TREATING SYMPTOMS; IGNORING THE DISEASE

On May 22, 2017, The Wall Street Journal ran an article about the legal profession’s enduring problem: psychological distress. For decades, attorneys have led most occupations in the incidence of serious psychological afflictions — depression, substance abuse, even suicide. Now some law firms are “tackling a taboo,” namely, the mental health problems of their lawyers.

Some observers theorize that a special “lawyer personality” is the culprit. In other words, we have only ourselves to blame, so no one should feel sorry for us. Then again, no one ever feels sorry for lawyers anyway. But attorney psychological distress has become a sufficient problem that, as the Journal reports, some big law firms are now “offering on-site psychologists, training staff to spot problems, and incorporating mental health support alongside other wellness initiatives.”

Stated differently, law firms are following the unfortunate path that has become a dominant approach in the medical profession: treating symptoms rather than the disease. Perhaps that’s because law firm leaders know that curing it would cut into their personal annual incomes.

The Facts

Other workers have serious psychological challenges, too. But attorneys seem to suffer in disproportionately high numbers. The Journal article cites a 2016 study of US lawyers finding that 20.6 percent of those surveyed were heavy drinkers (compared to 15.4 percent for members of the American College of Surgeons). Likewise, 28 percent experienced symptoms of depression (compared with eight percent or less for the general population). According to a 2012 CDC study cited in the Journal, attorneys have the 11th-highest suicide rate.

Now add one more data point. According to an ABA survey in 2007, lawyers in big firms are the least satisfied with their jobs. Anyone familiar with the prevailing big firm environment knows that it has deteriorated dramatically since 1985.

The New World

What has changed? For starters, just getting a job at a big law firm is more difficult. Corporate clients have found cost-effective alternatives to young attorneys billing $300 an hour to review documents. At many firms, demand remains soft.

But the real psychological problems begin after a new associate enters the door. For most of them, promotion to equity partner has become a pipe dream. In 1985, 36 percent of all lawyers in The American Lawyer’s first survey of the nation’s fifty largest firms were equity partners. In  2016, the comparable number was under 22 percent. More than 40 percent of all AmLaw 100 partners are now non-equity partners. The leverage ratio of equity partners to all attorneys has doubled. Stated another way, it’s twice as difficult to become an equity partner today as it was in 1985. That’s what’s been happening at the financial pinnacle of the profession.

The Business Model

There is nothing inevitable about the underlying business model that produces these outcomes. It’s a choice. In 1985, average profits per partner for the Am Law 50 was $300,000 — or about $700,000 in 2017 dollars. Today’s it’s $1.7 million. And the gap within most equity partnerships reflects their eat-what-you-kill culture. Instead of 3-to-1 in 1985, the ratio of highest-to-lowest partner compensation within equity partnerships often exceeds 10-to-1. As the rich have become richer, annual equity partner earnings of many millions of dollars has become commonplace.

At what cost? The future. As law firm leaders rely upon short-term metrics — billings, billable hours, and leverage ratios — they’re pulling up the ladder on the next generation. Too many associates; too few equity slots. Let the contest begin!

But rather than revisit the wisdom of the model, some big firm leaders have made what the Journal characterizes as a daring move: bring in a psychologist. It’s better than nothing, but it’s a far cry from dealing with the core problem that starts with the billable hour, moves through metrics that managers use to maximize short-run partner profits, and ends in predictable psychological distress — even for the so-called winners. The Journal notes that a psychologist at one firm was offering this sad advice to its attorneys: Take a cellphone reprieve by turning off all electronic devices between 2:00 am and 6:00 am.

But even such input from mental health professionals seems anathema to some firm leaders. According to the Journal, Dentons’ chairman Joseph Andrew says that his fear of offering an on-site psychologist was that “competitors will say we have crazy lawyers.”

Former Acting Attorney General Sally Yates recently told the New Yorker about her father, an attorney who suffered from depression and committed suicide. “Tragically,” Yates said, “the fear of stigma then associated with depression prevented him from getting the treatment he needed.”

For some firm leaders, “then” is still “now.” And that’s truly crazy.

LABOR DAY

Labor Day marks the end of summer. It’s also a time to reflect on our relationship with work. Lawyers should do that more often. In that regard, some big law leaders will find false comfort in their 2015 Am Law Midlevel Associates Survey ranking.

In a recent New York Times Op-Ed, “Rethinking Work,” Swarthmore College Professor Barry Schwartz suggests that the long-held belief that people “work to live” dates to Adam Smith’s 1776 statement in “Wealth of Nations”: “It is in the interest of every man to live as much at his ease as he can.”

Schwartz notes that Smith’s idea helped to shape the scientific management movement that created systems to minimize the need for skill and judgment. As a result, workers found their jobs less meaningful. Over generations, Smith’s words became a self-fulfilling prophecy as worker disengagement became pervasive.

“Rather than exploiting a fact about human nature,” Schwartz writes, “[Smith and his descendants] were creating a fact about human nature.”

The result has been a world in which managers structure tasks so that most workers will never satisfy aspirations essential for job satisfaction. Widespread workplace disengagement — afflicting more than two-thirds of all workers, according to the most recent Gallup poll — has become an accepted fact of life.

Lawyers Take Note

Schwartz’s observations start with those performing menial tasks: “Maybe you’re a call center employee who wants to help customers solve their problems — but you find out that all that matters is how quickly you terminate each call.”

“Or you’re a teacher who wants to educate kids — but you discover that only their test scores matter,” he continues.

And then he takes us to the legal profession: “Or you’re a corporate lawyer who wants to serve his client with care and professionalism — but you learn that racking up billable hours is all that really counts.”

More than Money

Many Americans — especially lawyers who make decent incomes — have the luxury of thinking beyond how they’ll pay for their next meal. But relative affluence is no excuse to avoid the implications of short-term thinking that has taken the legal profession and other noble pursuits to an unfortunate place.

You might think that short-term profit-maximizing managers would heed the studies demonstrating that worker disengagement has a financial cost. But in most big law firms, that hasn’t happened. There’s a reason: Those at the top of the pyramid make a lot of money on eat-what-you-kill business models. They can’t see beyond their own short-term self-interest — which takes them only to their retirement age.

Maintaining their wealth has also been a straightforward proposition: Pull up the ladder while increasing the income gap within equity partnerships. The doubling of big firm leverage ratios since 1985 means that it’s now twice as difficult to become an equity partner in an Am Law 50 firm. Top-to-bottom compensation spreads within most equity partnerships have exploded from three- or four-to-one in 1990 to more than 10-to-1 today. At some firms, it’s 20-to-1.

What Problem?

Then again, maybe things aren’t so bad after all. The most recent Am Law Survey of mid-level associates reports that overall satisfaction among third- through fifth-level associates is its highest in a decade. But here’s the underlying and problematic truth: Big law associates have adjusted to the new normal.

Thirty-one percent of Am Law Survey respondents said they didn’t know what they’d be doing in five years. Only 14 percent expected to make non-equity partner by then. They see the future and have reconciled themselves to the harsh reality that their firms have no place for them in it.

No one feels sorry for big firm associates earning six-figure incomes, but perhaps someone should. As Professor Schwartz observes, work is about much more than the money. In that respect, he offers suggestions that few large firms will adopt: “giving employees more of a say in how they do their jobs… making sure we offer them opportunities to learn and grow… encouraging them to suggest improvements to the work process and listening to what they say.”

I’ll add one specially applicable to big law firms: Provide meaningful career paths that reward talent and don’t make advancement dependent upon the application of arbitrary short-term metrics, such as leverage ratios, billable hours, and client billings.

What’s the Mission?

Schwartz’s suggestions are a sharp contrast to the way most big law firm partners operate. They exclude their young attorneys from firm decision-making processes (other than recruiting new blood to the ranks of those who will leave within five years of their arrival). Compensation structures reward partners who hoard clients rather than mentor and develop talent for the eventual transition of firm business to the next generation. The behavior of partners and the processes of the firm discourage dissent.

“But most important,” Schwartz concludes, “we need to emphasize the ways in which an employee’s work makes other people’s lives at least a little bit better.”

