Tag Archives: Cravath

CRAVATH SURVIVES

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Partner defections from Cravath, Swaine & Moore are so rare that when they happen, it’s major news. Without exception, such events generate predictions that the firm’s lockstep compensation structure is doomed. Scott Barshay’s move to Paul, Weiss, Rifkind, Wharton & Garrison provides the latest fodder for such false prophets.

From The Wall Street Journal: “The move raises questions about the ability of law firms that tie partner compensation to seniority to retain top talent during an M&A boom.”

From The American Lawyer: The move “casts new doubts on the viability of Cravath’s pure lock-step model of compensation, an outlier in a market where rivals have a freer hand to invest in top talent.”

As Yogi Berra said, “It’s deja vu all over again.”

In 2010, Barshay Was a “Young Gun”

Six years ago, I wrote about three young partners featured prominently in The Wall Street Journal. In their late-30s and early-40s, they had “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.”

This week, I went back and read the Journal article again. One of those partners was Scott Barshay, then 44-years-old.

“In the current big law world,” I wrote in June 2010, “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.”

Six Years Later

Well, now there’s a record: no sea change yet. Cravath gave Barshay an opportunity to develop clients and a reputation. He’s now a “go-to” corporate dealmaker. And he’s picking up his marbles — if he can — and “going to” Paul Weiss.

“More significant, say legal experts, is the prospect that Barshay’s departure will weaken Cravath’s much-vaunted cultural ‘glue’,” reports The American Lawyer’s Julie Triedman.

Who are these “legal experts,” anyway? Probably the same consultants and headhunters who benefit most from two pervasive and dubious big law firm strategies: growth for the sake of growth and aggressive lateral partner hiring.

More Data to Come

The reports that Barshay’s move could affect Cravath’s compensation structure assume that he left for more money. Paul Weiss’s chairman fueled those rumors by describing his firm’s system as modified lockstep that provides “flexibility at the upper end for star performers.” At Cravath, the upper end of the pay structure is reportedly $4 million. Barshay will probably make more at Paul Weiss. But at some point, does the answer to how much is enough always have to be “more”?

Headhunters offer predictable analyses. According to The American Lawyer, Sharon Mahn, “a longtime legal recruiter and founder of Mahn Consulting in New York who frequently places top partners at elite firms,” said Barshay’s defection “really sends a message that no firm is immune, that old-school firms can no longer rest on their laurels. This is a game-changing move.”

Those words might scare some big law firm leaders. After all, the warning is a twofer: it feeds their fears along with their confirmation bias. But it won’t faze Cravath. Departures like Barshay’s are rare, but the firm has seen them before.

As Cravath’s current presiding partner C. Allen Parker noted, “Partners are in lockstep systems because they believe it’s the best system for their clients and provides the most satisfying partnership environment.”

The “Deja Vu” Part

In May 2007, a reporter for The  American Lawyer asked Cravath’s then-presiding partner Evan R. Chesler whether partners would stick around if the firm made less money.

“I don’t know the answer to that,” he said. “I think there is more glue than just money.”

We now know the answer. Most will stick around and the firm properly ignores the rest. Barshay wasn’t the first “young gun” featured in the May 2010 Wall Street Journal article to leave the firm. That distinction went to James Woolery. In January 2011, he went to JP Morgan Chase as a senior dealmaker.

Two years after that, Woolery negotiated a huge three-year pay package to join Cadwalader, Wickerhsam & Taft as the chairman’s heir apparent. On the eve of his elevation to the top spot, Woolery left to co-found an activist hedge fund. According to the Journal, Paul Weiss agreed to jettison its activist investor representations to make room for Barshay. So maybe the two Cravath young guns will meet again — on opposite sides of the table.

Motives and Outcomes

Only Barshay knows for sure why he left Cravath. According to Thomson Reuters, It ranked second worldwide in announced deals for 2015. Paul Weiss was nineteenth. Barshay offered the standard “great opportunity” rhetoric that always accompanies such moves.

“This was such an amazing opportunity for me and for our clients that I couldn’t say no,” Mr. Barshay told The New York Times. “Joining Paul, Weiss was like getting an invitation to join the dream team.”

Most of corporate America thought he was already on one. At Paul Weiss, he’ll have to develop his own — a task far more daunting than fielding the clients gravitating to Cravath. Talent can create value, but underestimating the value of a franchise is a big mistake.

