Tag Archives: ABA Journal

THE ABA IS RAISING THE WRONG BAR

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“[W]hen we look at these low performing schools, you guys are doing absolutely nothing.”

So said a member of the Department of Education’s National Advisory Committee on Institutional Quality and Integrity last June. I wrote about the painful session in August. The question on the table was whether the American Bar Association should lose its power to accredit law schools. The ABA leaders on the receiving end of that stinging rebuke had expected routine approval. What they got instead was a three-hour thrashing.

Disaster Avoided

The ABA beat back the committee’s recommendation of a 12-month suspension of its accreditation power. Even worse, it learned nothing from the episode. That became apparent in October, when the ABA’s Section of Legal Education and Admissions to the Bar recommended a rule change that it thought was monumental. It’s actually far too little coming far too late.

The new rule would require at least a 75 percent of a law school’s graduates to pass a state bar exam within two years of receiving their degrees. The current standard requires a 75 percent pass rate within five years. Since 2000, only four law schools have faced difficulty under the current standard, and all were restored to full accreditation.

Looming Disaster Remains

The Department of Education’s heat directed at schools taking advantage of their students could cool significantly under President Trump, who recently paid $25 million to settle former students’ fraud claims against Trump University. The troubling law school backstory is a less dramatic variation on the same theme.

Plummeting national bar passage rates coupled with growing student debt for degrees of dubious value are the culmination of a dysfunctional market in legal education. That dysfunction is taking a cruel toll on a generation vulnerable to exploitation by elders who know better. Sooner or later, we’ll all pay the price.

The ABA’s latest misfire toward a remedy misses the key point: even passing the bar doesn’t mean getting a law job. Within 10 months of graduation, fewer than 60 percent of 2015 graduates obtained full-time long-term employment requiring bar passage. Compared to the class of 2014, the number of such positions declined by 10 percent (from 26,248 to 23,687). The total number of 2015 graduates: 40,000.

Students attending marginal schools bear the greatest burden. Their schools use a business model that relies on federal student loan dollars to fill classrooms. Because schools have no accountability for their graduates’ poor employment outcomes, they are free to dip ever deeper into the well of unqualified applicants. Prospective employers have noticed.

Disaster For Many Students

The ABA’s persistent refusal to confront the employment rate problem brought the Department of Education into the picture. At the June hearing, committee members posed tough questions that ABA Managing Director Barry Currier had a tougher time answering. As some marginal schools received huge federal dollars, the committee noted, the vast majority of their graduates couldn’t get law jobs.

Now the ABA proposes tinkering at the edges. Even at that, based on the outrage generated from some inside the professorial ranks, you’d think it was trying to do something truly revolutionary. Some educators complained that shortening the 75 percent bar passage rate period from five years to two would discourage schools from admitting minority candidates, thereby leading to a less diverse profession.

That’s a non sequitur. If an additional three years after graduation is needed for some graduates to pass the bar, whatever they’re learning during that post-graduate period can’t be coming from their former classrooms. And, of course, nothing in the ABA proposal solves the employment problem.

Disaster Rewards a Few

As educators rely on student debt to keep their law schools operating, they’re getting paid, regardless of how their graduates fare in the job market. That frames the issue with which the ABA should be grappling but continues to dismiss: Marginal law schools are unable place most of their graduates in full-time long-term bar passage-required jobs.

Solving that problem requires schools to have financial skin in the game. Here’s one suggestion: tie the availability of a student’s federal loan dollars to a law school’s employment outcomes. That would create accountability that no dean or administrator currently possesses. And they sure don’t want it.

The ABA is institutionally incapable of embracing the change required to create a functional market in legal education. Vested interests are too embedded. The clout of the marginal schools is too great.

For example, the head of the ABA’s last “task force” on the challenges of financing legal education was also serving as the chairman of the national policy board of the Infilaw consortium of for-profit law schools, including the Charlotte School of Law. In fact, Dennis W. Archer still chairs the Infilaw national policy board. On November 15, Charlotte was the subject of a rare event: the ABA placed the school on probation because of its admissions practices. The ABA also ordered public disclosure of its bar passage rates.

But the ABA didn’t address the bigger problem with Charlotte that afflicts students at similar schools: dismal full-time long-term bar-passage required employment rates. Charlotte’s rate for the class of 2015 was 26 percent — down from 38 percent in 2012. Here’s the real kicker: from 2011 to 2015, the number of graduates at Charlotte increased from 97 to 456.

Growing supply in response to shrinking demand. That’s what happens when the people running law schools view students as revenue streams for which the schools will never have any financial accountability. The federal government backs the loans; educational debt survives personal bankruptcy; many in a generation of young would-be attorneys begin adulthood in a deep, six-figure financial hole.

