BONUS TIME!

Posted on December 14, 2010 by thebellyofthebeast

Firms that abandoned lock-step in favor of merit-based compensation a year ago are now reversing course. Why?

The prevailing theory is backlash. Associate dissatisfaction pervades big law; some saw “competency models” as thinly disguised efforts to reduce associate wages. (http://www.lawjobs.com/newsandviews/LawArticle.jsp?id=1202443769098&rss=newswire&slreturn=1&hbxlogin=1) Restoring lock-step, the argument goes, should enhance morale.

But when firm leaders really care about morale, they’ll ask associates to evaluate partners on mentoring, training, and overall humanity — and, at least to some extent, partner compensation will reflect the results. Instead of looking into those unpleasant mirrors, managers are likely to form a new committee investigating the “associate problem,” as if it were a mystery.

One way to improve morale would be to tell associates the truth earlier. But quality merit review is tough work. Performing it properly is not in most large firms’ short-term economic interests. For starters, they can’t bill the time to clients.

When I chaired my firm’s associate review committee in the 1990s, the process focused on a single goal: Identifying the best among a distinguished group. That meant evaluating specific skills, developmental needs, and future prospects. To squeeze out personality conflicts and internal politics, partners from outside their assigned associates’ practice areas gathered performance information. Then the committee actually deliberated for an entire day.

In an era when lateral partner movement among firms was rare, promotion decisions were akin to choosing a new family member. Admittedly, subjective judgments produced the distinctions, but partners generally played fair with the next generations. The integrity of the process produced widespread respect for outcomes.

In those days, compensation didn’t turn on billable hours. High outliers (those billing over 2,400) were singled out for counseling that doesn’t happen anymore: “If you burn out, you’re no good to us or anyone else.” Low outliers (below 1,600) attracted a different concern: “Partners aren’t giving that person work. Why? Is there a performance problem?” Between those extremes, hours had little impact on reviews or compensation. As incredible as that now sounds, it was true throughout big law. Just ask the senior partner who is pressing you to “get your hours up.”

Transparency worked. Knowing relative position allowed associates to handicap prospects while they were most marketable. Performance ratings translated into monetary distinctions that spoke for themselves. Anyone displeased with the message could explore other options.

New York firms pioneered lock-step. Exploding client demand caused many more to follow. Uniform compensation to a class allowed partners to postpone the day of reckoning for those with limited futures. Unpleasant news went undelivered.

Some partners rationalized the failure to provide more candid feedback: “We need the bodies to run our business. We’re paying them decent money. So they’re doing ok.”

The first two points were true: A myopic MBA-mentality emerged and departing associates often found that their new positions paid substantially less than they had been making. But doing ok? Some lost their jobs, their lifestyle, and chunks of their self-image in a single belated conversation.

Lock-step was also supposed to improve morale by reducing internal competition. But as compensation packages ballooned, associate satisfaction plummeted and voluntary attrition skyrocketed. Bonuses tied to hours but unrelated to quality erode meritocracies and morale — as does boring work that doesn’t enhance attorney skills.

Modern mega-firms now face the toughest task. To perform truly merit-based reviews, they must develop meaningful individual assessments for legions of associates — sometimes hundreds in a single office. Without proof that the exercise contributes to the bottom line, what incentivizes firms to devote the non-billable time required to perform reviews diligently? Management’s concern for the future, you say? At most big firms, that means projecting next year’s equity partner profits. They’re counting on laterals to fill quality gaps.

Associates should be skeptical about how firms now promising merit review will deliver quality feedback. But lock-step that camouflages meaningful information is no panacea. Student loan repayment demands notwithstanding, sooner is better than later when it comes to acquiring the knowledge that frames life’s most important decisions.

EXPLAINING BAD BEHAVIOR

Posted on December 2, 2010 by thebellyofthebeast

I’ve never met Steven Pesner, who lit up the legal blogosphere with his now infamous e-mail to Akin Gump’s New York office litigation billers and their secretaries. (http://abovethelaw.com/2010/11/akin-gump-partner-pens-email-fantasy-about-firing-delinquent-time-keepers/) Some say he’s typical of big law partners; others argue hopefully that he is an exception. Someone else can tackle that survey. I’m interested in what the episode reveals about the prevailing large firm business model that put him in a position to disseminate the words that now define him.

First, his fundamental point applies to almost all large firms: Get your time in because the billable hour remains big law’s cornerstone. People working for Pesner undoubtedly log lots of them; they lead to revenue — an essential prerequisite to his internal power. That’s not unique.

Second, the model has many problems, only one of which he targets: Tardy time submission. Some attorneys wait a week — or even a month — before trying to “reconstruct” their billable activities. That allows them to believe that doing their best to remember earlier tasks isn’t lying. Insofar as Pesner sought to deter creative writing at week’s or month’s end, he was protecting clients and his firm. Of course, that doesn’t justify his rhetoric. Nothing can. But his topic reveals one of many flaws infecting the billable hour regime.

Third, economic self-interest looms large. His message went exclusively to all New York litigation personnel — a point commentators have ignored. Pesner’s departmental billings may well frame a larger internal debate: His NY litigation group’s near-term economic standing. He might have been preparing to defend his memo’s recipients against annual intra- and interoffice warfare with corporate, restructuring, and transactional group leaders. Most large firm equity partners eat what they kill, along with what they successfully claim to have killed. In many firms, allocating profits often starts geographically by office practice group before proceeding to rainmakers who then decide the fate of individuals within each group.

Fourth, Pesner’s valid points morphed into a tirade that reveals pervasive equity partner hubris, especially among big law managers: He believes his own press releases.

“9. For those of you who think you are exempt from doing time sheets on a daily basis, I’d suggest that you reevaluate your importance and get ready to prove that (a) you are busier than I am on legal work, (b) you are busier than I am on client development work, (c) you are busier than I am on firm work and (d) [Redacted] and I do not have better things to do with our time than beg you to be responsible.”

The word “I” appears five times. That’s how some senior partners orient their world — around themselves. Few, if any, others compare favorably to their own idealized self-images. Their constant refrain is “today’s young people just don’t want to work as hard as I did.” But as associates, none had the challenge of a BlackBerry keeping them on-call 24/7. In fact, they didn’t even have annual minimum billable hours requirements. Their hypocrisy is stunning.

Finally, he acknowledges the life-or-death power that all senior partners wield over subordinates’ careers:

“10. Candidly, I’d put every future material violator’s name in a hat, randomly pick out a name, and publicly fire the person on the spot—to demonstrate that time sheet compliance is serious business. And incidentally, it is my understanding that the job market is not so good right now in case you did not know.”

The immediate issue was time submissions, but the underlying attitude infects working relationships throughout big law. Pesner was unique in his candor, but not in his views. Few dare to challenge such a partner in a position to make or break careers. Pesner’s threatening finale leaves no doubt in that respect:

“11. Also, please remember that I have a long and excellent memory.

If you have any questions, think long and hard before asking them—this simply is not very complicated.”

Sometimes a few words from one man are worth a thousand pictures of what too many others in his profession have become.

“LIES, DAMN LIES, AND STATISTICS”

Posted on November 16, 2010 by thebellyofthebeast

ALM editor-in-chief Aric Press penned a provocative article about Indiana Law Professor Bill Henderson’s for-profit venture on recruiting, retention, and promotion. (http://amlawdaily.typepad.com/amlawdaily/2010/11/pressconventionalwisdom.html) The WSJ law blog and ABA Journal covered it, too. (http://blogs.wsj.com/law/2010/11/15/on-law-firms-and-hiring-is-a-new-paradigm-on-the-way/) Henderson is analyzing why some attorneys succeed in Biglaw and others don’t.

Does anyone else find his project vaguely unsettling?