Compare that to the dominant message that most big law firm leaders convey to their associates and fellow partners: We need to emphasize the ways in which an attorney’s work makes current equity partners wealthier.

Law firm leaders can develop solutions, or they can perpetuate the problem. It all starts from the top.

Failure of Leadership

The American Lawyer’s annual leaders survey reveals that most law firm managing partners are living in denial. When the changing world intrudes in ways that they can no longer ignore, another psychological state — cognitive dissonance — sets in as they try simultaneously to hold contradictory ideas in their heads. As a consequence, what is happening today at the top of most big firms is the antithesis of leadership.

Denial

In the Am Law leaders survey, 70 percent of respondents said that the sluggish demand for legal services in 2013 would continue through 2014. That’s not surprising. In 2012, only a fourth quarter surge saved many firms from the abyss. The unusual circumstances producing that phenomenon aren’t present this year.

If 2014 will be more of the same as firms compete for business in a zero-sum game, how do individual managing partners size up their situations? Unrealistically. Two-thirds of the 105 leaders responding to the survey of Am Law 200 firms were “somewhat optimistic” about the prospects for their firms in 2014. Another ten percent were “very optimistic.”

More than 80 percent expect profits per partner to grow in 2014 — and one-fourth of those expect growth to exceed five percent. They’ll use the same old model — 98 percent expect billable hour increases, even though three-fourths of respondents said their realization rates for 2013 are 90% or worse. They also said that only 18 percent of their matters include an alternative fee arrangement.

Cognitive dissonance

They can’t all be right about 2014 — for which an overwhelming majority say that “things will be tough for almost everyone else, but my firm will thrive.” More importantly, most of them won’t be right. So what are today’s leaders doing to prepare their firms for more of the harsh reality that they’ve already experienced for the past several years? Not much.

A staggering 85 percent of managing partners said they were somewhat worried (61 percent) or very worried (24 percent) about partners who are not billing enough hours. Almost 70 percent are concerned that some partners are staying on too long before retirement.

An Altman Weil Survey found similar results last summer. Seventy percent of law firm leaders said that older partners were hanging on too long. In the process, they are hoarding clients, billings, and opportunities in ways that impede the transition of firm business to younger lawyers. Yet the drive to maximize short-term profits led 80 percent of firm leaders to admit that they planned to respond to current pressures by tightening equity partner admission standards. Pulling up the ladder on the next generation is not the way to motivate the young talent needed to solve the transition problem.

Morale

All of this may be working well for some partners at the top of what remains a leveraged pyramid business model. But even among the partners, all is not well. The Altman Weil Survey reported that 40 percent of law firm leaders thought partner morale was lower than it had been in 2008. In other words, deequitizations and partnership purges during the Great Recession haven’t produced greater happiness in the survivor cohort.

The Am Law Survey confirms that this downward trend continues. In 2012, 63 percent of managing partners characterized the morale of their partners as “somewhat optimistic.” In 2013, it dropped to 56 percent — near the 2009 nadir of 54 percent.

Leadership lemmings

Every survey reveals that most big firm leaders have their eyes on a single mission: growth. Whether through aggressive lateral hiring or mergers and acquisitions, some managing partners are cobbling together entities that aren’t really law firm partnerships. They’ve forgotten that a sense of community and common purpose is essential to maintaining organizational morale. They’ve also forgotten that no law firm is better than the quality of its people.

Most leaders also acknowledge that a myopic growth strategy imposes significant financial and other costs on their institutions — overpaying for so-called rainmakers who are less than advertised; sacrificing the stability that comes from a cohesive culture in exchange for current top line revenues; incentivizing partners to hoard clients because billings determine compensation and client silos facilitate lateral exits; discouraging the development of talent that should comprise the future of the firm.

As managing partners build empires that they hope will be too big to fail, they might spend a little time considering whether their denial and cognitive dissonance are producing entities that are too big to succeed.

ARE LAWYERS BECOMING HAPPIER?

A recent scholarly study and the 2013 Am Law Midlevel Associates Survey together pose an intriguing question: Is the legal profession becoming happier? If so, that would be a welcome development.

Perhaps the answer is yes and I should take partial credit, at least for improved associate morale in some big firms. After all, for years I’ve been writing and speaking about the extent to which the profession has evolved in ways that undermine attorney well being, especially in large firms. Since the publication of my book, The Lawyer Bubble, many managing partners have invited me to address their partnership meetings on that subject. But before getting too carried away, let’s take a closer look.

No Buyer’s Remorse!

In “Buyers’ Remorse? An Empirical Assessment of the Desirability of a Lawyer Career,” Professors Ronit Dinovitzer (University of Toronto), Bryant Garth (University of California, Irvine – School of Law), and Joyce S. Sterling (University of Denver Strum College of Law) analyzed data from the After the JD project. It tracks about 4,500 lawyers from the class of 2000 who responded to questions in 2003, 2007, and 2012.

Among other things, the authors conclude that “the evidence of mass buyer’s remorse [over getting a legal degree] is thin at best.” (p. 3) I’m not convinced.

First, a new lawyer entering the market in 2000 has enjoyed better times for the profession than graduates of the last several years. That doesn’t render data from the class of 2000 meaningless, but a study based on the experience of those attorneys shouldn’t become a headline-grabber that unduly influences anyone considering a legal career today.

Second, the authors rely only on responses that attorneys provided in 2007. The answers they gave in 2012 are “currently being cleaned and readied for analysis” (p. 5), so the authors didn’t use them. What was the rush to get to print with 2007 data? Why not wait and use the 2012 results to see whether accelerating law firm trends since 2007 affected responses from even the comparatively lucky class of 2000.

(For more on those trends, including partner de-equitizations, salary reductions for non-equity partners, and the environment that has accompanied the accelerating drive to increase short-term profits, read Edwin Reeser’s excellent two-part article in the ABA Journal.)

More on the Data

In the end, After the JD is a useful source of information. But it’s an overstatement to argue, as Dinovitzer et al. assert, “the data from the AJD project are the best (and almost only) data available on the issues currently being debated.” (p. 5)

In fact, there have been dozens of studies on attorney satisfaction, including an October 2007 ABA survey in which six out of ten attorneys who have been practicing 10 years or more said they would not recommend a legal career to a young person. And that was prior to the Great Recession.

Now before defensive academics pull out their knives, let me state clearly that I’m not suggesting that the ABA’s online survey of 800 lawyers is somehow superior to the obviously more comprehensive After the JD project. It’s not. But contrary to the authors’ assertion, AJD is far from the only data available on the issues currently being debated.”

For example, Professor Jerome A. Organ (University of St Thomas School of Law) recently published a compilation of 28 attorney surveys taken between 1984 and 2007. Rates of satisfied attorneys ranged from a low of 59 percent (South Carolina – 2008) to a high of 93 percent (Minnesota – 1987). The latest national study on Organ’s list (ABA/NALP – 2007) reported a satisfaction rate of 76 percent. (He excluded the ABA’s reported 55 percent satisfaction rate in 2007 because it “was not a random sample of attorneys.” n. 144.)

The Am Law Survey

Meanwhile, Am Law’s annual Midlevel Associates Survey of third-, fourth-, and fifth-year associates reported record high levels of associate satisfaction. Are their lives improving?

Anecdotal evidence of another possibility comes from an observed shift in attitudes among students in my undergraduate and law classes over the past several years. Many members of the youngest generation of lawyers (and would-be lawyers) are so concerned about finding jobs that they are now equating satisfaction with getting and keeping one long enough to repay their staggering student loans. That might explain why the same Am Law survey found that only 10 percent of men and 6.5 percent of women saw themselves as equity partners at their current firms in five years.

Now What?

Even so, inquiries that I receive from law firm managing partners provide more anecdotal proof that some firms have decided to value associate morale. The question is whether firm leaders will have the courage to push positive change into the very heart of the prevailing big law firm business model.

On that front, the news is less encouraging. In March 2013, Forbes reported on a “Career Bliss” survey of 65,000 employees that ranked “law firm associate” first on the list of “Unhappiest Jobs in America.” Likewise, in a recent Altman Weil Flash Survey, 40 percent of managing partners reported that partner morale at their firms in 2013 was lower than at the beginning of 2008 (pre-recession).