Perhaps President-elect Trump will identify with the plight of the student-victims of this continuing disaster. Where would he be today if he had not been able to discharge his business loans through a string of bankruptcy filings? Not in the White House, that’s for sure.

INDIANA TECH: ANOTHER COSTLY LESSON IGNORED

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I’ll have more to say about the election, but not today. Instead, let’s take a closer look at a story that got lost in the shuffle of presidential politics. It deserves more attention than it received.

Back in 2013, when Indiana Tech opened the state’s fifth law school, I wrote that the decision was the latest example of pervasive legal market dysfunction. As the number of applicants declined, marginal schools increasingly were admitting students who wouldn’t be able to pass the bar, much less get decent jobs requiring a JD. Schools such as Indiana Tech were continuing to inflate the growing lawyer bubble, which was also the title of my 2013 book. (Proving that some things never change, it came out in paperback earlier this year.)

The central contributor to that bubble remains in place. Specifically, the federal student loan program absolves marginal law schools of accountability for their graduates’ poor employment outcomes, while encouraging administrators to fill classrooms with tuition-paying bodies. The results are predictable: lower admission standards, lower bar passage rates, and burgeoning law student debt for degrees of dubious value from marginal schools.

Victims of a Doomed Experiment

Indiana Tech’s inaugural class of first-year students began their studies in August 2013. Two years later, the school failed in its first attempt to get ABA accreditation. Further proving the ABA’s failure to address the continuing crisis in legal education, it granted Indiana Tech provisional accreditation earlier this year. The school graduated its first twelve students in 2016; only one passed the bar exam. Another passed on appeal, and a third passed the bar in another state.

On October 31, 2016, the school’s 71 students received an unwelcome Halloween surprise. The board of trustees announced its unanimous vote to close forever on June 30, 2017.

Indiana Tech President Arthur Snyder’s statement said, “[F]or the foreseeable future, the law school will not be able to attract students in sufficient numbers for the school to remain viable.”

Here’s the thing. President Snyder’s observation was equally true in 2011 — when the school completed its feasibility study and announced the decision to move forward. But rather than confront obvious facts about the demand for legal education that were apparent to everyone else, President Snyder insisted in 2013:

“We have given this decision careful research and consideration, and we believe we can develop a school that will attract and retain talented individuals who will contribute to our region’s economic development.”

Thanks to President Snyder and Indiana Tech’s board of trustees, those individuals — students and faculty — now face a tough and uncertain road.

Seeking Answers

What could have motivated such an obviously bad decision to open a new law school in the teeth of a lawyer glut? The answer is pretty simple. Snyder is a business guy. He has an MBA in strategic management from Wilmington University and a doctorate in education (innovation and leadership) from Wilmington University. Before joining the academic world, he spent more than 20 years in the telecommunications industry, rising to the position of vice president for the Data Systems Division of AT&T.

For someone focused on a bottom line approach to running higher education, adding a law school probably seemed like a no-brainer. In a 2011 interview for the National Law Journal, Snyder explained his strategy. Noting that about half of Indiana residents who attended ABA-approved law schools were doing so out of state, he said, “There are potential students who desire a law school education who cannot get that education in this area….”

Capturing that segment of the market was a strange premise upon which to build the case for a new law school. Which Indiana students admitted to established out-of-state schools did he expect to jump to an unaccredited newcomer?

The Real Play For Dollars

Like most law schools that should have closed their doors long ago, Indiana Tech’s business strategy sought to exploit market dysfunction. If the school could attract a sufficient number of aspiring attorneys to Fort Wayne, student loan dollars for tuition would take care of everything else, including a spiffy new building:

“The Indiana Tech Law School contains eight state-of-the-art classrooms, a courtroom, several learning and relaxation spaces for students including lounges and an outdoors patio, a three-story library, and everything else our students need to make their time here a successful and rewarding experience.”

Would graduates obtain decent full-time long-term jobs requiring the Indiana Tech JD degrees costing them close to $100,000? That would never become President Snyder’s problem.

The Opposite of Leadership

After the ABA denied Indiana Tech provisional accreditation in 2015, the handwriting was on the wall. But Snyder doubled down on a bad bet. The school tried to bolster admissions with a loss leader: a one-year tuition scholarship to students who enrolled in the fall of 2015. Anyone who took that deal is now twisting in the wind.

Indiana Tech reportedly lost $20 million. But its failed business strategy, followed by gimmicks that could never save it, produced dozens of real-life human victims whose damage is immeasurable. Those people don’t count in calculating Indiana Tech’s profit-and-loss statement. Except as conduits for federal student loan dollars, it’s fair to ask if they ever counted at all.

In his 2011 interview about the then-planned new law school, President Snyder suggested that Indiana Tech law school could be the first to offer a joint JD and master in science degree in leadership. He thought it would be an especially good fit because the university already has several programs in leadership.