At first, I thought of the venerable computer programming maxim, “garbage in, garbage out.” That’s because he’s asking Am Law 200 partners to identify values and traits they want in their lawyers — and he’s assuming they’ll tell him the truth. But will they admit to seeking bright, ambitious associates wearing blinders in pursuit of elusive equity partnerships typically awarded to fewer than 10% of large firm entering classes? Or that such low “success” rates inhere in the predominant Biglaw business model that requires attrition and limits equity entrants to preserve staggering profits?

Then I considered Mark Twain’s reflections on the three kinds of falsehoods: “Lies, damn lies, and statistics.” It came to mind because Henderson’s researchers “pour over the resumes and evaluations of associates and partners trying to identify characteristics shared by those who have become ‘franchise players’ and those who haven’t.” Here’s what those resumes and evaluations won’t reveal: the internal politics driving decisions.

Most Biglaw equity partners are talented, but equally deserving candidates fail to advance for reasons unrelated to their abilities. Rather, as the business model incentivizes senior partners to hoard billings that justify personal economic positions, those at the top wield power that makes or breaks young careers — and everybody knows it. Doing a superior job is important, but working for the “right” people is outcome determinative. Merit sometimes loses out to idiosyncrasy that is impervious to Henderson’s data collection methods.

But perhaps the biggest problem with Henderson’s plan is it’s goal: identifying factors correlating with individual success. Does the magic formula include “a few years in the military, a few years in the job force, or a few years as a law review editor?”

If managers warm to Henderson’s conclusions (after paying his company to develop them), they’ll leap from correlation to causation, develop checklists of supposed characteristics common to superstars like themselves, and hire accordingly. Law schools pandering to the Biglaw sliver of the profession (it’s less than 15% of all attorneys) could take such criteria even more seriously. Before long, prospective students will incorporate the acquisition of “success” credentials into their life plans.

The difficulty is that today’s Biglaw partners already favor like-minded proteges. That inhibits diversity as typically measured — gender, race, ethnicity, sexual orientation, and the like — along with equally important diversity of views and a willingness to entertain them. Even today, concerned insiders are reluctant to voice dissent from Biglaw’s prevailing raison d’etre — maximizing short-term profits at the expense competing professional values and longer-term institutional vitality. Won’t meaningful diversity — of backgrounds, life experiences, and resulting attitudes about professional mission — suffer as groupthink makes firms even more insular? Meanwhile, trying to improve overall “success” rates is a futile goal; they won’t budge until the leveraged pyramid disappears.

I don’t fault Henderson, who bypassed Biglaw practice for academia after his 2001 graduation. But Press’s warning is important: “To some extent, it doesn’t matter what Henderson and Co. discover. What matters is that the inquiries have begun…If we’ve learned anything from the last decade, it’s that we can’t predict the consequences of new information beyond acknowledging its power to disrupt.”

Consider two unfortunate examples. The flawed methodology behind U.S. News’ law school rankings hasn’t deterred most students from blindly choosing the highest-rated one that accepts them. (Exorbitant tuition and limited job prospects may be changing that.) Likewise, Biglaw’s transformation from a collegial profession to a short-term bottom-line business accelerated after publication of average partner profits at the nation’s largest firms (then the Am Law 50), beginning in 1985; I just published a legal thriller describing that phenomenon. (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104)

The most important things that happened to me — in Biglaw and in life — were fortuitous. No statistical model could have predicted them. Still, I hope Henderson’s study answers an important question: Would his likely-to-succeed factors have led any firm to hire me?

THE END OF LEVERAGE? JUST KIDDING.

Posted on November 11, 2010 by thebellyofthebeast

Since the beginning of the Great Recession, some observers have predicted the demise of the Biglaw leverage model. (http://www.law.com/jsp/article.jsp?id=1202428174244) Are they correct? After all, recent associate classes are dramatically smaller than in prior years. Unless equity partner ranks shrink proportionately, the argument goes, something has to give and that something will be the very business model itself. The days of using four or more associates to sustain a single equity partner must be numbered, right?

In fact, the model endures, but with structural innovations. What has been transient leverage — continuous non-equity attorney attrition coupled with annual replenishment from law schools — is giving way to something more permanent and, perhaps, more sinister for the future of the profession. Law firm management consultant Jerome Kowalski recently called it the “Associate Caste System.” (http://www.law.com/jsp/article.jsp?id=1202472939044&PostRecession_Law_Firms_A_New_Caste_System_Emerges)

New hires earning $160,000 a year are the “showcase pieces,” but they are a much smaller group than they once were. Below them at the same firms is a vast underbelly of lawyers. Some are full-time but have taken themselves off partner tracks and make less than their nominal classmates. At the bottom are contract attorneys whose jobs won’t last beyond their current projects. They work per diem with no benefits. Kowalski describes them as comparable to “those guys who hang around in front of a Home Depot waiting for some contractor to show up with a truck.”

The rise of legal outsourcing could add yet another attorney subclass contributor to Biglaw profits, provided firms can persuade clients to accept fees greater than what the people doing the outsourced work earn. That’s nothing new. For a long time, clients have regarded overpriced associates as a necessary cost incurred to retain a big-name attorney.

Does this add up to the demise of the lucrative leverage model that has kept average equity partner profits for the Am Law 100 well above $1 million annually for many years?

For all practical purposes, it means the opposite. Although big firms are hiring 30 or 35 new associates rather than the 100 or more of a few years ago, most of them will still be unpleasantly surprised when they don’t capture the equity partner brass ring after pursuing it for a decade or more. That component of the model remains intact. Meanwhile, the rest of the leverage action has moved to the growing ranks of underbelly people. For as long as they get paid less than their billing rates, they contribute to equity partner wealth.

In fact, many Biglaw managers prefer this new system. They save on recruiting (say, 35 instead of 150 new associates each year), summer programs, associate training, and other expenses associated with talent development. Meanwhile, the underclass of attorneys who know their places will resign themselves to their limited prospects: a source of permanent leverage.

This continues an ugly trend: Many big firms have been candidly closing long-term career windows for their youngest lawyers. For example, Morgan Lewis already had a non-partner track for those who opted onto it. But when the firm recently announced a return to lock-step associate compensation, it included this kicker: another permanent non-partner track for young lawyers who pursue partnership but don’t make it. (http://amlawdaily.typepad.com/amlawdaily/2010/11/morganlewispay.html)

Rather than up-or-out, it’s becoming stick around and make the equity partners some money. In earlier times, wise firm leaders either promoted such individuals to well-deserved equity partnerships or terminated them as counterproductive blockage that undermined morale and deprived more promising younger lawyers of developmental opportunities. Either way, positioning the next generation to inherit clients served long-term institutional interests. But that’s less important when equity partners jealously guard their clients to preserve personal economic positions and “long-term” doesn’t extend beyond current profits or the coming year’s equity partner compensation decisions.

Here’s my question: How will any aspect of this new world promote the profession’s unique and defining values or improve Biglaw’s dismal career satisfaction rates? Here’s an even better one: Does anyone care?

ACCELERATING IN THE WRONG DIRECTION

Posted on November 5, 2010 by thebellyofthebeast

Recently, law firm management consultant Hildebrandt Baker Robbins’ Kristin Stark offered her solution to problems that she sees with many large firm compensation systems:

“Firms need to be talking to their partners about their performance every year — and throughout the year. Ongoing coaching of partners on their performance and helping them make improvements has become a powerful tool for driving partner and firm performance in successful firms. High-performing partners want to work in an environment where co-owners are engaged and actively contributing to firm growth. Without this, a firm’s top performers are at risk.” (http://www.law.com/jsp/law/article.jsp?id=1202472843670&Partner_Compensation_The_Downturns_New_Touchy_Subject)

Stark buried the lead, but her key point appears to be that a firm’s principal mission should be to keep its rainmakers happy. Otherwise, they’re “at risk” — meaning that they’ll leave to make more money elsewhere.