The Bottom Line

In the end, Dinovitzer et al. seem encouraged that “the overall trend is that more than three-quarters of respondents, irrespective of debt, express extreme or moderate satisfaction with the decision to become a lawyer.”

That’s supposed to be good news. But there are more than 1.2 million attorneys in the U.S.. Even a 75 to 80 percent satisfaction rate leaves more than 200,000 lawyers with what sure looks like buyer’s remorse.

The profession can do better than a “C.”

THE LAWYER BUBBLE — Early Reviews and Upcoming Events

The New York Times published my op-ed, “The Tyranny of the Billable Hour,” tackling the larger implications of the recent DLA Piper hourly billing controversy.

And there’s this from Bloomberg Business Week: “Big Law Firms Are in ‘Crisis.’ Retired Lawyer Says.”

In related news, with the release of my new book, The Lawyer Bubble – A Profession in Crisis, my weekly posts will give way (temporarily) to a growing calendar of events, including:

TUESDAY, APRIL 2, 2013, 10:00 am to 11:00 am (CDT)
Illinois Public Media
“Focus” with Jim Meadows
WILL-AM – 580 (listen online at http://will.illinois.edu/focus)

TUESDAY, APRIL 2, 2013, 1:00 pm to 2:00 pm (CDT)
“Think” with Krys Boyd
KERA – Public Media for North Texas – 90.1 FM (online at http://www.kera.org/think/)

THURSDAY, APRIL 4, 2013, 11:00 am to Noon (EDT)
Washington, DC
The Diane Rehm Show
WAMU (88.5 FM in DC area) and NPR

FRIDAY, APRIL 5, 2013, 10:45 am to 11:00 am (EDT)
New York City
The Brian Lehrer Show
WNYC/NPR (93.9 FM/820 AM in NYC area)
(http://www.wnyc.org/shows/bl/)

SATURDAY, APRIL 6, 2013, Noon (EDT)
New Hampshire Public Radio
“Word of Mouth” with Virginia Prescott
WEVO – 89.1 FM in Concord; available online at http://nhpr.org/post/lawyer-bubble)

WEDNESDAY, APRIL 10, 2013, 8:00 am to 9:00 am (CDT)
The Joy Cardin Show
Wisconsin Public Radio (available online at http://www.wpr.org/cardin/)

FRIDAY, APRIL 12, 2013
The Shrinking Pyramid: Implications for Law Practice and the Legal Profession” — Panel discussion
Georgetown University Law Center
Center for the Study of the Legal Profession
600 New Jersey Avenue NW
Location: Gewirz – 12th floor
Washington, D.C.

TUESDAY, APRIL 23, 2013, 7:00 pm (CDT) (C-SPAN 2 is tentatively planning to cover this event)
The Book Stall at Chestnut Court
811 Elm Street
Winnetka, IL

Here are some early reviews:

The Lawyer Bubble is an important book, carefully researched, cogently argued and compellingly written. It demonstrates how two honorable callings – legal education and the practice of law – have become, far too often, unscrupulous rackets.”
—Scott Turow, author of Presumed Innocent and other novel

“Harper is a seasoned insider unafraid to say what many other lawyers in his position might…written with keen insight and scathing accusations…. Harper brings his analytical and persuasive abilities to bear in a highly entertaining and riveting narrative…. The Lawyer Bubbleis recommended reading for anyone working in a law related field. And for law school students—especially prospective ones—it really should be required reading.”
New York Journal of Books

“Anyone looking into a career in law would be well advised to read this thoroughly eye-opening warning.”
Booklist, starred review

“[Harper] is perfectly positioned to reflect on alarming developments that have brought the legal profession to a most unfortunate place…. Essential reading for anyone contemplating a legal career.”
—Kirkus Reviews

“[Harper] burns his bridges in this scathing indictment of law schools and big law firms…. his insights and admonitions are consistently on point.”
—Publishers Weekly

“Imagine that the elite lawyers of BigLaw and the legal academy were put on trial for their alleged negligence and failed stewardship. Imagine further that the State had at its disposal one of the nation’s most tenacious trial lawyers to doggedly build a complete factual record and then argue the case. The result would be The Lawyer Bubble. If I were counsel to the elite lawyers of BigLaw and the legal academy, I would advise my clients to settle the case.”
—William D. Henderson, Director of the Center on the Global Legal Profession and Professor at the Indiana University Maurer School of Law

“With wit and insight,The Lawyer Bubble offers a compelling portrait of the growing crisis in legal education and the practice of law. This book is essential reading for anyone concerned about the profession or contemplating a legal career.”
—Deborah L. Rhode, Professor of Law and Director of the Center on the Legal Profession, Stanford University

“This is a fine and important book, thoughtful and beautifully written. It makes the case – in a responsible and sober tone – that we are producing far too many lawyers for far too small a segment of American society. It is a must-read for leaders of law firms, law schools, and the bar, as the legal profession continues its wrenching transition from a profession into just another business.”
—Daniel S. Bowling III, Senior Lecturing Fellow, Duke Law School

“In this superb book, Steven Harper documents, ties together and suggests remedies for the deceit that motivates expanding law school enrollment in the face of a shrinking job market, the gaming of law school rankings and the pernicious effect of greed on the leadership of many of our nation’s leading law firms. The lessons he draws are symptomatic, and go well beyond the documented particulars.”
—Robert Helman, Partner and former Chairman (1984-98), Mayer Brown LLP; Lecturer, University of Chicago Law School

“Every sentient lawyer realizes that the legal profession is in crisis, but nobody explains the extent of the problem as well as Steven Harper. Fortunately, he also proposes some solutions – so there is still room for hope. This is an essential book.”
—Steven Lubet, author of Fugitive Justice and Lawyers’ Poker

“Steven Harper’s The Lawyer Bubble is an expression of tough love for the law, law firms and the people who work in them. The clear message is take control of your destiny and your firm to avoid the serious jeopardy that confronts far too many firms today. Whether you are a partner, associate, or law student, you should read this compassionate and forceful work.”
—Edwin B. Reeser, Former managing partner, author, and consultant on law practice management

“Harper chronicles the disruption of his once-genteel profession with considerable sadness, and places the blame squarely at the wing-tipped feet of two breeds of scoundrel: law school deans, and executive committees that have run big law firms …” –“Bar Examined” – Book Review in The Washington Monthly (March/April 2013)

SOMEBODY’S CHILD

Nine years ago, Senator Rob Portman (R-Ohio) supported a constitutional amendment banning same-sex marriage. Now he wants Congress to repeal the provisions of the Defense of Marriage Act that deny federal recognition to such marriages. Apparently, his reversal on this issue began two years ago when his college freshman son told Portman and his wife that he was gay.

Plenty of prominent national figures have similarly changed their views. The tide of history seems overwhelming, even to conservative commentator George Will. Others can debate whether Portman and those who have announced newly acquired positions favoring gay rights are courageous, hypocrites, opportunists, or something else.

For me, the more important point is that his own child’s connection to the issue caused Portman to think differently about it. Applied to lawyers, the question become simple:

What if the profession’s influential players treated the young people pursuing a legal career as their own children?

Portman’s explanation

In 2011, Portman knew that his son was gay when 100 law graduates walked out of his commencement address at the University of Michigan.

“But you know,” he told CNN recently, “what happened to me is really personal. I mean, I hadn’t thought a lot about this issue. Again, my focus has been on other issues over my public policy career.”

His key phrases are pregnant with larger implications: “[W]hat happened to me is really personal….I hadn’t thought a lot about this issue.”

Start with law school deans

As the lawyer bubble grew over the past decade, some deans and university administrators might have behaved differently if a “really personal” dimension required them to think “a lot” about their approaches. Perhaps they would have jettisoned a myopic focus on maximizing their law school rankings and revenues.

At a minimum, most deans probably would have disclosed earlier than 2012 that fewer than half of recent graduates had long-term full-time jobs requiring a legal degree. It seems unlikely that, year after year, they would have told their own kids that those employment rates exceeded 90 percent. Perhaps, too, deans would have resisted rather than embraced skyrocketing tuition increases that have produced six-figure non-dischargeable educational debt for 85 percent of today’s youngest attorneys.