Sometimes the most important learning in life comes from careful observation of negative role models. Speaking of negative role models, as I said at the beginning, I’ll have more to say about the election results in the days and weeks to come.

UNFORTUNATE COMMENT AWARD

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Today’s “Unfortunate Comment Award” winner is ABA President William (“Bill”) Robinson III, who thinks he has found those responsible for the glut of unemployed, debt-ridden young lawyers: the lawyers themselves.

“It’s inconceivable to me that someone with a college education, or a graduate-level education, would not know before deciding to go to law school that the economy has declined over the last several years and that the job market out there is not as opportune as it might have been five, six, seven, eight years ago,” he told Reuters during a January 4 interview.

Which year we talkin’ ’bout, Willis?

Recent graduates made the decision to attend law school in the mid-2000s, when the economy was booming. Even most students now in their third year decided to apply by spring 2008 — before the crash — when they registered for the LSAT. Some of those current 3-Ls were undergraduates in the first-ever offering of a course on the legal profession that I still teach at Northwestern. What were they thinking? I’ll tell you.

I’ve written that colleges and law schools still make little effort to bridge a pervasive expectations-reality gap. Anyone investigating law schools in early 2008 saw slick promotional materials that reinforced the pervasive media image of a glamorous legal career.

Jobs? No problem. Prospective students read that for all recent graduates of all law schools, the overall average employment rate was 93 percent. They had no reason to assume that schools self-reported misleading statistics to the ABA, NALP, and the all-powerful U.S. News ranking machine.

But unlike most of their law school-bound peers, my students scrutinized the flawed U.S. News approach. Among other things, they discovered that employment rates based on the ABA’s annual law school questionnaire were cruel jokes. That questionnaire allowed deans to report graduates as employed, even if they were flipping burgers or working for faculty members as temporary research assistants.

Law school websites followed that lead because the U.S. News rankings methodology penalized greater transparency and candor. In his Reuters interview, Robinson suggested that problematic employment statistics afflicted “no more than four” out of 200 accredited institutions, but he’s just plain wrong. Like their prospective students, most deans still obsess over U.S. News rankings as essential elements of their business models.

The beat goes on

With the ABA’s assistance, such law school deception continues today. Only last month — December 2011 — did the Section on Legal Education and Admission to the Bar finally approve changes in collecting and publishing law graduate placement data: Full- or part-time jobs? Bar passage required? Law school-funded? Some might consider that information relevant to a prospective law student trying to make an informed decision. Until this year, the ABA didn’t. The U.S. News rankings guru, Robert Morse, deferred to the ABA.

The ABA is accelerating the new reporting process so that “the placement data for the class of 2011 will be published during the summer of 2012, not the summer of 2013.” That’s right, even now, a pre-law student looking at ABA-sanctioned employment information won’t find the whole ugly truth. (Notable exceptions include the University of Chicago and Yale.) Consequently, any law school still looks like a decent investment of time and money, but as Professor William Henderson and Rachel Zahorsky note in the January 2012 issue of the ABA Journal, it often isn’t.

Students haven’t been blind to the economy. But bragging about 90+ percent employment rates didn’t (and doesn’t) deter prospective lawyers. Quite the contrary. Law school has long been the last bastion of the liberal arts major who can’t decide what’s next. The promise of a near-certain job in tough times makes that default solution more appealing.

Even the relatively few undergraduates (including the undergraduates in my class) paying close attention to big firm layoffs in 2009 were hopeful. They thought that by the time they came out of law school, the economy and the market for attorneys would improve. So did many smart, informed people. Youthful optimism isn’t a sin.

Which takes me to ABA President Robinson’s most telling comment in the Reuters interview: “We’re not talking about kids who are making these decisions.”

Perhaps we’re not talking about his 20-something offspring, but they’re somebody’s kids. The ABA and most law school deans owed them a better shake than they’ve received.

It’s ironic and unfortunate: one of the most visible spokesmen in a noble profession blames the victims.

AGING GRACEFULLY — OR NOT

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A recent NY Times article revealed the baby boomer’s dilemma: await marginalization or hog opportunities. It has profound implications for big law attorneys of all ages.

“[I]n my experience, it is much harder for older partners to maintain their position if their billable hours decline,” an employment lawyer told the Times.

So a law firm consultant suggested this strategy: “Very few people are so skilled that they can’t be replaced by a younger, more current practitioner. You’ve got to be so connected to important clients that the firm is going to fear your departure.”

That’s unfortunate advice, but not surprising. Most elders don’t mentor talented proteges to assume increasing responsibilities, persuade clients that others can do equally first-rate work, or institutionalize relationships so that the firm weathers senior partner departures and prospers over the long run. Instead, they create silos — self-contained practice groups of clients and attorneys who will give them leverage in the internal battles to retain money, power, and status. (See, e.g., The Partnership) Rather than waste time gaining fellow partners’ respect, the prevailing big law model prefers fear — or, more precisely, fear of a senior partner’s lost billings.