Wait a minute. A few lines earlier, Stark described the growing gap in high-to-low partner compensation: “Before the recession, [it] was typically five-to-one in many firms. Very often today, we’re seeing that spread at 10-to-1, even 12-to-1.”

“You can imagine that creates a lot of problems,” she continued. “It drives further tension between partners over compensation and creates an environment of the ‘haves’ and the ‘have-nots’ in law firms.”

What should firms that have become beholden to a few rainmakers and their often oversized egos do? Whatever it takes to keep them? Won’t that exacerbate the resentment of those whom Stark calls the “have-nots”? What are the limits of tolerably bad behavior by the “haves”? Big billers always get a pass for hoarding clients. How about verbally abusing subordinates? Or worse?

Meanwhile, she suggests, firms should coach other lawyers on the importance of “improving performance.” That’s code for billing more hours and bringing in more business. Forget about mentoring the next generation, encouraging collegiality, enhancing attorney career satisfaction, or focusing on other professional values for which the dominant large law firm model lacks a metrics link to bottom-line equity partner profits.

It also means reconciling the “have-nots” to their proper places in the firm:

“In this market firms have to constantly reevaluate the expectations of a partner, communicate with partners about what is required of them, and incorporate partner goals and expectations into the compensation process,” Stark said.

In other words, everyone should understand the need to work harder so that the highest paid equity partners widen their already enormous compensation advantages over all others.

All of this is an interesting commentary on a group of extraordinarily talented men and women — a firm’s longstanding (but non-rainmaker) equity partners who, apparently, somehow lost the intelligence and personality traits that caused them to excel in the first place. As students, their brains and hard work took most of them to the best colleges and law schools. As associates, their ambitions carried them past peers into equity partnerships. Presumably, they served clients who valued their work.

When did they lose it? Admittedly, a few never deserved promotion, but internal firm political stars aligned in a way that allowed them to bypass quality control criteria. Success made others fat, happy, and lazy; still others burned out. But most equity partners achieved their status because they had a lot going for them — and still do. If they continue to enjoy the practice of law, that alone pushes them as it always has.

Not so, says Stark. They need coaching to keep their expectations in check. They must pander to top billers whose eternal answer to the question “How much is enough?” will always be “More.” They should live with the anxiety accompanying ongoing performance evaluations throughout the year. Never mind that, in Biglaw as in life, individual careers experience peaks and valleys; rarely is any overall upward trajectory a straight line.

Fear isn’t a productive ingredient in the recipe for motivating talent. But try telling that to some large firm managing partners and their outside consultants. On second thought, don’t bother. They already know everything.

WORK-LIFE BALANCE MONTH

Posted on November 1, 2010 by thebellyofthebeast

Pity the United Kingdom, which I just visited. It has only “Work-Life Balance Week” — the last seven days of September. How many Americans realize that October was our “Work-Life Balance Month“? Such commemorations suggest an obvious question: What should we celebrate the rest of the year? Work-Life Imbalance?

The concept of work-life balance is laudable, even if the phrase itself can be somewhat off target. For those who are chronically unhappy with their jobs, “balancing” unpleasant “work” with the rest of “life” is at best palliative, not curative. Dissatisfaction with a career usually infects everything else. Notwithstanding daunting economic realities, a better long-term plan for such sufferers is to find another way to make a living.

On the other hand, my friend, Northwestern Professor Steven Lubet, correctly notes that no job is perfect: “That’s why they call it work.” But attorneys who generally enjoy their tasks still benefit from time spent on people and things other than clients and their problems. Enjoying life outside the office makes most of us better in every way and improves worker productivity. Unfortunately, that’s an increasingly tough sell in most of the Biglaw world where the MBA-mentality of misguided metrics — billable hours, billings, and short-term equity partner profits — force all oars in the water to row in the same myopic direction.

Being a lawyer has always been demanding, but when even satisfied attorneys feel pressure to work unreasonably long hours, bad things happen to them, their families, clients, firms, and the profession. Slackers can take no comfort in my views. An honest 2,000 billed hours — the annual minimum that most big firms report to NALP — requires 10-hour days and occasional weekends. (http://www.law.yale.edu/documents/pdf/CDO_Public/cdo-billable_hour.pdf) That’s more than firms required 25 years ago, but it’s still not unreasonable.

Unfortunately, too many large firms made the 2,000 minimum culturally irrelevant long ago. No debt-ridden associate concerned about keeping a job wants to bring up the rear of a year-end billable hours list. Nor does the pressure end with advancement. Equity partners must continually justify their economic existences — year-after-year.

During my 30 years at a large firm, my billed hours usually ranged from 2,000 to 2,200 yearly. Once or twice, they reached 2,500 and every incremental hour above 2,200 took a increasingly severe toll. Beyond losing any semblance of a personal life, how well does anyone function during the 14th hour of a workday compared to hour 8? A fatigued mind is fuzzy, irrational, less efficient, and prone to error. Most clients paying for an attorney’s 3,000th billed hour in a year are getting very little for their money. Yet some lawyers do that year after year — and some clients encourage such behavior.

The Department of Transportation reviewed scientific studies on the effects of exhaustion on the human mind and body before limiting over-the-road truckers to 70 hours in an 8-day period, after which they must rest for 34 consecutive hours. (http://www.fmcsa.dot.gov/rules-regulations/topics/hos/) Ask any Biglaw lawyer the last time he or she worked at that clip (or worse) and then went 34 straight hours without looking at a BlackBerry or talking with clients and colleagues on a cellphone.

Who presents the greater societal danger — a tired, overworked driver exceeding the 8-day maximum of 70 hours, or an attorney maintaining a more strenuous pace? Big-hours legal billers might argue that trucker fatigue is different. When a sleep deprived driver causes a catastrophe, innocent bystanders are at risk. If lawyer exhaustion produces suboptimal or even negative results, the client (or the attorney’s malpractice carrier) pays the price; usually it’s financial. That’s reassuring.

No one wants an attorney who has nothing to do. Likewise, every good lawyer sometimes confronts genuine emergencies that require burning the midnight oil. But a firm’s perennial billable hours winners present potential problems that, for some reason, don’t concern most clients. I’ve never understood why.

THEY’RE NOT ENTITLED TO ME

Posted on October 22, 2010 by thebellyofthebeast

At a recent debate, New York’s U. S. Senate candidate Joseph J. DioGuardi repeated his charge that Democratic incumbent Kirsten E. Gillibrand spent her early professional career at a prestigious New York City law firm (Davis, Polk & Wardwell) where she represented the world’s largest cigarette company. Gillibrand countered that DioGuardi cast pro-tobacco votes as a congressman. She also explained that, as a young lawyer, she had no choice in her assigned cases. (http://www.nytimes.com/2010/10/16/nyregion/16debate.html)

Gillibrand’s response was intriguing for two reasons. First, she fought tobacco taint with tobacco taint, rather than citing the foundational principle of our adversary system: However distasteful it sometimes seems, everyone is entitled to representation. Second, her law firm supposedly had a policy that allowed attorneys to decline work for its tobacco client. (http://www.nytimes.com/2009/04/10/opinion/10observer.html). If she didn’t avail herself of the firm’s policy, what does that mean?

Maybe nothing. Although she didn’t mention the principle that everyone deserves a lawyer, it still applies. That’s why even Liz Cheney’s most conservative colleagues with law degrees lambasted her for publicly listing current Department of Justice attorneys who represented Gitmo detainees pro bono — as if there was something wrong with providing a defense to those individuals.

To be sure, Cheney has the personal freedom to decline such representations. My former law school professor, Alan Dershowitz, defended notorious criminal defendants, but as he told my fellow classmates more than 30 years ago, “Everyone has a right to representation, but no one has a right to me.”