Then consider big firm senior partners

At the economic pinnacle of the profession, big firms have become a particular source of not only attorney wealth, but also career dissatisfaction. In substantial part, both phenomena happened — and continue to happen — because managing partners have obsessed over short-term metrics aimed at maximizing current year profits and mindless growth.

For example, the billable hour is the bane of every lawyer’s (and most clients’) existence, but it’s lucrative for equity partners. If senior partners found themselves pushing their own kids to increase their hours as a way to boost those partners’ already astonishing profits, maybe they’d rethink the worst consequences of a destructive regime.

Similarly, the average attorney-to-equity partner leverage ratio for the Am Law 100 has doubled since 1985 (from 1.75 to 3.5). Perhaps managing partners wouldn’t have been so quick to pull up the ladder on lawyers who sat at their Thanksgiving tables every year, alongside those managing partners’ grandchildren who accompanied them. Not every young associate in a big firm should advance to equity partner. But offering a 5 to 10 percent chance of success following 7 to 12 years of hard work isn’t a motivator. It invites new attorneys to prepare for failure.

Finally, compared to the stability of a functional family, the current big law firm lateral partner hiring frenzy adopts the equivalent of periodic divorce as a cultural norm. Pursued as a growth strategy, it destroys institutional continuity, cohesion, community, and morale. Ironically, according to Professor William Henderson’s recent American Lawyer article “Playing Not to Lose,” it offers little or no net economic value in return.

Adopting a family outlook or a parental perspective isn’t a foolproof cure for what ails the legal profession. Indeed, running law schools and big firms according to the Lannister family’s values (“The Game of Thrones”) — or those of Don Corleone’s (“The Godfather”) — might not change things very much at all.

It’s also worth remembering that Oedipus was somebody’s child, too.

DEWEY: COLLATERAL DAMAGE

The vast failure of knowledge among the nation’s brightest law students remains remarkable. Their comments in the wake of Dewey & LeBoeuf’s stunning implosion make the point regrettably clear. Even as they become collateral damage to a tragic story that has many innocent victims, some persist in allowing hope to triumph over reality.

The NY Times reported on the 30 second-year law students from the nation’s best schools who thought they’d be earning $3,000 a week as Dewey & LeBoeuf summer associates. They’re now scrambling to find another productive way to fill three months that were supposed to be a launching pad for full-time careers with starting compensation at $160,000 a year.

Idealistic dreams meet harsh reality

One Ivy League student expressed optimism that other firms would step up and offer jobs to the displaced:

“A firm may look like a corporation, yes, but we’re all part of a fraternity of lawyers. Next year one becomes a member of the bar association, a linked structure. The firms may be competitors, but at the end of the day this is still the greater legal field. I hope this sensibility that we are part of a profession will also be in the minds of people as they consider us.”

The article doesn’t say which Ivy League law school the student attends, but it — along with his undergraduate institution — has failed the educational mission miserably. Most large law firms, including Dewey & LeBoeuf, ceased membership in a profession years ago and, during the last decade, that trend has accelerated. A myopic focus on short-term business school-type metrics, two of which are growth and equity partner profits — has taken Dewey and many others down a road to unfortunate places.

Most big firms are no longer “part of a profession” that will step up to offer law students or anyone else a life preserver. If they hire people, such as former Dewey lawyers and staff, it’s because they fit those firms’ own business plans. Another student who thought he had a job at Dewey for the summer got it right: “Now every other program is full, and it’s not like they’re going to adjust their plans to accommodate the failure of this one.”

It’s all connected

Everyone wonders why the number of law school applicants continues to outpace the number of law school openings that, in turn, dwarf the demand for lawyers. One answer is that colleges and law schools don’t educate prospective law students about the daunting challenges ahead. In fact, those institutions have the opposite incentives: colleges want to maximize the placement of their graduates in professional schools because that makes them look good; law schools maximize applicants because it pumps up the selectivity component of their U.S. News & World Report rankings.

Those already in the legal profession are well aware of the true state of affairs. The great disconnect is the failure of information to make its way to prospective lawyers who could benefit most from it. The press has increased its attention to the topics — the glut of lawyers; staggering law school debt that now averages more than $100,000; increasing career dissatisfaction among practicing lawyers.

Of course, ubiquitous confirmation bias will continue to encourage prospective lawyers to see what they want to see as they rationalize that they’ll be the lucky ones running the gauntlet successfully. Some will; too many won’t. The remarks of the Ivy Leaguer who spoke with the Times shows how much work remains for those who truly care about the fate of the next generation — lawyers and non-lawyers alike. There are miles to go before any of us should sleep.

THE NON-EQUITY PARTNER BUBBLE

In May 2009, The American Lawyer reported that Am Law 100 firms had increased the number of non-equity partners threefold since 1999, but the number of equity partners grew by less than one-third. As big law leaders continue to pull up the ladder, what will come from the growing cadre of partners-in-name-only? Other than some short-term money for equity partners, nothing good.

Historically, most two-tier firms employed a simple strategy for non-equity partners: up-or-out. Within a reasonable period of time (for no benign reason, it’s gotten longer), non-equity partners either proved themselves worthy of elevation or moved on. Limited exceptions included specialized niche players who could stay indefinitely.

An article in the February 2012 issue of The American Lawyer, “Crazy Like a Fox,” suggests another option: permanent non-equity partners.

The Economic Case

Authors Edwin B. Reeser and Patrick J. McKenna offer financial justifications for the strategy. First, they say, clients unwilling to pay high hourly rates for first- and second-year associates have an easier time swallowing non-equity partner rates, even though they are much greater.

Sometimes, maybe. But clients are now scrutinizing the match between attorneys and their tasks. Using an unnecessarily expensive non-equity partner to perform associate work is dangerous.

Second, they argue, associate recruitment and training are expensive, with each new associate costing $250,000 to $300,000. As a class, Reeser and McKenna assert, “associates do not make money for the firm until sometime in the end of the third or even the fourth year.”

Maybe. But at current hourly rates and required minimum billables, the payback is probably sooner. (Do the math using an average profit margin of forty percent, which is conservative.) But their larger point is correct: non-equity partners are a source of leverage that for the Am Law 50 has doubled since 1985 — from an average of 1.75 to 3.54.

The Problems

Whatever the debatable short-term economic gain, the long-run cost of expanding the non-equity ranks and making them permanent is far greater.

For starters, such lawyers become second class citizens. They know it. Everyone in the firm knows it. They may be decent, hard-working people. But once they receive the scarlet letter of permanent non-equity status, their morale plummets.

It’s understandable. After all, throughout their lives they succeeded at everything they tried — outstanding college record, good grades at a top law school. They’re intelligent and ambitious, otherwise firms wouldn’t have hired them in the first place. But then, after years of hard work they learn that they won’t reach the next level and never will. Only magical thinking can wish away the demoralizing impact of that message.

Any firm creating a permanent subclass of such attorneys takes an individual problem and makes it an institutional one. For example, if permanent non-equity partners do meaningful and fulfilling work, they’ll deprive younger attorneys of those increasingly scarce opportunities. That expands the morale problem into the senior associate ranks where career satisfaction languishes at historic lows.

Conversely, if the permanent non-equity partners are performing tasks that other attorneys avoid, that creates other difficulties. Reeser and McKenna note that such practitioners sometimes “take on non-billable leadership positions…involving pro bono, diversity, recruiting, training, and professional development.” Unfortunately, there’s no better way to send a message of management’s indifference to such pursuits than by putting the B-team in charge.

Finally, the authors suggest that a non-equity track enables firms to “retain some whiz-bang lawyers who have young children they want to spend more time with or who just want to get off the equity partner treadmill.” Remarkably, no one seems willing to rethink the wisdom of a system that produces that unhappy treadmill in the first place.

The presence of more non-equity partners in big law might simply be a residue of the enormous associate classes hired in earlier years. But for firms using them to create a permanent subclass generating short-term dollars, the strategy makes no long-term sense. Because there’s no metric to capture the downside, big law leaders will ignore it.

But if the trend continues, the non-equity partner bubble will grow and the prevailing big law model will develop another enduring chink in its increasingly fragile armor.