Over time, intergenerational antagonisms result. Older partners become blockage because the leveraged pyramid that pervades big law requires adherence to short-term metrics. Artificial constraints block the promotion of well-qualified candidates who’ve given years of personal sacrifice. If there’s not economic room at equity partner decision time, their efforts will have been for naught; they’re left behind.

Meanwhile, young attorneys learn by example. “Firm” clients cease to exist; they’re absorbed into jealously guarded fiefdoms that become transportable business units. Traditional partnership principles of mutual respect and support yield to unrestrained self-interest.

Eventually, everyone loses. Young attorneys resent elders; wealthy equity partners erect futile defenses against their own inevitable decline to an unhappy place; firms lose the stability that comes with loyal clients.

For some aging big law partners, greed never retires. But for many others, hanging on isn’t about the money. As mortality rears its head, their real quest is for continuing relevance — the belief that they still have something to offer and are making a difference.

Another Times article suggested a possible way out of big law’s conundrum: encouraging partners to redirect their skills. The New York Legal Aid Society program, Second Acts, taps into the growing army of retired lawyers:

“The point is not to have distinct phases of working life and after-working life, but to meld the two by having pro bono work be part of a lawyer’s career. Therefore, when lawyers retire, they can somewhat seamlessly slip into meaningful volunteer work, said Miriam Buhl, pro bono counsel at…Weil, Gotshal & Manges.”

The article described 68-year-old Steven B. Rosenfield, a former Paul, Weiss, Rifkind, Wharton & Garrison partner who traded his commercial securities practice for work in juvenile rights.

Behavior follows embedded economic structures and the incentives they create. In big law, the myopic emphasis on a handful of short-term profit-maximizing metics — billings, billable hours, and leverage ratios — has produced blinding wealth for a few. But sometimes those metrics become less satisfying as organizing principles of life.

Firm demands have left all lawyers with little time to reflect on what their lives after big law might be. Someday, most successful big law partners will pay the price and need help finding a path that reshapes self-identity while preserving dignity. The challenge is to permit disengagement with honor.

Firms could do a great service — and improve their own long-term stability in the process — if they relieved the stigma of economic decline in ways that encouraged aging colleagues to do the right thing. But it requires thinking beyond today’s metrics that determine a partner’s current year compensation. It requires valuing what can’t be easily measured and embedding it in a firm’s culture so that reaching retirement age isn’t a shock, it’s a blessing. It requires empathy, compassion, and — most of all — leadership.

In short, it requires things that are, tragically, in very short supply throughout big law.

25 YEARS…

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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.”

WILL ANYONE NOTICE ON APRIL 27?

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When is a partner not a partner?

One of biglaw’s profitability secrets relates to what “partner” means. In increasingly common two-tier partnerships, only equity partners have an ownership interest that translates into the stunning average incomes reported in the Am Law 100. (In 2008, the average was $1.26 million.) The distinction should interest students who seek biglaw jobs and want to know what any particular firm is really like.

So where can they learn the truth? Every law student knows about the NALP Foundation. It’s the only organization that collects comprehensive personnel information directly from major U.S. law firms. It publishes much of it in a Directory that is every student’s bible of prospective employers. But data on firms’ non-equity/equity partner distribution is conspicuously absent from NALP’s reports, as is any attempt to track non-equity partners’ careers.

In December 2009, NALP decided NOT to collect data distinguishing equity from non-equity partners. When disappointed law students heard the news, NALP responded that it would begin compiling such information. It then backtracked because law firms balked.

Hmmmm…..

On April 6, a prominent group of 75 attorneys, judges, and legal scholars protested NALP’s decision on the grounds that tracking non-equity partners was important to assessing a firm’s true gender and racial diversity. Of course, they’re correct.

But there’s another reason to provide students with this information. According to Am Law, between 1999 and 2008, the nation’s 100 biggest firms increased their non-equity partner ranks threefold, but the number of equity partners grew by only one-third. What is the fate of most big firm non-equity partners? Don’t ask; don’t tell.

Could that be the real story behind NALP’s reluctance to cross so many of its biglaw board members, advisors, and benefactors?

NALP said it would reconsider the issue at its April 26 meeting. Will anyone notice? Will anyone care?

For students who understand the issue well enough to do the research, American Lawyer lends a hand. Although it doesn’t have diversity information, the annual Am Law 100 issue publishes overall breakdowns of the largest firms’ equity/non-equity partners. So why not let NALP take the next step? What happened to all of those biglaw free market enthusiasts who usually argue that complete, easily available information facilitates better decisions? What could be more relevant than a firm’s answer to a fundamental question: who are your real partners and whither goest the vast cadre of attorneys who survive the associate gauntlet only fail in their efforts to overcome the final hurdle into the ownership ranks?