Every lawyer has that power to exercise a final veto. If used, someone else will certainly take up the cause. But Gillbrand’s defensive response concerning her tobacco client suggests at least a retrospective queasiness with her earlier work. If the firm gave her the right to say no, what’s the significance of her failure to do so?

Every young associate in a big firm could answer that question. Regardless of a firms’s official position, practical considerations define the limits of an associate’s willingness to say no.

Large clients’ biggest and often unpopular problems have become central to Biglaw profits. The prevailing law firm business model has reduced the number of available equity partnership slots and concentrated internal power in the relatively few who control clients and billings. For an associate, it’s only natural that a firm’s official “freedom to choose” policy would sometimes yield to the pressures accompanying a request from a senior partner who can single-handedly make or break a subordinate’s career. Partners themselves sometimes confront analogous difficulties when clients push uncomfortably close to the outer edges of what their lawyers deem permissible.

Some consequences are subtle. The resulting erosion of individual attorney autonomy has probably contributed to growing career dissatisfaction, especially in large firms where unhappiness is greatest. In today’s tight labor markets, young lawyers desperately need their jobs to repay enormous student debt and sustain themselves. Few would risk unemployment to assuage their consciences or to avoid an abusive superior. In fact, most don’t allow such rebellious thoughts to enter their heads, but maybe they should.

One of my adult children recently encountered a high school classmate who is now working in a big firm after graduating from a top law school. While contemplating the many challenges confronting the next generation, consider that young lawyer’s lament and career plan:

“I’m working too hard for clients I don’t like pursuing I causes I can’t stand and making the world worse. But I have to do it long enough to repay student loans and get experience that I can use to do something worthwhile with my law degree.”

It may not be that simple. Those wrestling with situations that burden them with genuine moral havoc — whatever its nature or origins — might be well advised to extricate themselves sooner rather than later. Life’s decisions tend to be cumulative and the consequences of earlier choices that seem inconsequential at the time can endure far beyond their originally anticipated life expectancies. Just ask Kirsten Gillibrand.

WHO REMEMBERS FINLEY KUMBLE?

Posted on October 14, 2010 by thebellyofthebeast

“I just don’t see the need to cram two firms with around a thousand lawyers [each] together. It made no sense,” one Akin partner reportedly told the National Law Journal shortly after the collapse of Akin-Orrick merger talks.

The number of law firm mergers in 2010 is down from recent years, but look at the headliners: Sonnenschein – Denton; Hogan & Hartson – Lovells; Reed Smith – Thompson & Knight; Orrick and anyone. An earlier consolidation wave produced K&L Gates, DLA Piper, Bingham McCutcheon and others.

How much of this activity proceeds from the simplistic premise that bigger is always better?

When I was a young partner in my large firm, Finley Kumble became a disaster that struck fear in the hearts of big firm expansionists. During the early 1980s, Finley rocked the legal world as it signed up high-profile figures and raided other firms’ superstars, some of whom earned the then-staggering sum of $1 million annually. From only 8 lawyers in 1968, Finley became the nation’s second largest firm by 1985.

It promoted itself as a national powerhouse run on principles of meritocracy. The more business a lawyer generated, the more money he or she took home. Money was the glue that held the partnership together. Does that sound familiar?

But Finley grew too fast, assuming debt for office expansions and promising outsized paychecks to big name lateral hires. As revenue dollars dwindled, the firm disintegrated. With more than 650 attorneys at the time of its dissolution in 1987, it was still one of the nation’s largest firms.

The ghost of Finley Kumble haunted Biglaw leaders for years. Some saw its end as confirming that even large, diverse firms possessed their own identities. Mixing cultures through aggressive recruitment of name players with portable practices was a mistake. Others concluded that senior attorneys and their egos couldn’t survive as a single cohesive unit if their sole point of intersecting common purpose was greed. Still others saw the failure as an inevitable consequence of unrestrained growth. Finley proved that there was a limit on the size that any healthy large law firm could attain. No one knew the outside boundary with certainty, but crossing it was fatal.

What did today’s Biglaw managers learn from the lessons of Finley Kumble’s demise? Probably very little. After all, lawyers excel at distinguishing away precedent that undermines their preferred positions.

In that respect, modern proponents of growth through merger and high-profile lateral acquisitions can point to many differences between Finley and today’s firms. For example, the use of MBA-type metrics that focus on short-term profits at the expense of non-monetary values is now pervasive throughout Biglaw. In that respect, the earlier potential for cultural clashes has diminished as current year equity partner profits have become the universal coin of the realm. Likewise, lateral movement at all levels — especially among rainmakers who were Finley Kumble’s signature recruits — has become commonplace. Indeed, the legal world has become more hospitable to Finley’s central mission and modus operandi.

It would be interesting to hear from former Finley attorneys on the question of how today’s large firms differ from what their old firm once was. Perhaps Finley was just ahead of its time. Or perhaps some major players in Biglaw law are about to see their times change. Or maybe the large firm segment of the profession is proceeding toward the same countdown that big accounting firms have already experienced: From Big 8 to Big 6 to Big 5 to Big 4 — and the race is on to be one of those few.

Here’s the key question: Who benefits in the long run from the rise of mega-firms? Management consultants embrace strategic fits producing scale economies that supposedly benefit clients and equity partners. Perhaps they are correct. But who considers whether hidden costs include undermining community, exacerbating attorney dissatisfaction, or imperiling broader professional values?

Personally, I enjoyed the time when I recognized most of my equity partners at the firm’s annual meetings. Who is willing to develop or consider a metric by which to measure that?

KEEP FEEDING PROFITS THE BEAST. WHAT COULD GO WRONG?

Posted on October 7, 2010 by thebellyofthebeast

Most Biglaw equity partners are weathering the persistent economic storm quite well. But who’s paying the price?

As the economy cratered in 2009, average equity partner profits for the Am Law 100 actually edged up slightly — to $1.26 million. As the summer of 2010 ended, law firm management consultant Hildebrandt Baker Robbins reported that profits remained healthy in a stagnant market. (http://www.hbrconsulting.com/PMIQ2-2010) (Its Peer Monitor Economic Index (PMI) purports to capture the “drivers of law firm profitability, including rates, demand, productivity and expenses.” How’s that for a nifty, all-inclusive metric?)

Recently, Citi released six-month data for 2010 showing increases in average equity partner profits compared to 2009, notwithstanding flat revenue and reduced demand. (http://amlawdaily.typepad.com/amlawdaily/2010/09/citimidyear.html)

How are the equity partners doing it? Look at the PMI components: revenue, expenses, and productivity.

1. During the first half of 2010, billing rates trended up by 4%. According to Citi, that increase could reflect senior partners with higher billing rates doing work that younger lawyers once performed. Such hoarding is the way some partners respond to lean economic times. No one escapes the pressure to maintain hours.

2. Reduced expenses is a nice way of saying that attorneys and staff lost their jobs. Black Thursday in mid-February 2009 was bad enough; Biglaw laid off thousands of associates that week. But Hildebrandt noted that headcount reductions actually peaked months later — in the fourth quarter of 2009. This “relentless focus on cost cutting has managed to sustain profitability.”

The chairman of Citi’s Law Firm Group added, “Given these results, we see the first six months of 2010 as lackluster from a volume perspective but made palatable due to belt-tightening.” Whose belts?

3. Increased productivity is MBA-speak for squeezing more billable hours from attorneys. Hildebrandt expressed concern that the quarter’s 1.7% productivity increase marked a slowdown compared to the 2.3% gains of the two prior quarters. The prime directive remains: Get those hours up.

Now what?

Hilbedrandt’s report: “We may be reaching an inflection point where major fundamental changes in legal service delivery are needed to prosper in the years ahead. New approaches to firm structures, client management, pricing strategies and talent development need to be closely examined. The challenge to firms will be in their willingness to innovate, experiment and change longstanding firm traditions in order to find new avenues of growth and profitability.”