THE LAW SCHOOL QUANDARY

Law school deans are getting conflicting advice. Let’s sort it out.

“Provide more practical training” has become the latest mantra. At the recent annual meeting of the Association of American Law Schools, Susan Hackett, a legal consultant and former general counsel of the Association of Corporate Counsel, argued for a year of executive-style classes covering business topics and skills. Here’s a better suggestion: students seeking a business school education should attend business school.

Meanwhile, according to the National Law Journal, Peter Kalis, chairman of K&L Gates, said that some current law school criticism is misplaced: “I believe law schools should concentrate on the education of law students from the perspective of acculturating them in the rule of law. Law students should spend that time being immersed in and becoming familiar with common law subjects.” More fee simple, anyone?

Finally, a Northwestern University law professor and a first-year Kirkland & Ellis associate offered a dramatic solution to the shortage of attorneys. You probably didn’t know there was one. Although the U.S. already leads the world in lawyers per capita, the authors concluded that allowing colleges to offer undergraduate law programs would: 1) reduce law school tuition to zero (for such students); 2) produce more lawyers; 3) cause some attorneys to charge lower fees; and 4) assure broader access to legal services for lower- and middle-income Americans. While not prohibiting law schools from offering today’s $150,000 J.D. degree programs, the plan would put most law schools out of business.

Where to begin? One reason the United States has too many lawyers is that law school has long been a default solution for college students. But when youthful expectations clash with the harsh reality that most attorneys endure, career dissatisfaction results. Allowing poorly informed undergraduates to pursue a law degree right out of high school would be exponentially worse — for them and the profession. (Commenters to the on-line version of the article destroyed the authors’ cavalier comparison of their scheme to the UK system. If you’re wondering why The Wall Street Journal editorial board published such a flawed piece, you’re not alone.)

What do students think?

At the same time, today’s law students like the education they’re getting. According to the recently released 2011 Law School Survey of Student Engagement of 33,000 current students at 95 law schools in the U.S. and Canada, 83 percent of respondents said that their experience in law school was “good” or “excellent.” Eighty percent said they definitely or probably would attend the same law school if they could start over again. Maybe most of these students will join the ranks of unhappy scambloggers when they can’t get jobs to repay their loans, but for the moment they’re satisfied.

But the same study revealed that 40 percent of students felt that their legal education had so far contributed only some or very little to their acquisition of job- or work-related knowledge and skills. In other words, some like their law school experience, even if it’s not equipping them in a practical way for positions they hope to obtain.

A final point may resolve this apparent contradiction. When students seek their first law jobs, curriculum makes little difference. Candid big firm interviewers admit that, except insofar as a particular course might give a recruit something interesting to discuss in an interview, subject matter is irrelevant. In fact, dramatic curriculum innovation is underway at many schools and, however worthwhile it otherwise may be, affected students haven’t become more desirable to prospective employers:

“There’s no employer out there right now — not law firms, not the Department of Justice, not the ACLU — that are seeking out these graduates,” Indiana University Maurer School of Law Professor William Henderson observed at the AALS meeting. “These programs haven’t affected hiring patterns. It’s still all sorted out with credentials. It’s based on the brand of the law school.”

If the vast majority of students are happy with the law school experience and changing it won’t improve their job prospects, perhaps the legal academy and its critics should consider focusing attention elsewhere. Here’s an idea: Provide prospective law students better information about the real life that most lawyers lead. For too many of them, it comes as an unpleasant surprise. Forewarned is forearmed.

FED TO DEATH

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

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

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

A NEW LAW SCHOOL MISSION – PART II

The second and final installment of “Great Expectations Meet Painful Realities” — my latest contribution to the debate about the legal profession’s growing crisis — is now available in the December 2011 issue of Circuit Rider, the official publication of the Seventh Circuit Bar Association. My article begins on page 26. For those who are interested, here’s the link to Part I.

OCCUPY BIG LAW

The encampments are gone, but Occupy Wall Street leaves behind a slogan that should make any history student shudder and some big law leaders squirm:

“We’re the 99-percenters.”

It’s not a leftist fringe rant. During a recent Commonwealth Club of California appearance, presidential debate moderator Jim Lehrer said that, if becoming President turned on the answer to a single question, he’d pose this one to every candidate:

“What are you going to do about the growing disparity of wealth in the United States of America?”

Once-great civilizations collapsed under such weight. A similar internal phenomenon is quietly weakening some mighty law firms.

Destabilizing trends

“Don’t redistribute wealth — that’s class warfare” has become a popular rhetorical rallying cry. (See, for example, the Wall Street Journal‘s lead editorials on December 2  and 7.) But a stealth class war has already produced massive economic redistribution — from the 99-percenters to the one-percenters.

Nobel laureate Joseph Stiglitz writes in Vanity Fair that the top one percent control 40 percent of the nation’s wealth — up from 33 percent 25 years ago. In a recent interview, Jeffrey Winters of Northwestern University notes: “[In America], wealth is two times as concentrated as imperial Rome, which was a slave and farmer society. That’s how huge the gap is.”

Both Winters and Stiglitz suggest that today’s oligarchs use wealth to preserve power. One effective tactic is to encourage the pursuit of dreams that, for most 99-percenters, are largely illusory. My favorite New Yorker cartoon is a bar scene with a scruffy man in a T-shirt telling a well-dressed fellow patron: “As a potential lottery winner, I totally support tax cuts for the wealthy.”

For today’s young attorneys, one largely illusory dream has become the brass ring of a big firm equity partnership atop the leveraged pyramid.

Big law winners

So far, wealthy lawyers have avoided public outrage. But between 1979 and 2005, the top one percent of attorneys doubled their share of America’s income — from 0.61 to 1.22 percent. For the Am Law 50, average equity partner profits soared from $300,000 in 1985 ($630,000 in today’s dollars) to $1.5 million in 2010.

Even so, the really big gap — in society and within large law firms — is inside the ranks of the privileged, and it has been growing. By one estimate, the top one-tenth of one percent of Americans captured half of all gains going to the top one percent. Similarly, management consultant Kristin Stark of Hildebrandt Baker Robbins observes that before the recession, the top-to-bottom ratio within equity partnerships “was typically five-to-one in many firms. Very often today, we’re seeing that spread at 10-to-1, even 12-to-1.”

So what?

Meritocracies are vital and valuable, but for nations as well as for institutions, extreme income inequality reveals something about the culture that produces it. A recent study found that only three nations in the Organization for Economic Cooperation and Development — Chile, Mexico and Turkey — have greater income inequality than America. Perhaps it’s coincidental, but all OECD countries with less inequality — including Norway, Denmark, Sweden, Switzerland, Canada, Germany, Austria, and Britain — likewise surpass the U.S. in almost every quality of life measure.

In big law, exploding inequality is one symptom of a profound ailment: The myopic focus on short-term compensation metrics that reward bad behavior — hoarding clients, demanding more billables, raising leverage ratios. As the prevailing model creates stunning wealth for a few, it encourages attitudes that poison working environments and diminish the profession.

Unlike imperial Rome, today’s large firms won’t fall prey to Huns and Vandals. Rather, modern casualties include mentoring, training, collegiality, community, loyalty, and building institutional connections between clients and young lawyers. Those characteristics once defined the very concept of professional partnership. Today’s business of law makes precious little room for them. Clients who think that these relatively new trends aren’t compromising the quality and cost of their legal services are kidding themselves.

A meaningful Occupy Big Law movement would require that: 1) clients (and courts approving attorneys’ fees petitions) finally say, “Enough!” and 2) would-be protesters stop viewing themselves as future equity partner lottery winners. Meanwhile, senior partners need not worry about disaffected lawyers and staff taking to the streets.

After all, there’s no way to bill that time.

BONUS TIME — AND ANOTHER UNFORTUNATE COMMENT AWARD

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.

A MODERN TRAGEDY IN FIVE ACTS

The American Lawyer‘s November cover story tells the sad tale of Jonathan Bristol. His client, Ken Starr, was a high-profile financial adviser to celebrities. (Starr is no relation to his namesake, the former Whitewater special prosecutor and current president of Baylor University.) In 2009, one of Starr’s clients, Uma Thurman, began asking tough questions for which he had no answers. Last year, he pleaded guilty to investment adviser fraud, wire fraud, and money laundering.