PUZZLE PIECES – Part 12

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[Concluding the imaginary cross-examination of a real senior partner profiled in the April 2010 issue of ABA Journal (http://www.abajournal.com/magazine/article/not_done_yet) — and connecting the final dots to the ongoing associate compensation squeeze-plays…]

Q: “Adversity tests leadership, doesn’t it?”

Partner: “I agree.”

Q: “And 2009 was a tough year, wasn’t it?”

Partner: “It was a difficult time for many people.”

Q: “For many people — but not for your firm’s equity partners, right?”

Partner: “Wrong. Our revenues were down and the decisions we made to let people go were agonizing.”

Q: “But not so agonizing that they slowed your mission to keep billable hours up and average equity partner profits at $2 million a year, correct?”

Partner: “Some things can’t be measured in dollars.”

Q: “True. But Am Law reported recently that your firm’s 2009 average equity partner profits were just under $2 million, right?”

Partner: “That’s the report.”

Q: “If we return to your earlier comments about free market capitalism, who has borne the owner’s risk to your firm in the current economic downturn, Dechert’s equity partners who on average saw their incomes drop from $2.35 to $2 million a year, or the salaried workers — associates, non-equity partners, and staff — who lost their jobs in 2009?”

Partner: “We shared the pain. But we’re no different from other large, successful law firms. Someone running another big firm made the point three years ago: We have to keep our stock price high.” http://www.mlaglobal.com/articles/JCashmanMayerBrownCutsTrib.pdf; http://blogs.wsj.com/law/2007/03/02/more-on-the-mayer-brown-departures/tab/article/

Q: “When you say other large, successful firms, are you referring to the ones that, according to a NY Times April 1 article  (http://dealbook.blogs.nytimes.com/2010/04/01/at-law-firms-reconsidering-the-model-for-associates-pay/), are now developing ways to cut associate salaries?”

Partner: “I can’t speak to what other firms are doing.”

Q: “That article wasn’t an April Fool’s Day joke, was it? Underlying all of those efforts is the mission to preserve equity partners’ seven-figure incomes, isn’t it?”

Partner: “If you say so.”

Q: “And now many people like you — aging senior partners who’ve become accustomed to making millions — don’t know what to do next with your lives, do you?”

Partner: “Speaking for myself, time has crept up on me.”

Q: “You were so focused on pulling up the ladder as a way to protect what you had that you forgot to plan your own exit strategy, didn’t you?”

Partner: No answer.

Q: “Justice can be ironic, can’t it? You don’t have to answer that. No further questions at this time.”

PUZZLE PIECES – Part 11

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[The imaginary cross-examination of a real biglaw senior partner continues…]

Q: “By the way, when Am Law reports a firm’s average equity partner profits, that doesn’t tell us anything about the range, does it?”

Partner: “An average is an average. A range is a range.”

Q: “In some big firms, the range can be pretty substantial, can’t it?”

Partner: “Sure.”

Q: “In fact, at the top of elite firms like yours, the equity partners typically earn several million dollars a year more than the average, right?”

Partner: “We don’t comment on such matters.”

Q: “The point is, when you say ‘everything is relative,’ that’s true even within the equity partnership, right?”

Partner: “What’s your point?”

Q: “Even among the select group of winners who make it into the equity partnership, the even fewer who go on to become firm leaders — as you did — are the real success stories, aren’t they?”

Partner: “That’s the American way, isn’t it? A successful business depends on leaders and the market rewards us accordingly. In that sense, we all become products of the decisions we make.”

PUZZLE PIECES – Part 10

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[Continuing the imaginary cross-examination of a real senior partner profiled in the April 2010 issue of the ABA Journal(http://www.abajournal.com/magazine/article/not_done_yet)]

Q: “All right. Let’s look at 2009. In February, your firm cut 19 attorneys from its U.S offices and, a few weeks later, another 10 staffers?”

Partner: “We weren’t alone. Surely, you remember Black Thursday of that month — 800 biglaw attorneys and staff fired in a single day; over 1100 attorneys for the week.”

Q: “In March 2009, you said good-bye to 125 people — 63 attorneys and other time keepers and 62 adminsitrative staff?”

Partner: “With markets crashing, the firm couldn’t keep unproductive people on the payroll.”

Q: “And firms like yours couldn’t let their billable hours drop below 2,000 a  year, could they?”

Partner: “I don’t agree with that.”

Q: “Your firm’s responses for the NALP Directory said its minimum billable hours expectation for associates in 2008 was 1,950 in Philadelphia and 2,000 in New York, right?”

Partner: “So what? That’s not unique. Our press release explained that we’ve tried to match our resources with our projected needs.”