What does that mean? Last week, Hildebrandt’s Lisa Smith offered a five-year scenario in which increased efficiency, outsourcing, and use of staff attorneys could combine to reduce the number of current non-partner attorneys in the Am Law 200 from 65,000 to 47,500 — a 27% drop. (http://www.hbrconsulting.com/blog/archive/2010/09/23/chipping-away-at-the-traditional-model.aspx ) It’s unclear if her assumed efficiency gains included expected law firm consolidations, but mergers of any businesses usually eliminate jobs.

Meanwhile, non-economic metrics — the ones that the predominant Biglaw business model ignores — add another dimension. Associate satisfaction continues to plummet. If someone asked, many partners would express discontent as well. Particularly unhappy would be those feeling vulnerable to the metrics that make decisions automatic in too many big firms: billings, billable hours, and leverage ratios.

Think equity partners are safe? Think again. As Citi’s Law Firm Group chairman noted, “Most firms reduced equity partner headcount in the first half of 2010, so it’s clear that this is a focal point. We believe it will continue to be a priority throughout 2010.”

All of this brings to mind Martin Niemoller’s famous remark about Nazi Germany during the 1930s: “First they came for the Socialists, and I did not speak out because I was not a Socialist…” His litany continued through trade unionists and Jews before concluding,

“When they came for me, no one was left to speak for me.”

Here’s where the analogy fails: More than 85% of attorneys practice outside Biglaw. That’s a lot of survivors.

SOLVING THE BIGLAW MYSTERY OF GROWING CAREER DISSATISFACTION

Posted on September 30, 2010 by thebellyofthebeast

Clues that explain the growing ranks of dissatisfied Biglaw attorneys are everywhere — even on C-Span. I’d intended to watch the recently televised replay of a judicial conference panel discussion for a few minutes, but the ongoing train wreck captivated this onlooker for an hour. I wonder if I can get CLE credit?

Participants included a Biglaw managing partner, the general counsel of Fortune 100 company, and a professor at a top law school. The absence of a law firm management consultant was surprising; they’re ubiquitous.

There’s no reason to name the Biglaw partner or his firm because his views are mainstream — and reveal why attorney career dissatisfaction continues to increase more rapidly in large firms than elsewhere. Here’s a synopsis of his comments:

1. Law schools should turn out project managers. That’s what he and his clients really need because front line opportunities — such as trials for litigators — are disappearing.

2. In their first days at his firm, new associates learn about its finances: “They realize that our 35% profit margins are fragile. They understand the importance of billing their time. They know more about the firm’s finances than I did as a first-year partner.” He didn’t mention Am Law‘s most recent report that his firm’s average equity partner profits exceeded $1 million. Everyone avoided that elephant in the room.

3. When asked whether associates today felt greater work-related pressures, he was adamant: “No. People today are nostalgic for a time that never existed. As an associate, I worked hundreds of hours a week reviewing documents. Today’s associates don’t work any harder, just differently. They leave the office, have dinner with their families, help put the kids to bed, and then work from their home computers. So they actually have it better than I did.”

The client representative on the panel followed with a line that generated the day’s biggest laugh: “I’m wondering how you billed hundreds of hours a week when there are only 168 hours in a week. But then I realized that you were talking about the bill you sent the client!”

No one asked the Biglaw partner an obvious and unsettling question: His firm’s NALP directory reports an associate minimum requirement of 2,000 billable hours yearly. What was the requirement in the early 1970s, when he was an associate? (Answer: There wasn’t one. There also weren’t cellphones or BlackBerrys that tether today’s attorneys to their jobs — 24/7.)

The law professor responded that law schools can’t train project managers because they’re not business schools. Besides, the law requires something different from such vocational-type training. He could have added that fewer that 15% of all attorneys comprise the NLJ 250, thereby prompting the obvious follow-up: Why should law schools tailor curriculum to satisfy such a small segment of the profession anyway?

“With highly paid starting positions in big firms disappearing,” he concluded, “what am I supposed to tell incoming students they’ll be getting for the $150,000 required to obtain a law degree?” No one suggested the truth, however he saw it.

The general counsel disagreed with the Biglaw partner on a key point: “I don’t hire lawyers to be project managers. I want their best judgments and special skills.” The Biglaw partner replied that perhaps the GC didn’t really know what he wanted or needed.

The audience submitted written questions; the best came from a judge: “I didn’t go to law school to become rich. Why is everything so focused on the money? Is professionalism gone and, if so, how do we recover it?”

When such panels include attorneys willing to speak truth to power, we’ll hear honest answers to those inquiries. But who wants that?

BIGLAW’S GLASS IS 44% FULL

Posted on September 23, 2010 by thebellyofthebeast

Give credit where it’s due: Not all big firms are bad, and even those many might consider the most problematic aren’t problems for everybody in them. After all, the ABA’s most recent survey reported that 44% of lawyers in big firms (defined as having more than 100 lawyers — which means it’s not limited to Biglaw) were satisfied with their careers. Sure, that’s a failing grade in every course I’ve ever taken or taught, but it’s a base upon which to build. So what accounts for such attorneys and what can be done to increase their ranks?

Some are satisfied because they thrive in the predominant Biglaw business model. The myopic focus on metrics — billings, billable hours, and associate/partner leverage to maximize short-term equity partner profits — doesn’t seem misguided to them. Rather, it feels natural, maybe even necessary. When I was in law school, most of these personality types were in business schools. Now they’re everywhere.

Another group works at firms that have resisted adopting this MBA mentality; the beneficial results permeate their cultures. I spoke recently with a friend who’s the chairman of a big firm that hasn’t wrapped itself in the false security of numbers. Instead of metrics, he still requires senior partners to render subjective judgments about attorney quality in determining compensation and promotion. Of course, objective data matter, but they’re not dispositive.

That’s how most firms once operated. They’re reluctant to admit it now, but just about everybody running a big firm today owed early success to someone else. Typically, it was a mentor who recognized untapped potential and was willing to spend time and effort developing it. Rather than self-contained books of business, young attorneys had supporters whose principal aim was to identify and nurture first-rate minds that would eventually produce first-rate lawyering. Whatever wealth followed was a by-product of talent that attracted clients, not the exclusive goal of a short-term profits equation.

My friend’s firm doesn’t lead the Am Law 100 in any rankings, but it has done reasonably well in associate satisfaction surveys and equity partners are averaging over $1 million yearly. If polled, he and many in his firm would be among Biglaw’s satisfied attorneys. They serve interesting clients on challenging matters.

That takes me to a third point. Even firms adhering slavishly to the misguided metrics model have something valuable to offer their lawyers besides money. When I started at my former firm over 30 years ago, partners recruiting me warned that some tasks would be boring, even menial, but others would be exhilarating. Biglaw clients typically have problems at the law’s cutting edge. It was true then; it’s true now — although the balance has tipped more toward boring and menial, especially for younger attorneys.

Still, this begins to resolve an apparent paradox: The ABA survey reporting high levels of dissatisfaction — with big firms faring the worst — also found that seven out of ten attorneys generally regarded their jobs as intellectually challenging.

So whether a lawyer is at a firm like the one my friend leads, in a different environment where the MBA mentality of misguided metrics rules, or somewhere in between, a viable path to career satisfaction remains possible throughout Biglaw. In the end, it’s is no different from other aspects of life: We are products of decisions that define who and what we are.

That’s leads to a final observation. Sooner than it realizes (or prefers), the current generation of large firm managers will find itself replaced with a younger group of leaders who will impose their own vision. How will the ascendants respond to the choices that will define them, their institutions, and the 15% of the bar comprising the NLJ 250 that exerts a disproportionate influence over the profession?