Starr’s scheme doesn’t interest me; his lawyer does. Bristol’s saga reflects the 30-year evolution of an attorney and his profession. Indeed, because many of Bristol’s experiences look so familiar, some lawyers will find his story unsettling. At least, they should.

ACT ONE

His path into the law was typical — Amherst College (magna cum laude), followed by the University of Virginia Law School. Undergraduates throughout the country still identify with ambitions that Bristol probably held when he was their age — do well at a top college; get into a first-rate law school; enjoy a rewarding career. What could go wrong?

ACT TWO

After graduating in 1981, he went to a boutique Manhattan firm, Dreyer & Traub, where he practiced real estate finance law. Many would say that, today, such a job looks even more appealing as a big law alternative than it was then: smaller, more collegial, better sense of community.

ALM reporter Ross Todd writes, “as a junior partner in Dreyer & Traub’s waning days, Bristol needed to find clients and bill hours.” That was true in the mid-1990s and it’s worse today. Most big firm senior partners say they want aggressive attorney-entrepreneurs, but they ignore the perilous downside. Bristol found clients all right, but eventually he, they, and his firm became defendants themselves. I don’t know why Dreyer & Traub collapsed, but along with a lot of other small firms, it’s gone. So are some bigger ones.

ACT THREE

After leaving Dreyer & Taub in the spring of 1995, Bristol went through a succession of firms before landing at Brown, Raysman, Millstein, Felder & Steiner. In December 2006, Brown Raysman joined Thelen, Reid & Priest in the largest merger of that year. Some blame that transaction for Thelen’s dissolution less than two years later. Since then, lots of mergers have failed; more will follow.

ACT FOUR

In November 2008, Winston & Strawn picked up Bristol and 18 other former Thelen lawyers. Although his annual compensation for 2009 and 2010 was set at $1.35 million, in mid-2009 he agreed to reduce his guaranteed amount to $500,000. His metrics — billables, billable hours, and leverage ratio — must have been in deep trouble. That’s how most big firms measure value.

Bristol’s world continued to collapse as his biggest client, Starr, got behind on his legal bills. The amount — $750,000 — may not seem large for a firm with gross revenues of more than $700 million in 2010. But for a partner already wilting under the heat of the short-term metrics spotlight, it provided tippping-point pressure. Bristol allowed Starr to transfer stolen funds through his personal attorney escrow accounts.

ACT FIVE

In a request to delay sentencing, Bristol’s lawyer wrote that his client’s childhood left considerable emotional scarring: “For much of his adult life, Mr. Bristol has been in therapy to treat depression and anxiety.” If he suffered from those afflictions in college, he couldn’t have chosen a less suitable career.

From all of this, endless lessons emerge: know yourself; know your partners; scrutinize lateral hires; don’t assume anything about an attorney just because he or she comes from a great school or well-respected firm; being entrepreneurial is a two-edged sword; think beyond short-term metrics; character counts; and so forth.

But maybe the most important message is a universal one that few will heed. Perhaps inadvertently, one of Bristol’s former partners at Dreyer & Traub, Edward Harris, Jr., summarized it in The American Lawyer article:

“If you’ve got your eyes on the prize, sometimes you might ignore caution signs or something along the way.”

While enjoying the holiday season with family and friends, consider this addendum: Think about whether the prize you eye is the right one.

THE ARROGANCE OF OVERCONFIDENCE

Most of us hate admitting our mistakes, especially errors in judgment. Lawyers make lots of judgments, which is why they should pay special attention to two recent and seemingly unrelated NY Times articles.

In the October 23 NYT Magazine, psychologist and economics Nobel laureate Daniel Kahneman describes an early encounter with his own character flaw that led him to research its universality. Assigned to observe a team-buidling exercise, he was so sure of his predictions about the participants’ future prospects that he disregarded incontrovertible data proving him wrong — again, and again, and again.

In subsequent experiments, he discovered that he wasn’t alone. A similar arrogance of overconfidence explains why, for example, individual investors insist on picking their own stocks year after year, notwithstanding the overwhelming evidence that their portfolios are worse for it.

In the same Sunday edition of the Times, philosopher Robert P. Crease discusses the two different measurement systems. One relates to traditional notions: how much something weighs or how far a person runs. Representatives from 55 nations met recently to finalize state-of-the-art definitions for basic units of such measurements — the meter, the second, the kilogram, and so forth.

The second system is less susceptible to quantification. Crease notes: “Aristotle…called the truly moral person a ‘measure,’ because our encounters with such a person show us our shortcomings.” Ignoring this second type in favor of numerical assessments gets us into trouble, individually and as a society. Examples include equating intelligence to a single number, such as I.Q. or brain size, or evaluating students (and their teachers) solely by reference to standardized test scores.

Lessons for lawyers — and everyone else

Now consider the intersection of these two phenomena — the arrogance of overconfidence and the reliance on numbers alone to measure value. For example, in recent years, a single metric — partner profits — has come to dominate every internal law firm conversation about attorney worth. Billings, billable hours, and leverage ratios have become the criteria by which most big law leaders judge themselves, fellow partners, their associates, and competitors. They teach to the same test — the one that produces annual Am Law rankings.

The arrogance of overconfidence exacerbates these tendencies. It’s one thing to press onward, as Kahneman concludes most of us do, in the face data proving that we’re moving in the wrong direction. Imagine how bad things can get when a measurement technique appears to validate what are really errors.

I’m not an anarchist. (I offer my advanced degree in economics as modest support.) But the relatively recent notion that there is only one set of law firm measures for defining success — revenues, short-term profits, leverage — has become a plague on our profession. Of course, we’re not alone. According to the Times, during the academic year 2005-2006, one-quarter of the advanced degrees awarded in the United States were MBAs. Business school-type metrics are ubiquitous and, regrettably, often viewed as outcome determinative.

But lawyers know better than to get lost in them, or once upon a time they did. The metrics that most big firm leaders now worship were irrelevant to them as students two or three decades ago. Like today’s undergraduates, they were pursuing a noble calling. Few went to law school seeking a job where their principal missions would be maximizing client billings and this year’s partner profits.

Will the profession’s leaders in the next generation make room for the other kind of measure — the one Aristotle had in mind — that informs the quality of a person’s life, not merely it’s quantitative output? Might they consider the possibility that focusing on short-term metrics imposes long-run costs that aren’t easily measured numerically but are far more profound?

Reviewing the damage that their predecessors’ failures in that regard have inflicted — as measured imprecisely by unsettling levels of career dissatisfaction, substance abuse, depression, and worse — should motivate them to try.

Meanwhile, they’ll have to contend with wealthy senior partners telling them to keep their hours up — a directive that those partners themselves never heard. Good luck to all of us.

HUMBLE LEADERSHIP

Over a year ago, I considered the then newly-named dean of the Harvard Business School, Nitin Nohria. He’s been an outspoken critic of MBA curriculum that fosters short-term thinking at the expense of ethics and long-term values.

Nohria’s appointment came after the economic collapse of 2008 caused many to rethink what I call the MBA mentality of misguided metrics. Business school faculty worried that they’d taught too narrowly — emphasizing the need to maximize short-term profits at the expense of important but less easily measured values. Some suggested that business management should become more like a profession, such as medicine or, ahem, law.

Unfortunately, the most visible and powerful segment of the legal profession — big law — had already evolved to mimic some of the business world’s worst features. Nohria would have to look elsewhere for guidance.

So I read with interest his recent Q&A in the Wall Street Journal. Ethics has been a centerpiece of his curriculum overhaul at Harvard. But he’s even more concerned that this new classroom emphasis won’t stick once students return to the workforce.

“[T]here seems to be a big difference between people’s understanding of their responsibilities as business leaders and their capacity to live up to those when faced with pressure or temptation,” he told the Journal.

Because those achieving power have more difficulty retaining their moral compasses, Nohria’s new mission is cultivating humility.

“Abraham Lincoln said people think that the real test of a person’s character is how they deal with adversity,” Nohria told the Journal. “A much better measure of a person’s character is to give them power. I’ve been more often disappointed with how people’s character is revealed when they’ve been given power.”