The Cravath glue remains.

CRAVATH GETS IT RIGHT, AGAIN

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biglaw-450The focus of The American Lawyer story about Richard Levin’s departure after eight years at Cravath, Swaine & Moore understates the most important point: Levin is a living example of things that his former firm, Cravath, does right. I can count at least three.

#1: Top Priority — Client Service

Cravath hired Levin, a top bankruptcy lawyer, from Skadden, Arps, Slate, Meagher & Flom on July 1, 2007. At the time, Cravath didn’t have a bankruptcy/restructuring practice. But at the beginning of the downturn that would become the Great Recession, its clients were drawn increasingly into bankruptcy proceedings.

Explaining the firm’s unusual decision to hire Levin as a lateral partner, the firm’s then-deputy presiding partner C. Allen Parker told the New York Times that “the firm was seeking to serve its clients when they found themselves as creditors. Many of Cravath’s clients have landed on creditors’ committees in prominent bankruptcy cases, he said, and the firm has helped them find another firm as bankruptcy counsel.”

In other words, Cravath sought to satisfy specific client needs, not simply recruit a lateral partner who promised to bring a book of business to the firm. The Times article continued, “While Mr. Parker does not foreclose the chance of representing debtors — which is often considered the more lucrative side of the bankruptcy practice — for now, it is an effort to serve clients who are pulled into the cases.”

#2: Mandatory Retirement Age

It seems obvious that Levin’s upcoming birthday motivated his departure to Jenner & Block. Less apparent is the wisdom behind Cravath’s mandatory retirement rule. As The American Lawyer article about his move observes:

“[A]t 64, Levin is now approaching Cravath’s mandatory retirement age. And he says he’s not ready to stop working. ’65 is the new 50,’ Levin says. ‘I’d be bored. I love what I do [and] I want to keep doing it.'”

Well, 65 is not the new 50 — and I say that from the perspective of someone who just celebrated his 61st birthday. More importantly, sophisticated clients understand that a law firm’s mandatory retirement age benefits them in the long run because it makes that firm stronger. When aging senior partners preside over an eat-what-you-kill big law compensation system, their only financial incentive is to hang on to client billings for as long as possible. It creates a bad situation that is getting worse.

Recent proof comes from the 2015 Altman Weil “Law Firms in Transition” survey responses of 320 law firm managing partners or chairs representing almost half of the Am Law 200 and NLJ 350. I’ll have more to say about other results in future posts, but for this entry, one of the authors, Eric Seeger, offered this especially pertinent conclusion about aging baby boomers:

“That group of very senior partners aren’t retiring,” he explains.

Seeger went on to explain that even if they were, younger partners are not prepared to assume client responsibilities. Why? Because older partners don’t want that to happen. According to the Altman Weil survey, only 31 percent of law firm leaders said their firms had a formal succession planning process.

At Cravath, mandatory retirement works with the firm’s lock-step compensation structure to encourage much different behavior. Aging partners confront an end date that provides them with an incentive to train junior attorneys so they can assume client responsibilities and assure an orderly intergenerational transition of the firm’s relationships. Hoarding clients and billings produces no personal financial benefit to a Cravath partner.

In contrast, hoarding is a central cultural component of eat-what-you-kill firms. Individual partners guard clients jealously, as if they held proprietary interests in them. Internal partnership fights over billing credit get ugly because a partner’s current compensation depends on the allocations. Partners have learned that the easiest way to avoid those fights is to keep their clients in silos away from other partners. For clients, it can mean never meeting the lawyer in the firm who could be most qualified to handle a particular matter. If they understood the magnitude of the problem, most clients would be astonished and outraged.

#3: Strategic Thinking

With respect to Richard Levin’s practice area, the most recent Georgetown/Thomson Reuters Peer Monitor Report notes that in 2014 big firm bankruptcy practices suffered a bigger drop in demand than any other area. Lawyers who had billed long hours to big ticket bankruptcy matters have now been repurposed for corporate, transactional, and even general litigation tasks. Don’t be surprised as firms announce layoffs.

