THE BIG LAW PARTNER LOTTERY

In last Sunday’s The New York Times Magazine, Adam Davidson suggests that many of today’s most intelligent and educated young people have entered an employment lottery. He draws on the best-selling Freakonomics by Stephen J. Dubner and Steven D. Levitt, who use the unlikely prospect of hitting it big to explain otherwise irrational economic behavior in drug dealer gangs: legions of foot soldiers seek to become kingpins someday.

Davidson focuses on the entertainment industry where people with solid academic credentials and big dreams go to work in mail rooms. In passing, he identifies large law firms as another example where, for most young attorneys, analogous dreams meet a similarly unfortunate fate.

The topic is particularly timely. The National Law Journal just released its annual list of the NLJ 250 “Go-to law schools” from which the nation’s biggest firms draw the most new associates. In 2007, the top twenty law schools sent fifty-five percent of graduates to big firms; in 2011, that percentage was down to thirty-six.

As the job market for new attorneys languishes, most of last year’s 50,000 law school graduates would count those new associates as already having won a lottery. But the real story is that they have actually acquired a ticket to one or two more.

The long odds

As more firms have developed two-tier partnerships, the big law lottery has become a two-step ordeal. Merit still matters, but attaining even the highest skill level is only a necessary and not sufficient condition for advancement. To get a sense of the odds against success, consider the most recent data on NLJ 250 associates who were promoted to partner last year (non-equity partners in two-tier systems).

In 2011, forty-seven Harvard law graduates went from associate to big firm partner. That sounds like a lot, except that five years earlier — in 2006 — Harvard sent 338 graduates into large firms. Although that fifteen percent rate isn’t as bad the lottery, winnowing the number down to include only those who will become equity partners gets closer. (A time lag of five years isn’t quite long enough for the groups of new and promoted associates to match exactly, especially as partner tracks have become longer. But it’s adequate to illustrate the point.)

Other top schools’ graduates face even worse odds. Columbia law sent 313 graduates to big firms in 2006; thirty-one of its grads went from associate to partner in 2011. In 2006, 143 Northwestern law grads got big firm jobs; in 2011, fourteen NU graduates advanced from associate to partners. The University of Pennsylvania’s 2006 class sent 187 into big firms; those firms promoted fifteen U Penn associates to partner last year.

A few schools fared better in this comparative sweepstakes: the University of Texas placed 194 of its 2006 graduates in big firms; last year twenty-nine UT grads went from associate to big law partners. Vanderbilt also broke the twenty percent barrier.

Irrational behavior?

Why do associates continue to play such long odds in a game that doesn’t yield any outcome for years and, for the vast majority of participants, turns out badly?

Understandably, some associates take big law jobs solely to burn off student loan debt before pursuing the dreams that actually took them to law school in the first place. But others are playing the big law lottery.

Meanwhile, those at the top of law firm pyramids have worsened the odds. They have pulled up the ladder by lengthening the equity partner track, reducing the rate of new equity partners, increasing leverage, and running their firms to maximize short-term equity partner wealth at the expense of long-run institutional stability and their colleagues’ personal well being.

Rationalizing these actions, many big law leaders have convinced themselves that the current generation of young lawyers is inferior to their own. They complain about those who act as if they’re entitled to everything and unwilling to work hard, as they once did. Three concluding points:

First, many large firm attorneys in the baby boomer generation act entitled, too.

Second, when today’s big law leaders were associates, no one was telling them to get their hours up.

Third, motivation and behavior follow incentive structures. If some of today’s young attorneys sometimes behave as if they don’t have a reasonable shot at winning the equity partner lottery, it’s because they don’t.

LAW SCHOOL DECEPTION — PART II

The National Law Journal just published its annual list of “go-to” schools — those that supply the most new associates to large law firms. Clearly, lower tier students aren’t alone in struggling to find jobs. One top school’s ride on the NLJ 250 rankings roller coaster is particularly interesting and instructive.

Northwestern jumped from eleventh to second place on the list in 2007. Then-Dean David Van Zandt credited the “tremendous effort to reach out to employers,” along with the emphasis on enrolling students with significant postgraduate work experience, as attracting big firm recruiters. Last year, Northwestern took the number one spot.

But in 2010, the school dropped to eighth — a relative decline that overall market trends don’t explain, but growing class size does. Northwestern awarded 234 JDs in 2007; the 2010 class had 50 more — 284. One reason: misguided short-term metrics became guiding principles.

Two years ago, the ABA Journal reported that Northwestern had become one of the most aggressive recruiters of transfer students (adding 43 to the first-year class). Such students were a win-win for short-term metrics-lovers: Their undisclosed LSATs didn’t count in the U.S. News rankings and their added tuition boosted the financial bottom line.

Meanwhile, Northwestern’s “go-to” position could continue dropping next year because the class of 2011 will include another new contingent — the first group of accelerated JDs. That program emerged from focus groups of large law firm leaders — part of the dean’s outreach program — who helped to shape Northwestern’s long-range strategic document, Plan 2008, Building Great Leaders for the Changing World.

