It’s not all bad news. In the ABA survey, 84% found the practice of law to be intellectually stimulating. When I’ve invited lawyers of different ages and stages of their careers to make guest appearances in my undergraduate course on the profession, Biglaw attorneys spoke enthusiastically about tackling cutting-edge legal problems. Then they heard this question:

“What has been your happiest time as a lawyer?”

Here are some answers:

A 20-something senior associate: “Certainly not now. My life is not my own. I’m billing long hours in the hope of becoming a partner. Then I’ll gain more autonomy and control.”

A 30-something non-equity partner: “Life was easier when I was an associate. But I work hard now because I think things will get better if I make equity partner. Of course, that’s a big ‘if”.”

A 40-something equity partner: “I never realized how good I had it as an associate. Now I feel pressure to bring in clients so I can justify my equity compensation; that process never ends. You think that becoming an equity partner means you’ve crossed some finish line, but that’s when the race really begins.”

A 50-something equity partner: “I don’t know what I’ll do when I’m not a partner in my firm anymore. I haven’t had time to think about what’s next for me. Now, when I consider that prospect, the future becomes a source of anxiety.”

I don’t know to what extent these attorneys’ comments represent their respective demographic groups in Biglaw or elsewhere. But it’s no surprise to me that surveys consistently find practicing lawyers to be among the least satisfied workers and that attorneys in large firms today have the most difficulty finding the upward leg of the U-shaped happiness curve, assuming it’s out there.

The Biglaw business model has provided some of its attorneys with a lot more money than their predecessors. Career satisfaction that contributes to overall happiness?

That’s more complicated.

ON THE BEACH

Posted on by
1

While I’m away next week, perhaps you’ll reconsider one of my earlier posts, “VACATION? WHAT’S THAT?”  (https://thebellyofthebeast.wordpress.com/2010/06/28/vacation-whats-that/))

Or, you could read my new legal thriller, The Partnership. It’s enjoying brisk sales and receiving strong reviews from lawyers and lay readers alike. (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1 )

A new post will appear during the week of August 16.

YOGI BERRA’S WISDOM

Posted on by
Reply

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)

WHO’S LAZY?

Posted on by
Reply

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.”

OTHERWISE OCCUPIED FOR A TIME

Posted on by
Reply

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.

FOR BIGLAW SUMMER ASSOCIATES ONLY…

Posted on by
Reply

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.

BABY BOOMERS STRIKE AGAIN

Posted on by
Reply

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?

A BETTER ALTERNATIVE OR A LEAP FROM THE FRYING PAN?

Posted on by
Reply

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?

IT’S NOT JUST ME

Posted on by
Reply

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!”

2,000 HOURS

Posted on by
Reply

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.

EARLY RETURNS

Posted on by
Reply

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.”

25 YEARS…

Posted on by
Reply

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.”

SECOND AND THIRD THOUGHTS?

Posted on by
1

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.

WHEN IS BAD NEWS REALLY GOOD NEWS IN DISGUISE?

Posted on by
Reply

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)

THE MBA MENTALITY RETHINKS ITSELF?

Posted on by
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?

LIFE IMITATES ART

Posted on by
Reply

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.