Cravath’s timing may have been fortuitous. It hired Levin at the outset of the Great Recession — just as a big boom time for bankruptcy/restructuring lawyers began. Likewise, Levin departs as that entire segment of the profession now languishes. I think Cravath’s leaders are too smart to think that they can time the various segments of the legal market. But the firm’s strategic approach to its principal mission — client service — caused it to do the right things for the right reasons.

The harder they work at that mission, the luckier they get.

ANOTHER COLOSSAL LATERAL MISTAKE

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Lateral hires are risky. Even managing partners responding to the Hildebrandt/Citi 2015 Client Advisory’s confidential survey admitted that only about half of their lateral partners are break-even at best — and the respondents had unrestrained discretion to decide what qualified as “break-even.” As Ed Newberry, co-global managing partner of Squire Patton Boggs told Forbes, “[L]ateral acquisitions, which many firms are aggressively pursuing now … is a very dangerous strategy because laterals are extremely expensive and have a very low success rate….”

Beyond the financial perils, wise firm leaders understand that some lateral partners can have an even greater destructive impact on a firm’s culture. In late 2014, former American Lawyer editor-in-chief Aric Press interviewed Latham’s outgoing chairman Bob Dell, who was retiring after a remarkably successful 20-year run at the top of his firm. Dell explained that he walked away from prospective lateral partners who were not a good cultural fit because they stumbled over Latham’s way of doing things.

Press wrote: “Culture, in Dell’s view, is not a code word for soft or emotional skills. ‘We think we have a high-performance culture,’ he says. ‘We work at that. That’s not soft.'”

Under the Radar and Under the Rug

Most lateral hiring mistakes attract little public attention. Firm leaders have no reason to highlight their errors in judgment. Fellow partners are reluctant to tell their emperors any unpleasant truth. If, as the adage goes, doctors bury their mistakes and lawyers settle theirs, then managing partners pretend that their mistakes never happened and then challenge anyone to prove them wrong. The resulting silence within most partnerships is deafening.

Every once in a while, a lateral hire becomes such a spectacular failure that even the press takes note. When that happens, the leaders of the affected law firm have nowhere to hide. Which takes us to James Woolery, about whom I first wrote five years ago.

Without mentioning Woolery specifically, I discussed a May 28, 2010 Wall Street Journal article naming him was one of several Cravath, Swaine & Moore partners in their late-30s and early-40s taking “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.”

“We’re more aggressive than we used to be,” 41-year-old Cravath partner James Woolery told the Journal. “This is not your grandfather’s Cravath.”

A Serial Lateral

Six months later, it wasn’t Woolery’s Cravath, either. He’d already left to co-head J.P. Morgan Chase’s North American mergers and acquisitions group.

In 2013, only two years after accepting the Chase job, Woolery moved again. With much fanfare, he negotiated a three-year deal guaranteeing him at least eight million dollars annually to join Cadwalader, Wickersham & Taft. How was the cultural fit? The firm’s chairman, Chris White, described him as “the epitome of the Cadwalader lawyer” who deserved the lucrative pay package that made him the firm’s highest paid partner. A new title created especially for Woolery — deputy chairman — also made clear that he was White’s heir apparent.

To no one’s surprise, in 2014 Cadwalader announced that Woolery would take over as chairman in early 2015. As he prepared to assume the reins of leadership, the firm took a dramatic slide. The current issue of The American Lawyer reports that Cadwalader posted the worst 2014 financial results of any New York firm. Woolery’s guarantee deal looked pretty good as his firm’s average partner profits dropped by more than 15 percent. The firm’s profit margin — 26 percent — placed it 87th among Am Law 100 firms.

On January 19, 2015, the firm’s managing partner, Patrick Quinn, convened a conference call with all Cadwalader partners to convey a stunning one-two punch: Woolery would not become chairman, and he was leaving the firm to start a hedge fund. Woolery was not on the call to explain himself.

Unpleasant Press

No law firm wants this kind of attention. No client wants its outside firm to project uncertainty and instability at the top. No one inside the firm wants to hear about someone who has now been “thrust into the role of designated chairman of the firm,” as The American Lawyer described Patrick Quinn.

Woolery is gone, and so is Chris White, the former Cadwalader chairman who sold fellow partners on Woolery and his stunning guaranteed compensation package. White, age 63, left the firm in November to become co-CEO of Phoenix House, the nation’s largest non-profit addiction rehabilitation center.