Q: “That press release came in July 2009, when your firm reportedly terminated another 25 associates along with staff and paralegal positions, right?”

Partner: “You’re citing Law.com and Above The Law.” 

Q: “And you’ve been shrinking your summer associate programs — in your Philadelphia headquarters, for example, from 37 in 2008 to 23 in 2009 to 13 in 2010, according to your NALP report?”

Partner: “If you say so.”

Q: “And in New York from 25 in 2009 to 12 this year?”

Partner: “Whatever the report says.”

Q: “Did your firm ever worry that it might be throwing its furniture into the fireplace in an effort to keep the house warm?”

Partner: “We’re keeping the best people. I’m not concerned.”

Q: “And you’re trying to keep the billable time of those survivors above 2,000 hours annually, aren’t you?

Partner: “That’s your characterization and conclusion, not mine.”

Q: “When you joined the firm in the early 1970’s, there’s wasn’t as much discussion about billable hours, which for most big firms in those days averaged around 1,700 a year, right?”

Partner: “It was a less important metric then. Times have changed.”

Q: “And another metric — leverage — now dictates that associates work eight years at your firm before receiving even non-equity partner consideration, right?”

Partner: “That’s what our NALP submission states.”

Q: “And the only thing your NALP submission says about the prospects for advancement to equity partnership thereafter is ‘CBC’ — case-by-case, right?”

Partner: “I don’t think we’re unusual in that respect. There are exceptions, but the pyramid is the prevailing large firm business model today. It endures because it works.”

PUZZLE PIECES – Part 9

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Q: “That’s a good way to put it. ‘Everything is relative,’ as you say. In the case of your firm, keeping average equity partner profits above $2 million required you to take a number of cost-cutting actions in 2008, right?”

Partner: “Yes.”

Q: “According to Law.com, in March 2008, you laid off 13 associates in the finance and real estate practice and then later gave them the option of taking temporary positions in other practice groups?”

Partner: “That was the report.”

Q: “In December 2008, you cut 72 U.S. adminsitrative positions and started the termination process for another 15 staff positions in London?”

Partner: “That was the report.”

Q: “And you managed to stay above $2 million in average equity partner profits for 2008, didn’t you?”

Partner: “That’s what the American Lawyer  reported. But look at 2009 if you want to understand the challenges we faced in trying to keep our position in the Am Law 100 rankings.”

PUZZLE PIECES – Part 8

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Recession? What recession?

On Monday, April 12, 2010, the National Bureau of Economic Research (NBER), the non-profit group that officially marks the beginning and end of economic downturns, announced that the recession — which started in December 2007 — is not yet over. http://www.nytimes.com/2010/04/13/business/economy/13recession.html

With the DOW Industrials back above 11,000 for the first time since September 2008 and most economists generally bullish on the future, how does biglaw view the situation?

Across the board, attorney hiring remains way down. Many firms that offered full-time jobs to new graduates deferred starting dates into 2011; a few even withdrew offers. Some firms abandoned altogether the second-year student summer programs that have anchored big firm recruiting for more than 40 years. The surviving programs for summer 2010 are a fraction of their 2007 sizes. Pretty bleak, right?

Maybe not for everyone. For a peek inside, consider the ongoing fictional cross-examination of the very real Dechert LLP senior partner profiled in the April ABA Journal (“Not Done Yet”).

(By the way, the data in the questions are real. As Yogi Berra would say, “You can look it up” in the cited sources.)

Q: “You said that the enormous increases since 1995 in equity partner incomes at your firm and others like it reflect ‘free market capitalism’ at work, right?”

Partner: “Yes. Any business enterprise maximizes profits.”

Q: “In capitalism, does the owner bear any risks?”

Partner: “Sure. The owner bears the ultimate risks of the enterprise. If the business fails, the owner’s investment is wiped out.”

Q: “The owner bears the risk of economic setbacks during downswings in the business cycle, right?”

Partner: “Yes.”

Q: “But in the most recent economic collapse, your firm’s owners  — the equity partners — bore very little of that risk, didn’t they?”

A: “I don’t agree. Even the Am Law data show otherwise.”

Q: “Let’s take a look. Am Law reported Dechert’s average equity partner earnings went from an all-time high of $2.35 million in 2007 to $2.145 million in 2008. Is that what you’re referring to?”

Partner: “That’s a decline of almost 9%!”

Q: “A decline to levels that remain astronomical, right?”

Partner: “Everything is relative. 2009 was even worse.”

PUZZLE PIECES – Part 7

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With the added context of David Brooks’ article on leadership, “The Humble Hound,” (NY Times, April 9, 2010) (http://www.nytimes.com/2010/04/09/opinion/09brooks.html), we resume the imaginary cross-examination of a very real senior partner profiled in “Not Done Yet” (ABA Journal, April 2010) (http://www.abajournal.com/magazine/article/not_done_yet)  

Partner: “If you’re asking me whether we have very talented attorneys who don’t progress to equity partnership, my answer is yes.”