That leads to another point: leadership. Defining a law school’s proper mission is critically important. There’s nothing wrong with getting input from all relevant constituencies, including large law firms. But retooling curriculum to fulfill big law’s stated desires for associate skills is a dubious undertaking.

In February 2010, Van Zandt explained his contrary rationale during a PLI presentation to large firm leaders. Simply put, he saw starting salaries as setting the upper limit that a school can charge for tuition. Accordingly, attending law school makes economic sense only if it leads to a job that offers a reasonable return on the degree’s required financial investment. However valid that perspective may be, the slipperiness of the resulting slope became apparent when Northwestern’s laudable goal — updating curriculum — focused on satisfying big firms that paid new graduates the most.

Tellingly, in the ABA’s Litigation quarterly, Van Zandt explained that high hourly rates made clients “unwilling to pay for the time a young lawyer spends learning on the job…As a result, the traditional training method of associate-partner mentoring gets sacrificed.” Law schools, he urged, should pick up that slack.

But the traditional training method gets sacrificed only because the firms’ prevailing business model doesn’t reward such uses of otherwise billable time. Rather than challenge leaders to reconsider their own organizations that produce staggering associate attrition rates and many dissatisfied attorneys, the dean embraced their short-term focus — maximizing current year profits per partner.

Relatively, Northwestern still fares well in the “go-to” rankings, but the data depict a dynamic exercise in magical thinking. Among the top 20 schools, it led the way in increasing class size as the school’s absolute big law placement numbers steadily declined: 172 in 2007; 154 in 2008; 142 in 2009; 126 in 2010.

Most law schools feel the continuing crunch. Overall, the top 50 law schools graduated 14,000 new lawyers in 2010; only 27% went to NLJ 250 firms — a drop of three percentage points (400 lawyers) from 2009. But that only highlights an obvious question: Why should that shrinking tail wag any dog? A diversified portfolio of career outcomes less dependent on large firms is a more prudent plan for schools and their students.

Even if jobs reappear, there’s another reason to combine balance with candor: Recent surveys indicate that a majority of large firm attorneys become dissatisfied with their careers anyway. Those metrics never appear on law school websites. Deans are uniquely positioned to help prospective students make informed decisions. They could serve the profession by focusing less on marketing and more on giving prospective students the truth, the whole truth, and nothing but the truth. If only there were a metric for it.

2,000 HOURS

Why is Yale an outlier? Last year, only 35% of its graduates started their careers in large firms. An equal number accepted judicial clerkships; many will eventually join biglaw for a while. Still, Yale has a longstanding pattern of trailing peer institutions that, until this year, routinely placed more than half of their graduating classes directly into big firms.

One explanation is Yale’s public service tradition. Recently, I stumbled onto another: the school encourages candor about associate life in biglaw.

For many reasons — including the quest for perceived status, the urgency of educational loan repayment schedules, and the promise of future riches — most graduates seek initial employment in big firms with stated minimum annual billable hour requirements. Unfortunately, students view such numbers as abstractions.

They don’t pause to consider what it means to say that 2,000 hours has replaced 1,800 as a critical evaluation metric. (A 1958 ABA pamphlet suggested 1,300 as an appropriate yearly goal. Seriously. That would qualify as part-time, non-partner track employment today.)

Yale publishes a brochure that breathes life into the numbers. “The Truth About The Billable Hour” outlines hypothetical workdays and should be required reading for any prospective lawyer.(http://www.law.yale.edu/documents/pdf/CDO_Public/cdo-billable_hour.pdf) 

When commuting, lunch, and bathroom breaks get included, the concept of billing 2,000 client hours assumes new meaning. It also provides perspective on legal consultant Hildebrandt Baker Robbins’s observation in its 2010 Client Advisory to our profession:

“The high point of law firm productivity was in the late 1990s, when average annual billable hours for associates in many firms were hitting 2,300 to 2,500.”

Astronomical billable hours are what Hildebrandt and others in its cottage industry told us was “productivity.” So guess what happened after they advised firms to increase it?

According to Hildebrandt in 2010: “The negative growth in productivity, even during the ‘boom’ years preceding the current downturn when demand was growing at a healthy rate, was driven to some extent by associate pushback on the unsustainable billable hour requirements at many firms.”

“Associate pushback” is a euphemism for skyrocketing attrition rates. Before the Great Recession, average associate attrition from the nation’s largest firms in 2007 had risen to 70% of that year’s new hires. (NALP published the data in its 2008 “Update on Associate Attrition.”) No one cares about that crisis level of turnover now because the demand for new graduates has collapsed and those who have jobs aren’t going anywhere soon — at least, voluntarily.

But if recent surveys are accurate, relatively few of the newly employed winners will find career satisfaction in their current firms. So what will happen after they finish repaying their school loans?

Like earlier crises confronting the profession, we’ll probably ignore that one when we get to it, too.