Meanwhile, newly designated Cadwalader chairman Quinn says that the firm has no plans to change its strategy, including its reliance on lateral partner hiring. Maybe Chris White can use his new job to help Quinn and other managing partners shake their addiction to laterals. Apparently, first-hand experience with failure isn’t enough.

HAPPINESS IS…CRAVATH?

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Big law’s future has become big news. On September 25, The New York Times published a special section that included several articles on large firms; two are particularly interesting.

“Culture Keeps Firms Together in Trying Times” discusses the handful of large firms that have shunned the widespread eat-what-you-kill approach to partner compensation. It focuses on three firms, Cravath, Swaine & Moore, Debevoise & Plimpton, and Cleary, Gottlieb, Steen & Hamilton, all of which have retained lock-step compensation systems. For any class of associates, those who survive to partner continue advancing together throughout their careers.

“The only way a partner does better is if the firm does better,” says Debevoise presiding partner Michael W. Blair describing the behavior that follows such structural incentives.

Lock-step is a sharp contrast to most other big firms, which follow what Dewey & LeBoeuf’s management called the “barbell” system: Lots of service partners on one side of the barbell balance out a handful of star partners on the other side. Then-Dewey partner Jeffrey Kessler rationalized the yawning equity partner compensation gaps that this approach creates: “The value for the stars has gone up, while the value of service partners has gone down.”

Not worth it

The Times quotes Cleary managing partner Mark Leddy’s answer to the Kesslers of the world: “People who want to be a star and make $10 million a year don’t fit in here…Breaking the lock-step system for them would be an unacceptable cost to our culture.”

Why does culture matter? There are many answers, but Major, Lindsey & Africa’s recent compensation survey may have identified an important one. Almost eighty percent of partners in lock-step compensation systems are satisfied or very satisfied with their work. A closer look at the MLA survey reveals that the combined group of satisfied and very satisfied partners is about the same for lock-step as for non-lock-step firms. But the lock-step firms’ have a big advantage in the very satisfied group — fifty-five percent compared to only twenty-six percent for non-lock-step firms.

Satisfied versus very satisfied

That leads to James B. Stewart’s observations about Cravath, where he was an associate in the 1970s. In “A Law Firm Where Money Seemed Secondary,” Stewart notes that all attorneys in his firm were intelligent, well-credentialed and hard working, but those advancing to partner had something else in common: They loved their work. It gave them a huge competitive advantage over those who didn’t. Returning to the MLA survey, I think Stewart may have captured a significant difference between the lawyers who are very satisfied and those who are merely satisfied: Attitudes about work affect performance.

Stewart also notes that “of the 20 or so associates hired each year, one or two might be chosen to be a partner.” He concludes that “over the ensuing decades, Cravath doesn’t seem to have changed much.” He’s right.

But the rest of the large law firm segment of the profession has. In fact, many have modeled themselves after the Cravath attrition-and-leverage model, but they added an unfortunate twist away from lock-step compensation: Partners eat what they kill, so every year’s compensation review is a new self-justification exercise. That incentive structure produces a much different culture; most of it is ugly and little of it enhances a firm’s long-run stability.

About the associates…

Before getting too misty-eyed over life at Cravath, it’s worth pausing on one more data point. In the most recent Am Law Survey of Midlevel Associate Satisfaction, Cravath placed 119 out of 129 firms — down from 111 in 2011. The firm has been dropping steadily on that list since 2010, when it placed 84th out of 137. (Both Cleary Gottlieb and Debevoise did much better.)

A closer analysis suggests that Cravath associates do, indeed, enjoy their work. Unfortunately, they don’t seem to enjoy it enough to offset the things that place the firm near the bottom of the satisfaction survey.

Cravath scored above the all-firm averages in work-related subcategories, including quality of work assigned, opportunities to work with partners, and level of responsibility. But it received low marks in other subcategories, including likelihood of staying two years, morale, communication about partnership prospects, and family-friendliness. Lock-step partner compensation isn’t a panacea, but imagine how much worse a place like Cravath would be without it.

Following the money

Perhaps the most telling comment about the interaction between compensation and firm culture comes from former Dewey & LeBoeuf partner Ralph Ferrara who spent twenty-three years at lock-step Debevoise before making what he describes as “an imprudent decision” in leaving: “In my heart, I never left Debevoise; it’s a place that I still love to this day.”