Author Jonah Lehrer made a similar observation in a WSJ article discussing one study’s conclusion that nice people have a better chance of advancing:

“Now for the bad news, which concerns what happens when all those nice guys actually get in power. While a little compassion might help us climb the social ladder, once we’re at the top we end up morphing into a very different kind of beast.”

What does this have to do with lawyers? Plenty, especially most of those who run big firms where power has become concentrated increasingly at the top.

“Before the recession,” one management consultant observed, the top-to-bottom ratio within equity partnerships “was typically five-to-one in many firms. Very often today, we’re seeing that spread at 10-to-1, even 12-to-1.”

Several months ago, one big firm leader offered the Journal this spin:

“Pay spreads widen as firms become more geographically diverse, operating in cities with varying costs of living, said Peter Kalis, chairman of K&L Gates. The firm’s pay spread rose from about 5-to-1 to as much as 9-to-1 in the past decade as it expanded. ‘Houses cost less in Pittsburgh than they do in London,’ Mr. Kalis said.”

It’s a nice soundbite, but for reasons I’ve outlined before, not particularly persuasive. (E.g., Are there no top-of-the-range equity partners at K&L Gates’ Pittsburgh headquarters?)

But here’s the larger point: K&L Gates ranked 105th out of 126 firms in The American Lawyer  2011 Mid-Level Associate Survey. The firm scored well below the national averages in morale, collegiality, associate relations, training and guidance, family-friendliness, and overall rating as a place to work.

Kalis deserves praise for inviting recruits seeking jobs at his firm to ask tough questions. They won’t pose this one, but any leader should consider it:

While those at the top of big firms have consolidated their wealth and power, does true leadership — measured by the positive energy that everyone else in the place exudes — seem absent in a lot of them?

If Nohria is correct that the test of character comes when a person gains power, many at the top of some big firms could do better. Then again, it all depends on the metrics by which they’re measured.

THE COST OF DISSATISFACTION

This month began with the publication of The American Lawyer‘s annual Mid-Level Associate Satisfaction Survey results. The dismal descent to historic depths continues. Let’s end it with this question: Why should law firm leaders care?

Answer: Because dissatisfied lawyers are costing them money.

That’s the conclusion of Harvard Business School Professor Teresa Amabile and fellow researcher, Steven Kramer, in The Progress Principle. They reported their findings in the Labor Day edition of the New York TimesAt a time when most workers feel fortunate to have jobs, Amabile and Kramer have a tough sell in convincing employers, including law firm leaders, to worry about the psychological state of their employees.

We all know the mantra: No one is required to accept any job. The market allocates resources. A labor market clears at the point where buyers and sellers agree on a price for services sought and rendered. Workers take into account the factors that matter to them and get paid appropriately for the jobs they’re willing to do. Case closed.

Not quite. Such an analysis makes dubious assumptions about the market. On the employee side, bad or incomplete information can distort outcomes. A prospective law student might hope to emulate popular media images that merge with law school promotional materials promising a secure, well-paying future. Once in school, individual financial imperatives — such as the need to repay staggering educational debt — can constrain post-degree options. Meanwhile, the anticipated job often turns out to be neither secure nor well-paying.

Likewise, employers take false comfort in the misconception that a new hire is simply exercising free will in a free market. A firm assumes that if young attorneys’ experiences diverge from rosier expectations, any resulting psychological distress isn’t its problem. Never mind that the firm’s underlying business model produces behavioral incentives and a culture that exacerbate the disconnect.

“We’re just trying to run a business,” most law firm leaders would say. “There’s no metric for assessing the impact of career dissatisfaction on performance. If I can’t measure it, how can I consider it when making decisions?”

As long as everyone keeps billing hours, the profits beast continues to be fed. As unhappy associates alone bear the burden of their discontent, leaders rationalize their indifference to growing dissatisfaction with a simplistic analysis: if it gets too bad, people can leave and find another job. In the current buyer’s market for associates, boatloads of replacements are waiting in the wings anyway.

The work of Amabile and Kramer offers an intriguing rebuttal to myopic managers who can’t see past next year’s profits. In a longitudinal study encompassing ten years and 238 professionals in seven different companies, they asked people to make daily diary entries about their emotional states. Negative inner work lives resulted in “a profound impact on workers’ creativity, productivity, commitment and collegiality.”

The findings challenge the conventional wisdom that pervades many big firm cultures, namely, that pressure enhances performance. According to Amabile and Kramer, the data suggest that the opposite is true: “[W]orkers perform better when they are happily engaged in what they do….[O]f all the events that engage people at work, the single most important — by far — is simply making progress in meaningful work.”

The authors note Gallup’s estimate that America’s “disengagement crisis” costs $300 billion annually in lost productivity. They also observe that the vast majority of 669 surveyed managers shared an important incompetence: the managers “failed to recognize that progress in meaningful work is the primary [employee] motivator, well ahead of traditional incentives like raises and bonuses.” The catalysts that enable such progress are worker autonomy, sufficient resources, and learning from problems.

Big firm leaders determine the extent to which their workers experience these three catalysts. The leveraged pyramid and its billable hour regime enslaves associates while inhibiting partners from becoming mentors. In other words, the prevailing big law model cuts the wrong way for everyone. The resulting work environment produces dissatisfaction that’s costing the equity partners money.

How much money? William Bruce Cameron’s observation (sometimes attributed to Einstein) was right: “Not everything that can be counted counts, and not everything that counts can be counted.”

FROM THE SPORTS PAGE

Subtle clues revealing the cause of a fundamental problem confronting the legal profession are everywhere, even in the sports section.

Recently, the New York Times wrote about 26-year-old Josh Satin, who made his major league debut for the New York Mets on Sunday, September 4. This time of year, such stories about minor league ballplayers getting a chance to play for out-of-contention major league teams are common. Regrettably, one of my hometown franchises — the Cubs — affords such opportunities almost every year.

This line of the Satin article caught my eye:

“After graduating as a political science major from Cal, Satin was selected by the Mets in the sixth round of the 2008 draft. And like any number of 20-somethings with a liberal arts degree and nebulous career prospects, he kept law school applications at the ready.”

Satin was drafted the  same year I began offering an advanced undergraduate course that targeted students like him. For many juniors and seniors who can’t decide what to do next, law school becomes a default solution that buys them more time. Sometimes it works out okay; for too many others, it’s a place where dreams go to die.

Bad information bears much of the blame for the problem of poor career choices that, in turn, contribute to widespread attorney dissatisfaction. Law schools skirting the outer limits of candor to fill their classrooms have made the problem worse. So has the transformation of big firms from a profession to a collection of short-term profit-maximizing businesses that use misguided metrics to drive decisions.

As a consequence, some not-so-funny things happened to many of those who went to law school for the wrong reasons. For starters, the promise of a secure future at a well-paying job turned out to be illusory. The persistent problem of lawyer oversupply rose to crisis levels during what would have been Satin’s first year of law school, if he’d gone. Since then, the market for new talent has gotten worse.

But even many who found decent legal jobs have been unpleasantly surprised. Popular images of dynamic lawyers engaged in courtroom battles widen the gap between student expectations and the reality they’ll encounter; that eventually makes for some very unhappy attorneys. By the time the truth hits, many find themselves burdened with educational debt equal to a home mortgage, albeit without the house.

That doesn’t mean no one should go to law school. The law is a great and noble pursuit in many ways. In fact, even the most pessimistic assessments suggest that about half of all attorneys enjoy satisfying careers. I sure did.

Nor does it mean that everyone who dreams of playing major league baseball — or any other high-profile job that the media infuses with irresistible glamour — should give it a shot. Everyone enjoys watching extraordinarily talented celebrities ply their trades, but for most of us, being a spectator is our highest and best use at such events. In his address to the Northwestern graduating class of 2011, Stephen Colbert referred to commencement speakers who tell college graduates to follow their dreams and asked, “What if it’s a stupid dream?”

But acknowledging the stupidity of a dream shouldn’t make law school the fallback answer to one of life’s most important questions, “Now what?”