My friend put the issue squarely:

“I’ve been able to resist the dominant trend toward what you correctly call misguided metrics. The challenge is whether those of us sharing that view will be able to pass that ethic along to the next generation. I don’t know the answer to that question. But you agree, don’t you, that it’s a great profession?”

Yes, I do.

He’s still the best — and smartest — lawyer I know.

INTERVIEWING SEASON — THE MORE THINGS CHANGE…

Posted on September 1, 2010 by thebellyofthebeast

Labor Day is a good time to talk about getting a job. When it comes to Biglaw, I’ve been on both sides of that table. As interviews proceed on law school campuses, I wonder, “If I were a law student today, what would I ask big firm representatives?”

Here’s my answer: the same question that I posed to them 30 years ago. Before revealing it, I offer a few thoughts from an insider’s perspective.

Every law student knows the two-step process. Grades, life experience, and the campus interviewer’s subjective reactions combine at the first stage to answer a single question: Should the recruit receive an invitation to visit the firm’s offices for more interviews that, if successful, will culminate in a job offer?

As I conducted such interviews, I also asked myself what I assumed students were asking themselves about me:

“Is this someone with whom I’d want to work — perhaps for a long time?”

The process involved judgments about which reasonable partners differed. Personally, I was looking for brains and the interpersonal competence to use them effectively. I gave the nod only to those whom I thought would pass muster at the next level and receive offers. There was no reason to waste anyone’s time.

Can a student influence the exercise?

Grades and resumes are what they are, so there’s not much maneuvering room there. Even so, thoughtful interviewers are looking for something more: a relaxed, engaging conversation. How can a student help to achieve it?

This sounds trite, but being authentic is the best strategy because that’s how you’re most comfortable. What have you accomplished if someone likes the person you pretend to be? How long can you maintain that facade? Through the second stage of attorney interviews at a firm? For a summer, if you get an offer? Until you become a non-equity partner? You’ll lose yourself if you start down that road.

Eventually, most recruiters will ask if an interviewee has any questions. Generally, students are reluctant to raise controversial topics. I didn’t, either. Perhaps it was cowardice, but I like to think that I developed a more subtle path to a firm’s jugular. Subject to modification for a particular interviewer’s age, here it is:

“Can you briefly sketch your own career highlights at the firm as, say, a second-year associate, a fifth-year associate, a non-equity partner, and now?”

The question works for both stages of the interview process — on campus and in the office. Lawyers love to talk about themselves and, if you pay attention, you can learn much from the responses.

For example, when a young partner in a prestigious New York firm told me that he’d spent his 10 years there on a single large lawsuit and still hadn’t seen the inside of a courtroom (or much of his family), I learned everything I needed to know about the place. It was — and remains — a great firm of talented attorneys. But I’d attended law school for reasons that seemed unrelated to what he was doing with his life.

Conversely, a fourth-year associate from another big firm told me that he’d recently first-chaired and won a federal jury trial. That sounded like a better fit for my lawyerly ambitions.

Of course, that was then. Any recruit looking for the New York experience that I shunned 30 years ago can find it in most large firms everywhere today. On the other hand, a first-chair trial for any Biglaw associate is rare because small cases offering such opportunities fall outside the current metrics-driven business model in two respects: 1) The limited stakes render associates’ huge hourly rates prohibitive, and 2) a firm’s average profits-per-equity-partner are higher when associates become absorbed into the leverage calculation on large matters.

But the salient point of my earlier inquiry still holds. The experiences of an attorney who has been with the same firm for several years are relevant to potential newcomers. Those listening carefully — and hearing between the spoken lines — can glean important truths about opportunities, mentoring, lifestyle, working environment, and firm culture. If the interviewer is a lateral hire, the answers provide different insights.

So while you’re busy hoping that a firm will offer you employment, you’ll also be getting information that will help you decide whether it’s a job you really want (and for how long). The effort could prevent you from becoming another statistic, namely, one of the more than half of practicing lawyers who are so dissatisfied that they counsel young people to avoid a legal career altogether.

One final point: I, too, labored under constraints that still persist, namely, enormous student loans that leave new graduates little room to maneuver. Get any job now; figure out a way to tolerate it later; repay crushing educational debt; then regroup. I get it.

But law students posing the right questions might cause some big firm interviewers to revisit their own careers, institutions, and lives. As others within the profession raise serious questions about the dominant Biglaw business model, its impact, and its future, a gentle nudge from the next generation can’t hurt.

OUTSOURCING: THE BEGINNING OF A NEW AND IMPROVED BIGLAW BUSINESS MODEL?

Posted on August 16, 2010 by thebellyofthebeast

If you’re a new law school graduate looking for work, or an equity partner seeking to profit this year (and maybe next) from the leverage that high-priced associates add to your firm’s bottom line, outsourcing sounds like a bad idea. But for those concerned about the long-run psychological well-being of the profession, the implications are more ambiguous.

It’s not novel. Throughout corporate America, outsourcing has been an important profit-maximizing technique for a long time. Lawyers have made a lot of money assisting clients in the development and implementation of such strategies. The resulting loss of American jobs has been sold as a necessary price paid to remain competitive in the world economy.

Such cost-minimization makes sense where protocols can assure a quality finished product. But when lead turns up in the paint on children’s toys from China, well….

Now, as the NY Times recently reported, outsourcing has pushed its nose into the biglaw tent. (http://www.nytimes.com/2010/08/05/business/global/05legal.html) If the trend continues, what is the fate of the dominant large law firm business model that relies on associate/partner leverage as the source of equity partner wealth? (See my earlier article, “Send The Elevator Back Down” at http://amlawdaily.typepad.com/amlawdaily/2010/07/harper3071410.html)

Its days may be numbered but, then again, its days may be numbered with or without outsourcing.

As the Times article notes, outsourcing is particularly advantageous for mundane legal tasks — due diligence on corporate deals and document review for major litigation matters. What client can resist paying “one-third to one-tenth” of a big firm’s hourly rates for such work?

The challenge will be to find the limits and assure quality output. Due diligence seems unimportant until a major potential liability gets overlooked. Document review is dull, but large lawsuits have turned on an internal memo buried in a gigantic collection; a discerning eye made all the difference.

Still, it seems likely that clients will gravitate toward firms that can offer lower rates for outsourced attorneys performing necessary but non-critical work. It is equally clear that clients will continue to “pay a lot of money” to lawyers with special experience and expertise — “world-class thought leaders and the best litigators and regulatory lawyers around the world,” as one corporate leader put it in the Times.

With these trends, new law school graduates will face shrinking labor markets, especially at entry level positions in big firms. But for the fortunate few who get jobs, their work could get better as outsourced labor performs some of the menial tasks that now account for most young associates’ billable hours.

Meanwhile, senior attorneys will have new incentives to mentor proteges so they become their firms’ next generation of “world-class thought leaders.” (See my earlier article, “Where Have All The Mentors Gone?” at http://amlawdaily.typepad.com/amlawdaily/2010/07/harpermentors.html)

What will all of this mean for equity partner profits? The big firm leaders who do the right things — strict quality control of outsourced work coupled with a serious investment in the development of inside talent — will thirve as their firms deleverage. Unfortunately, others intent on maximizing short-term dollars by prolonging the lives of their leveraged business enterprises will do okay, too — at least for a while. But such a myopic focus runs enormous long-term risks for the affected institutions.

And here’s a wild card: Small and mid-sized firms with talented senior attorneys may find that these new pools of outsourced talent enable them to compete with the mega firms. Size may no longer be everything. In fact, it may not be anything at all.

If I’m correct, the resulting transformation will slow biglaw’s growth rate and, perhaps, shrink that segment of the profession. But instead of the mind-numbing tasks that are the bane of any young attorney’s biglaw existence, associates will find themselves doing work that more closely resembles what they thought being a lawyer meant when they first decided to attend law school. If that happened — and reality began to resemble expectations — lawyers as a group could become more satisfied with their jobs. The unthinkable might even happen: a slow reversal in the tide of recent surveys that consistently rank attorneys near the bottom of all occupations in career fulfillment.