Q: “Compared to you and those who rose those through the ranks with you, it’s a lot of very talented attorneys, isn’t it?”

Partner: “Sure.'”

Q: “That’s because today’s big firm business model requires leverage — lots of non-equity attorneys and other time-billers for every equity partner, right?”

Partner: “Look, big law firms have become businesses. I didn’t make it that way and I can’t ignore the marketplace. If we don’t maintain high equity partner profits through appropriate leverage ratios and other means, we’ll lose our ability to attract and retain the best people. If that happens, the entire institution will be at risk and we’ll endanger the jobs of everyone who works there. It’s called free market capitalism and I didn’t invent it.”

Q: “You didn’t invent the phrase, ‘pulling up the ladder,’ either, did you?”

AND HUBRIS, too

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David Brooks is right on this one — and the legal profession is Exhibit A.

Before resuming my imagined cross-examination of a distressingly real biglaw senior partner in “PUZZLE PIECES,” I want to pause on Brooks’ April 9 NY Times column. He makes my point in a broader context: the pervasive absence of thoughtful reflection that passes for leadership is not unique to big law firms.

Looking at corporate America, he asks, “Who’s in charge?”

Then he answers his own question: “They are superconfident, forceful and charismatic.”

To these characteristics, I would add another: hubris.

Having navigated internal politics to reach the pinnacle of power in their organizations, they don’t revisit their guiding principles. Armed with an MBA (or at least, the equivalent mentality of misguided metrics), they validate their governance using the same criteria that swept them to the top.

As a result, attorneys who enjoyed every advantage as they rose through the ranks have now tied themselves to a mypoic view that encourages them to pull up the ladder on their kids’ generation. Compared to the growing national debt that preoccupies many with concern for our progeny’s well-being, baby boomer greed is wreaking far more enduring havoc.

Brooks argues in favor of an alternative style: the humble hound — a leader who combines “extreme personal humility with intense professional will” and “thinks less about her mental strengths than about her weaknesses…She understands she is too quick to grasp pseudo-ojective models and confident projections that give the illusion of control.”

To save them from themselves, big law firms need more such leaders. But who will mentor candidates through the daunting journey into equity partnerships and then upward?

Certainly not 64-year-old senior partners who don’t think about their own retirements until they receive lists of firm nominees for their management committees, only to find that because of advancing age their names aren’t on them.

What can you say about a leader for whom the approach of a 65th birthday comes as a surprise?

PUZZLE PIECES – Part 6

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Q: “OK, let’s get specific. Let’s talk about you. Your path to the top of your firm was a lot easier than it is for new associates today, right?”

Partner: “I don’t accept that. We’re a meritocracy. Cream rises to the top.”

Q:  “Just because cream rises to the top doesn’t mean you skim all of it off, does it?”

Partner: “That’s clever, but what’s your point?”

Q: “Are you saying that the path to equity partnership at your firm is no more difficult now than it was for you?”

Partner: “I don’t think about it that way.”

Q: “I’m sure you don’t. But I’m asking you to think about it that way now. According to Am Law, in 1995 your firm had 315 lawyers of whom 132 — more than 40% — were equity partners, right?”

Partner: “That’s what it reported.”

Q: “In Feburary 2010, American Lawyer reported that your firm ended 2009 with more than double that number of lawyers — almost 800 in all. But during that 14-year period, the number of equity partners rose by a measly 17 — to only 149 , right?”

Partner: “You’ve posed a compound question, but what’s your point?”

Q: “When you’re averaging only one additional equity partner per year on a net basis, every associate in an incoming class of 20, 30 or even more law school graduates faces pretty daunting odds against success, correct?”

Partner: “The best will still make it.”

Q: “And if your firm wants to preserve its equity partners’ multi-million dollar incomes, some highly capable attorneys — people good enough to have advanced if they’d been in your demographic group 30 years ago — won’t capture the brass ring of equity partnership today, will they?”

Partner: “We’ll always have room for the best.”

Q: “Your Honor, I move to strike the witness’ last answer as non-responsive.”

THE COURT: “Motion granted. The witness is instructed to answer the question.”

PUZZLE PIECES – Part 5

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Q: “According to Am Law, in a dozen years, your firm’s average equity partner profits soared by $2 million — from about $350,000 in 1995 to $2,350,000 in 2007, right?”

Partner: “That’s what they published.”

Q: “In 2007, you personally were at the top of the equity partnership, weren’t you?”

Partner: “I’m not going to apologize for success.”

Q: “I haven’t asked you to apologize yet, have I?”

Partner: “No.”