If the bankruptcy judge approves the proposed former partners compensation plan, Ferrara will pay almost $3.4 million to help fund repayments to Dewey’s creditors. Even so, given the amounts he reportedly made at Dewey, his move in 2005 was probably advantageous financially. I wonder if the additional money was worth it to him — and how his heirs will spend it.

BONUS TIME — AND ANOTHER UNFORTUNATE COMMENT AWARD

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Above the Law’s David Lat wins my Unfortunate Comment Award with this assessment of Cravath, Swaine & Moore’s recent 2011 bonus announcement:

“My own take: these amounts — which are the same as the 2010 and 2009 bonus scales at CSM, except for the most-senior associates — are fair. The past three years — 2009, 2010, and 2011 — have been fine for Biglaw, but not amazing. To the extent that firms are treading water a bit, it’s reasonable for them to keep associate compensation at the same levels.”

“Treading water a bit”?

Let’s start with the suggestion that “the past three years have been fine for Biglaw, but not amazing.” According to The American Lawyer, Cravath’s 2008 average equity partner profits were $2.5 million — admittedly a sharp decline from 2007. But it’s still pretty good and, since then, equity partner profit trees have resumed their growth to the sky.

As the economy struggled, Cravath’s average partner profits increased to $2.7 million in 2009 and to $3.17 million in 2010, according to the Am Law 100 surveys. That’s not “treading water.” It’s returning to 2007 profit levels — the height of “amazing” boom years that most observers had declared gone forever. Watch for 2011 profits to be even higher.

“It’s fair [and] reasonable to keep associate compensation at the same levels as 2009 and 2010″

If Lat’s comparative baseline is the American labor force generally, his view of fairness has superficial appeal. To most people, Cravath’s bonuses atop base salaries starting at $160,000 are impressive — ranging from $7,500 (first-year associates) to $37,500 (seventh-year associates). Couple those numbers with big firm partner complaints that law schools fail to train lawyers for tasks in the big law world and perhaps associates should consider themselves fortunate that they’re not being asked to rebate a portion of their pay for the privilege billing long hours.

(There are problems with current legal education in America, but the critique that graduates aren’t prepared for big law practice misses several key points, including: Eighty-five percent of lawyers will never have big firm jobs, the vast majority of those who do won’t keep them for more than a few years, and most of the remaining survivors will find their careers surprisingly unsatisfying. For more, take a look at “A New Law School Mission.”)

But I digress. For now, the question is fairness. In law firms, it’s a relative concept — a point that causes Lat’s analysis to miss the mark badly.

As Cravath’s 2010 average equity partner profits have been returning to their 2007 high-water mark, compare them to associate bonuses, which haven’t:

Associate bonus after first full year

2007: $35,000, special $10,000

2011: $7,500

Second-year

2007: $40,000, special $15,000

2011: $10,000

Third-year

2007: $45,000, special $20,000

2011: $15,000

Fourth-year

2007: $50,000, special $30,000

2011: $20,000

Fifth-year

2007: $55,000, special $40,000

2011: $25,000

Sixth-year

2007: $60,000, special $50,000

2011: $30,000

Seventh-year

2007: $60,000, special $50,000

2011: $37,500

Earlier this year, Sullivan & Cromwell offered spring associate bonuses for 2010 ranging from $2,500 (first-year) to $20,000 (seventh-year). Cravath and others then followed suit. Even if that happens again this year, recent classes will still be far worse off than their 2007-era predecessors.

Meanwhile, law school tuition has continued to rise, so the newest associates have the biggest educational loans to repay. In the current buyer’s market for young attorneys, that’s more good news for big firms. Their associates — whose average billables are back over 2,000 hours again — won’t be going anywhere. Unless, of course, the staggering attrition rates needed to sustain the leveraged big law pyramid push them out the door. Viewed as an integrated system, the prevailing model functions effectively to produce and exploit an oversupply of lawyers.

Most big firms will follow Cravath’s lead. But they can afford to do better — a lot better — and they should. As associate bonuses have stagnated, the overall average equity partner profits for the Am Law 100 have returned to pre-recession levels — reaching almost $1.4 million in 2010.

How much is enough? More, apparently. According to the latest survey of Am Law 200 firm leaders currently appearing in the The American Lawyer, managing partners expect the upward profits trend to continue. Keeping the lid on associate compensation is a key to that strategy. It hasn’t been a great ride for the non-lawyer support staff, either.