Such a scenario would be an ironic turn of events. The extraordinary wealth that clients now confer on those running today’s highly leveraged big firms could be providing the impetus to upend the profession and force the emergence of a new business model in which leverage no longer mattered.

Of course, everything could careen wildly in a different direction –toward further corporatization of law firms as non-attorneys provide private investment capital, become shareholders, and complete the MBA takeover of the profession. That movement is clearly afoot in Great Britain. (See http://www.abanet.org/legaled/committees/Standards%20Review%20documents/AnthonyDavis.pdf) Once senior partners become accountable to non-attorney boards of directors, the individual autonomy that once defined being a lawyer will have disappeared.

But it doesn’t cost any more to be optimistic, does it?

“SILENT GRIEF” – “DEADLY SERIOUS” FOLLOW-UP

Posted on July 30, 2010 by thebellyofthebeast

Two especially useful comments to “DEADLY SERIOUS” — retitled in “SILENT GRIEF” in the Am Law Daily version posted Friday — illustrate why I continue this blog.

One came from “Recovering Attorney,” who wrote:

“There are some resources devoted to attorneys who need assistance. For law students, the Dave Nee Foundation promotes suicide prevention and education http://www.daveneefoundation.com/. The Lawyers With Depression website also has many helpful articles and robust discussions http://lawyerswithdepression.com/. Check out the many links at both sites.”

A longer comment came from “Former Big Law Partner.” It can be viewed in its entirety by clicking on the right side of The Belly’s home page, but here’s an excerpt:

“For starters, we have to recognize that the personalities of most of us who make the cut and are hired as associates at BigLaw firms are, by nature, extremely competitive and accustomed to success…I think that we need to recognize that we tend to have personalities that make us particularly susceptible to the kinds of excesses that occur at BigLaw firms when there are not other mechanisms in place, either in our personal lives or at the firms themselves, that can help us to draw back and retain a proper perspective on our professional lives.

“Second, I agree that the overriding profit motive of nearly all law firms, not just BigLaw, is driving lawyers to desperation…Without question, I believe that it is the motive not just to make a comfortable living, but to be wealthy, that is robbing our profession of its soul.

“Third, the law schools know that there will not be job offers for all of the graduating law students, many of whom will be saddled with tremendous debt when they graduate, but nevertheless, the schools gladly take incoming students’ tuition money. Many of those students have so much debt that, if they are lucky enough to get a job (because of the glut of lawyers churned out by the law schools), they have little choice but to remain in that job as long as they can to pay down their loans, which causes many to be trapped in situations where they are unhappy…

Finally, I think that society has changed in ways that have removed many of the safety nets that might have, at an earlier time, prevented some of us from reaching such depths of despair over our jobs…[O]ur shared political or civic community has eroded to a substantial degree and, I think, exacerbates the sense of alienation and depression that we sometimes can feel.

I went through a very difficult time as I rose through the ranks of a BigLaw firm and struggled with many of these tensions…I was lucky to have moved to a different situation at the time that I did, when there were such opportunities. Unfortunately, many of those don’t exist given the current state of the economy and glut of lawyers.

And that is the real crux of the matter with attorney suicides, as I see it: It is when people see no alternatives and have given up any hope that they take such a drastic and tragic action. I hope that structural changes in law firms and law schools can be made that will give lawyers real alternatives. In the meantime, I think that all we can do is what you are doing in your college seminar and here: bringing these issues into the light and trying to raise the consciousness of current and prospective lawyers to these dangers.”

Thanks for these thoughtful contributions.

DEADLY SERIOUS

Posted on July 26, 2010 by thebellyofthebeast

For some reader out there, this may be the most important article I’ve written — and there’s no room for levity. Yet another biglaw attorney ended his own life.

On July 15, a Chicago subway train struck and killed a Reed Smith partner. Late last week, the Cook County medical examiner confirmed that the 57-year-old father of two intentionally placed himself in harm’s way. (http://www.law.com/jsp/article.jsp?id=1202463774221&rss=newswire)

It’s difficult to determine what leads anyone to take such an irrevocable step. The lines that tether each of us to this earth are thin and fragile. But the relative frequency with which lawyers in large firms have become the subject of such recent reports is disconcerting.

In April 2009, a 59-year-old Yale Law School graduate who headed Kilpatrick Stockton’s Supreme Court and appellate advocacy group took his own life. http://www.abajournal.com/magazine/a_death_in_the_office/

A month later, two more attorney suicides made the news — an associate and a partner in two different large firms. http://abajournal.com/news/disappointments_preceded_suicides_by_lawyers_at_three_major_law_firms In

January 2010, a 45-year-old partner in Baker & Hostetler’s Houston office apparently shot himself on a Galveston beach. http://amlawdaily.typepad.com/amlawdaily/2010/01/tragedy.html

Are these events more frequent? Or just more frequently reported? I fear it’s the former.

We’ve all encountered unhappy attorneys, but during my first 25 years in a big firm, I’d never heard of a lawyer anywhere who’d taken his or her own life. When I attended such a funeral for a young partner in 2005, eulogies confirmed that he’d battled internal demons since childhood.

That insight offered comfort. Survivors can move forward more easily when viewing themselves as dramatically different from the deceased. It requires a skill that lawyers hone: distinguishing otherwise relevant precedent.

Then came the unavoidable wave that began in early 2009.

Only those closest to the victim can even begin to describe the special circumstances surrounding his or her plight. The causes of such fatalities are as unique as the individuals involved. The choice to continue living becomes a frighteningly close call for some. Severe depression, other mental illness, and unrelenting physical pain can wreak incomprehensible havoc. None makes suicide a correct decision for the afflicted — just understandable. But if any such factors contributed to the recent spate of biglaw victims, the public reports didn’t disclose them.

Maybe government lawyers, attorneys in small- or mid-size firms, or those in other positions are committing suicide, too, but receiving less media attention. For example, when a 64-year-old Connecticut solo real estate practitioner hanged himself in November 2009, press coverage was minimal. (http://www.law.com/jsp/article.jsp?id=1202435932676) But such an argument loses its appeal when you consider that attorneys in the 250 largest firms comprise fewer than 15% of those practicing.

Does the interaction between the dominant large firm business model and the economic downturn provide a partial explanation? After all, most of the recently reported attorney suicides involved accomplished biglaw partners in their 40s and 50s.

No single set of shoulders bears the blame, and only the respective firms know whether or to what extent their actions might have contributed specifically to these final acts. I make no accusations in that regard.

But as a general matter, firms adhering religiously to an MBA-mentality of misguided metrics — billings, billable hours, and associate-partner leverage — as fundamental criteria for lawyer evaluation have become less collegial and more unforgiving. Even in good times, justifying your own economic existence anew during every review cycle can be unsettling or worse. For some, the feared loss of income or status can be powerfully unpleasant.

Assuming that they might have contributed even minimally to these tragedies, the pressures of the dominant biglaw model aren’t disappearing any time soon. So what’s my point? Simply this: The regime doesn’t have to victimize the most vulnerable.

Everyone — especially lawyers — should periodically assess whether the fit of a chosen job is right. Even if it’s not, the work may still be an acceptable way to make a living. No job is perfect; that’s why they call it work. But for some, the psychological toll can mount in dangerous ways. In such cases, only individual action can arrest a downward slide.

That might mean counseling, viewing your employment differently, finding a new legal job, or leaving the profession altogether. One thing is certain: For the chronically distressed, inaction can become a lethal decision.