Q: “The point is: you were making a lot of money in 2007 when it first hit you that your 65th birthday was approaching, right?

Partner: “Yes.”

Q: “Millions of dollars a year?”

Partner: “Yes.”

Q: “That amount dwarfed what your mentors at the firm made 20 or more years earlier, didn’t it?”

Partner: “Sure. So what? All well-run big firms became more lucrative  over the past two decades.”

Q: “But not everyone in those firms — or yours — benefitted, did they?”

Partner: “Your question is too vague. You’ll have to be more specific.”

PUZZLE PIECES – Part 4

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[An imaginary cross-examination of the 67-year-old Dechert partner profiled in “Not Done Yet” continues…]

Q: “What about money?”

Partner: “What about it?”

Q: “Do you think your equity partner income made you reluctant to admit — even to yourself — that someday you’d have to retire from your firm?”

Partner: “I don’t know why it would. Wealth creates options.”

Q: “Perhaps. Or maybe it fuels the lesser angels of our nature. Forty years ago, you didn’t become a lawyer because you thought it would make you rich, did you?”

Partner: “No. As I told the ABA reporter, early American lawyers such as Daniel Webster and Henry Clay inspired me.”

Q: “When you started your career in the early 1970s, no one talked much about billable hours, did they?”

Partner: “No.”

Q: “Or partner leverage?”

Partner: “Nope.”

Q: “Or other law firms’ average equity profits per partner?”

Partner: “How much money people made was not the subject of polite conversation. There’s more information today.”

Q: “I take it that you’re referring to the Am Law 100. What’s that?”

Partner: “The annual listing of the nation’s largest law firms.”

Q: “Do you remember when the first list appeared?”

Partner: “Sometime in the 1980’s, wasn’t it?”

Q: “1985; it started as the Am Law 50. Ten years later — in 1995 — what did Am Law report the total number of lawyers in your firm to be?”

Partner: “Probably around 300.”

Q: “You’re close. 315. How many of those were equity partners?”

Partner: “I don’t recall.”

Q: “Let me refresh your recollection. The July/August 1996 issue of American Lawyer says you had 132 equity partners — more than 40% of your firm’s attorneys. Do you know what Am Law said Dechert’s average equity partner profits were in 1995?”

Partner: “I’m sure you’ll tell me.”

Q: “$345,000 in 1995. Do you know what Am Law reported your firm’s average equity partner income to be a dozen years later — in 2007 –when you had the revelation that, alas, you were getting older?”

Partner: “Go ahead.”

Q: “$2.35 million.”

Pause.

Q: “Let’s talk about how that happened.”

PUZZLE PIECES – Part 3

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As he himself described it, one of the top partners at Dechert LLP was 64 years old when he first realized that on his next birthday he’d turn 65. Now 67, he’s quoted in “Not Done Yet”:

“It made me start to think, ‘I’m in the traditional retirement zone without having spent one day thinking about it.’…Every time I set a timetable for a decision, I move it.”

That’s a witness statement I’d like to cross-examine — even if only in my dreams.

Q: “You’re an intelligent, accomplished attorney at one of the nation’s most prestigious firms, aren’t you?”

Partner: “I suppose you could say that.”

Q: “Don’t be modest. You have Ivy League undergraduate and law degrees sandwiched around an MBA, right?”

Partner: “Yes.”

Q: “You’re a senior partner at one of the nation’s elite firms — a group known as the Am Law 100, right?”

Partner: “Yes.”

Q: “You say that you didn’t think about retirement for a single day until you were 64?”

Partner: “Right.”

Q: “The light dawned when a list of nominees for the firm’s policy committee circulated and you saw that your name wasn’t on it, right?”

Partner: “That’s correct.”

Q: “You must have been pretty busy worrying about other things?”

Partner: “I’ve cultivated a very demanding practice. Law has become a 24/7 job.”

Q: “In your case, the job was so demanding that it completely distracted you from any awareness that you were getting older, is that what you’re saying?”

Partner: “Well…”

Q: “Before you answer, let me ask if you think anything else might have been contributing to your denial of the inevitable?”

Partner: “What do you mean?”

PUZZLE PIECES – Part 2

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Tomorrow, I’ll return to the first of two articles that propelled me to launch this blog with “PUZZLE PIECES.”  First up is “Not Done Yet,”  (ABA Journal, April 2010 http://www.abajournal.com/magazine/article/not_done_yet/), about an aging big law firm partner who approached traditional retirement age only to have his own mortality surprise him.

Born just a few years before the beginning of a baby boomer generation that seemed always to have its way, he’s not alone in pondering the question: “Now what?” In fact, there are one-quarter million attorneys over 55 behind him.

But knowing his answer is less important than understanding the path that has taken him and many others to their current predicaments. Even more important are the implications for those now seeking an opportunity to get into that game.