Now you know why my next post will be titled, “Occupy Big Law.” I’m not kidding.

FROM KENTUCKY TO CRAVATH TO CHASE

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Six months ago, I wrote about a new development at Cravath. (https://thebellyofthebeast.wordpress.com/2010/06/03/a-better-alternative-or-a-leap-from-the-frying-pan/) The Wall Street Journal reported that the firm was allowing lawyers in their 30s and 40s to “make a name for themselves” by taking the lead on client deals. Tradition dictated deference to elders in such matters, but Cravath’s lock-step system meant that “older attorneys didn’t mind because the pay they received didn’t get cut” as younger attorneys gained a higher profile. (http://online.wsj.com/article/SB10001424052748703630304575270472434024454.html)

“‘We’re more aggressive than we used to be,’ said 41-year-old Cravath partner James Woolery. ‘This is not your grandfather’s Cravath.’ He said the new approach means more ‘hustling for loose balls’ than in the past.”

When the article appeared, I wondered if Cravath’s experiment would backfire, leading young partners to consolidate clients, billings, and power for personal gain — even, perhaps. chafing at Cravath’s vaunted lock-step system. After all, financially motivated defections now pervade big law.

Alternatively, I speculated that allowing eager lawyers to run with client batons could be a win-win situation. If they remained loyal, the upstarts could grow the entire pie in true partner-like fashion.

I missed the obvious: Some rising young partners at Cravath didn’t want to be lawyers anymore. Woolery himself is now leaving to co-head JP Morgan Chase’s North American mergers and acquisitions. ((http://dealbook.nytimes.com/2011/01/20/cravaths-woolery-to-join-jpmorgan-as-senior-deal-maker/)

“I’ve had a business management focus, even at Cravath, and this opportunity allows me to expand that,” Wollery told the Times. He said the move would allow him to build on skills that he’d been honing, including business development.

Business development?

He elaborated for the Am Law Daily:

“Woolery points to his experience running Cravath’s business development group as the driving factor behind his decision to move to J.P. Morgan. In the five years that he has led the group, it has evolved from a pitch book operation to a more substantial research and development group consisting of 30 professionals — corporate and litigation attorneys, and analysts.

“‘Doing that work was what led me to wanting to do this job [at J.P. Morgan].'” (http://amlawdaily.typepad.com/amlawdaily/2011/01/woolery.html)

From the University of Kentucky College of Law to Cravath partner, he now moves to a position that doesn’t even require a law degree. Maybe there’s more behind Woolery’s move — more money, more challenges — who knows? But a successful young lawyer in search of more clients found a client in search of him, albeit not for his skills as an attorney.

Big firm lawyers are increasingly assuming non-attorney corporate positions. (http://amlawdaily.typepad.com/amlawdaily/2010/12/lawyers-ceos.html) It’s additional proof of the profession’s transformation to a business: Many large law firms have developed cultures that make them training grounds for corporate leaders. Fully corporatized lawyers don’t even need an MBA to advance. (Woolery doesn’t have one.)

As an educator of students tracking themselves toward the law, I wonder how rising legal stars now leaving the profession altogether would answer these questions:

ON LAW SCHOOL

Why did you attend law school in the first place? Like many others, did you view it as the last bastion of a liberal arts major who couldn’t decide what to do next? Did you regard it as a circuitous path to a corporate career? If so, wouldn’t getting an MBA have been more efficient?

ON THEIR JOBS

Did your legal work and resulting career match your expectations? If not, in what ways — good and bad?

ON LIFE

Have you enjoyed a satisfying career? Have changes in you, your firm, or the profession played a role in your departure from the profession? It’s not just about money, is it?

Most big law attorneys say they’re too busy billing hours to consider these questions at all, much less on a regular basis. It reminds me of Yogi Berra’s response to his wife’s complaints as they got lost while he drove to Cooperstown for his Hall of Fame induction ceremony.

“I know we’re lost,” he finally admitted, “but we’re making good time!”

Yogi arrived at his desired destination. Too many lawyers never think about theirs — and then wonder why they’re dissatisfied professionally.

A BETTER ALTERNATIVE OR A LEAP FROM THE FRYING PAN?

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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?