In my Convocation Address to the Northwestern University Weinberg College of Arts & Sciences graduating class of 2010 last month, the line that interrupted my remarks with the longest and loudest applause from the 10,000 students and parents in attendance was also the most important:

“Seeking help when you need it is never a sign of weakness; it’s proof of strength.” (http://www.youtube.com/watch?v=DP3Uhiol6Vs)

I promise a lighter article next time.

A BETTER ALTERNATIVE OR A LEAP FROM THE FRYING PAN?

Posted on June 3, 2010 by thebellyofthebeast

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 May 25, 2010 by thebellyofthebeast

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!”

EARLY RETURNS

Posted on May 19, 2010 by thebellyofthebeast

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.”

“SEND THE ELEVATOR BACK DOWN…”

Posted on May 17, 2010 by thebellyofthebeast

Kevin Spacey regards late actor Jack Lemmon as a key influence in his life. He often quotes Lemmon’s famous remark:

“If you’re lucky enough to have done well, then it’s your responsibility to send the elevator back down.”

I thought about those comments as I read this year’s Am Law 100 listings and then took another look at last year’s. Rather than sending the elevator back down, most biglaw leaders seem to be pulling the ladder up.

A year ago, the editors of American Lawyer observed that since 1999, the number of non-equity partners in Am Law 100 firms increased threefold. But the equity ranks rose by only one-third. For context, that was a decade when demand for all legal services surged and large firms in particular experienced explosive growth in revenues, headcount, and profitability.

In other words, there was more room everywhere — except at the top, apparently.

The May 2010 issue of American Lawyer noted that as gross revenues for the Am Law 100 fell, average equity partner profits for the group actually increased to over $1.26 million. How did that happen?

Answer: A multi-pronged attack.

First, firms increased productivity — which is another way of saying that some associates lost their jobs so the survivors could bill more hours. Remember Black Thursday in mid-February 2009 — a second St. Valentine’s Day massacre?

Second, they reduced staff, slashed summer programs, deferred or withdrew previous offers to new hires, and cut other expenses.

Finally and less publicly, some firms quietly moved equity partners to income status while putting the brakes on new entrants to the equity ranks. As a result, the number of non-equity partners rose again in 2009. That bulge in the biglaw python now comprises almost 40% of all Am Law 100 law firm partners.

Where will they go?

Maybe someday the biglaw benefactors bankrolling the National Association for Law Placement (NALP) will allow that organization systematically to gather tracking data that will tell us, just as it does for associates. You might think that all of the free market proselytizers in large firms would embrace more transparency on a topic of such central importance to law students trying to make career decisions.

Think again. NALP tried, but the organization ceased collection efforts in December 2009 because firms balked at providing it. In April, a prominent group of judges, professors, and attorneys wrote a letter criticizing NALP’s capitulation. In response, its executive director offered assurances that the board would consider the issue on April 26.

Now what?

WHEN IS BAD NEWS REALLY GOOD NEWS IN DISGUISE?

Posted on May 7, 2010 by thebellyofthebeast

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)

28 DAYS – The Big Squeeze Continues

Posted on April 27, 2010 by thebellyofthebeast

While we’re waiting for NALP to reveal what it decided on April 26 — when it was supposed to grapple with the problem of getting biglaw firms to provide career tracking information on their non-equity partners (see my April 21 post: “Will Anyone Notice on April 27?”) — consider another recent NALP move…

Twenty-eight days sounds like a lot of time, doesn’t it?

On February 26, 2010, NALP announced a new provisional guideline. Beginning in August 2010, students receiving summer or permanent job offers from new prospective employers will have 28 days to respond. Yea or nay…up or down…fish or cut bait…

You get the idea.

NALP ignored the elephants in the room: law firms follow no uniform timetable in extending offers and, even worse, an accepted offer can turn out to be bogus when the employer later withdraws or defers it. When that happens, the victim is without recourse.

In other words, the ongoing capitulation to biglaw’s demands continues. In 2008, NALP adopted the prior rule giving students 45 days to ponder the decision that could shape their futures. Most big firms thought that was too long. Before that, students had until December 1. Before NALP existed, they had as much time as an individual firm gave them — which was usually a lot.

Do you detect a one-sidedness to the trend? Law firms have always retained flexibility to make rolling offers at their pleasure and to revoke them at will. Who’s looking out for the students?

Not NALP:

“Member feedback…has indicated that a shorter period will still allow students sufficient time to choose among competing offers.” (http://www.nalp.org/provisionaltimingguidelines2010)

Ah, “member feedback.” Who provides that? Not students or anyone committed to their best interests, that’s for sure.

NALP’s board consists of biglaw representatives and law school career development officers seeking to maximize their graduates’ placements in large law firms. That means the big firms wield commanding voices.

The new guideline is an example. Biglaw scuttled NALP’s recommendation to move “the current recruiting model away from rolling response deadlines to a model based on ‘offer kickoff dates,’ the specific dates before which offers could not be made,” followed by a universal 14-day response period. That wasn’t perfect, but at least it would have allowed students to know all of their options before locking in their final answers.

Under the new rule, they’ll never know what might have been. Then again, based on biglaw’s associate attrition rates immediately preceding the Great Recession, the vast majority of new hires won’t remain with their first employers for more than three years anyway.

Whether students should rush like lemmings to the sea toward biglaw opportunities is a question that most students don’t consider, but they should. Shortening the response time won’t help them or the profession’s growing problem of attorney career dissatisfaction.

After piling up enormous law school debts as new job offers dwindle, are any of you prospective biglaw associates feeling squeezed again?

WILL ANYONE NOTICE ON APRIL 27?

Posted on April 21, 2010 by thebellyofthebeast

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

Posted on April 20, 2010 by thebellyofthebeast

[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

Posted on April 19, 2010 by thebellyofthebeast

[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

Posted on April 18, 2010 by thebellyofthebeast

[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

Posted on April 15, 2010 by thebellyofthebeast

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

Posted on April 14, 2010 by thebellyofthebeast

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

Posted on April 13, 2010 by thebellyofthebeast

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

Posted on April 12, 2010 by thebellyofthebeast

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

Posted on April 11, 2010 by thebellyofthebeast

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.”

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The Belly of the Beast

Steven J. Harper, Esq.

Tag Archives: attorneys

BONUS TIME!

EXPLAINING BAD BEHAVIOR

“LIES, DAMN LIES, AND STATISTICS”

THE END OF LEVERAGE? JUST KIDDING.

ACCELERATING IN THE WRONG DIRECTION

WORK-LIFE BALANCE MONTH

THEY’RE NOT ENTITLED TO ME

WHO REMEMBERS FINLEY KUMBLE?

KEEP FEEDING PROFITS THE BEAST. WHAT COULD GO WRONG?

SOLVING THE BIGLAW MYSTERY OF GROWING CAREER DISSATISFACTION

BIGLAW’S GLASS IS 44% FULL

INTERVIEWING SEASON — THE MORE THINGS CHANGE…

OUTSOURCING: THE BEGINNING OF A NEW AND IMPROVED BIGLAW BUSINESS MODEL?

“SILENT GRIEF” – “DEADLY SERIOUS” FOLLOW-UP

DEADLY SERIOUS

A BETTER ALTERNATIVE OR A LEAP FROM THE FRYING PAN?

IT’S NOT JUST ME

EARLY RETURNS

“SEND THE ELEVATOR BACK DOWN…”

WHEN IS BAD NEWS REALLY GOOD NEWS IN DISGUISE?

28 DAYS – The Big Squeeze Continues

WILL ANYONE NOTICE ON APRIL 27?

PUZZLE PIECES – Part 12

PUZZLE PIECES – Part 11

PUZZLE PIECES – Part 10

PUZZLE PIECES – Part 9

PUZZLE PIECES – Part 8

PUZZLE PIECES – Part 7

AND HUBRIS, too

PUZZLE PIECES – Part 6

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