I don’t know if Josh Satin will remain a major league ballplayer. If he doesn’t, I don’t know what he’ll do after that. But meanwhile, give him credit for having the courage to pursue passions for which he obviously has talent. It’s a safe bet that he’s happier than his college classmates “with a liberal arts degree and nebulous career prospects [who] kept law school applications at the ready,” sent them in, and pursued legal careers for which they had incomplete knowledge, limited enthusiasm, or both. Compounding the difficulties with which they began law school, they’re now having trouble finding the secure, well-paying and exciting work that they thought would be waiting for them when they graduated.

It turns out that for most of the nation’s 50,000 annual graduates, those particular jobs were never there at all.

SUFFERING IN SILENCE

The 2011 Am Law associate survey is out. Billable hours continue moving up; morale continues moving down. As I explain in “Suffering in Silence” (appearing in the September 2011 print edition of The American Lawyer), those who get to participate in the survey are the lucky ones.

It’s especially appropriate for Labor Day.

AGING GRACEFULLY — OR NOT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A NEW LAW SCHOOL MISSION

What ails the profession and is there a cure?

If you haven’t already seen it, you might want to take a look at Part I of my article, “Great Expectations Meet Painful Realities,” in the Spring 2011 issue of Circuit Rider. My latest contribution to the debate on the profession’s growing crisis begins on page 24 of the Seventh Circuit Bar Association’s semi-annual publication.

Part II begins at page 26 of the December 2011 issue.

IMPROVING PROSPECTS — BUT FOR WHOM?

Life is just a matter of perspective. For example, here’s some apparently good news:

— The legal sector added 1,500 jobs in April.

— Ashby Jones at the Wall Street Journal Law Blog cited a recent article in The Guardian for the proposition that the U.K. might actually have a shortage of lawyers next year. Could the U.S. be far behind?

— NALP’s Executive Director James Leipold noted that, along with an overall attorney employment rate of 88.3% for the class of 2009, “the most recent recruitment cycle showed signs of a small bounce in the recruiting activity of law firms, a sign that better economic times likely lie ahead.”

Now consider each headline a bit differently:

— “Legal sector” isn’t limited to attorneys; more than 44,000 new law school graduates hit the market every year.

The Guardian article relies solely on a report from the College of Law that has an interest in encouraging applications to its program for prospective solicitors. More than one comment to the initial report expressed angry skepticism about the College’s short-term motives. Where have I heard that before?

Meanwhile, the Bureau of Labor Statistics projects that, for the entire ten-year period from 2008 to 2018, net U.S. attorney employment will increase by only 100,000. Even if all aging attorneys retired as they turned 65, there aren’t enough of them to make room for all the newbies. In 1970, for example, law schools awarded only about one-third of the number of JDs conferred in 2010.

— To his credit, NALP’s Leipold went behind the 88% employment rate for the class of 2009. The resulting caveats are significant.

First, the percentage employed are graduates “for whom employment status was known.” Who’s excluded? Who knows?

Second, nearly 25 percent of all reported jobs were temporary; more than 10 percent were part-time.

Third, only 70 percent “held jobs for which a J.D. was required.” Unfortunately, law schools don’t offer tuition refunds (or relief from student loans) for education that was unnecessary for their graduates’ actual employment opportunities. That doesn’t surprise me. (See “Law School Deception.”)

Finally, more than 20 percent of employed graduates from the class of 2009 “were still looking for work.” Beneath the veneer of superficially good news — having a job — career dissatisfaction continues to eat away at too many of the profession’s best and brightest in yet another generation.

That doesn’t mean people shouldn’t go to law school. It means that they should think carefully about it first, starting with this question: why do I want to be a lawyer and will the reality of the job match my expectations?

Turning the employment subject toward big law leads to one more lesson on perspective.

A day after the Ashby Jones and James Leipold articles, the WSJ‘s Nathan Koppel summarized big law’s continuing job-shedding: the NLJ 250 lost another 3,000 in 2010, bringing their total decrease since 2008 to 9,500. They may be hiring some new associates, but they’re getting rid of many more.

NALP expects to release its 2010 employment data in May. But every big law leader knows that May’s true importance lies in a much more significant event: annual publication of the Am Law 100. For some partners, pre-release anxiety is palpable, if not paralyzing.

This year, average equity partner profits for the Am Law 100 went up by over 8% — to almost $1.4 million. For context, that surpasses 2007, which was the peak of an uninterrupted five-year PPP run-up. Pretty stunning for an economy that remains difficult for so many. Gross revenues increased as overall headcount dropped by almost 3%. More revenues from fewer attorneys meant more billables — mislabeled as higher “productivity” in big law terms — for the chosen. (See “The Misery Index.”) As jobs remained scarce and associate hours climbed, equity partner earnings continued their ascent.

How much is enough? For some people, the answer will always be more; short-term metrics that maximize current PPP guide their way. Life is easy when deceptively objective numbers make solutions simple, reflection unnecessary, and the long-term someone else’s problem. It’s just a matter of perspective.

BIG LAW INCIVILITY

Attorney incivility is nothing new. Noting that the problem dated to the nineteenth century, Chief Justice Warren Burger addressed it in 1971 remarks to the American Law Institute. He criticized the lawyer who equated zealous advocacy with “how loud he can shout or how close he can come to insulting all those he encounters.” (“The Necessity for Civility,” 52 FRD 211, 213 (1971))

Here’s a more recent example from a deposition, cited in Judge Marvin E. Aspen’s oft-quoted 1998 article on the erosion of civility:

Mr. V: Please don’t throw it at me.

Mr. A: Take it.

Mr. V: Don’t throw it at me.

Mr. A: Don’t be a child, [Mr. V]. You look like a slob the way you’re dressed, but you don’t have to act like a slob….

Mr. V: Stop yelling at me. Let’s get on with it.

Mr. A: You deny I have given you a copy of every document?

Mr. V: You just refused to give it to me.

Mr. A: Do you deny it?

Mr. V: Eventually you threw it at me.

Mr. A: Oh, [Mr. V], you’re about as childish as you can get. You look like a slob, you act like a slob.

Mr. V: Keep it up.

Mr. A: Your mind belongs in the gutter.

Evidence of incivility among adversaries is largely anecdotal; the best examples don’t lend themselves to statistical analysis. A recent Above the Law post led me to ponder this question: does the prevailing big law business model contribute to incivility?

Mark Herrmann, a former big law partner, writes “Inside Straight” from his relatively new vantage point as in-house counsel. “How to Be a Crappy Partner” isn’t about civility, but some of his readers’ comments led me to this observation: when lawyers inside a law firm treat each other poorly, no one should expect their behavior to improve for outside opponents.

Unpleasant personalities are everywhere. Big firm lawyers as a group may be no worse than those in other practice settings; jerks exist across the spectrum. Likewise, drawing conclusions from any potpourri of Above the Law comments is dangerous. Even so, the most coherent “Crappy Partner” reactions fall into the following categories, each of which has a counterpart in external incivility:

— Disrespect for People’s Time

“Give me 10 minutes as an associate in a world without Blackberrys–please.” Other examples: delaying assignments until they conflict with an associate’s long-planned (and widely known) vacation; imposing tight deadlines only to let the completed work sit undisturbed on the assigning partner’s desk for two weeks; Friday night forwarding of a client’s earlier request for answers by the following Monday with a message revealing that the partner sat on the client’s request for five days.

Incivility counterpart: Fighting over inconsequential scheduling matters; taking actions, such as so-called emergency motions, solely to disrupt opponents’ personal lives.

— Flagrant Misbehavior

“Believe it or not, I’m on your side.” Examples: partners who yell, scream, and act in ways that most parents wouldn’t tolerate from a two-year-old; verbal abuse; sexist comments; narcissism.

Incivility counterpart: Ad hominem attacks.

— Lack of Candor About the Big Law Model

“I’m smart; that’s why you hired me. I can do the math.” Examples: pretending that associates don’t notice as fewer than ten percent of earlier new hires advance to equity partner after years of 2,000+ billables; bragging about the firm’s tenth year of increasing partner profits while laying off associates and staff; giving lip-service to mentoring and professional development when short-term profits drive decisions based on metrics that exclude such considerations.

Incivility counterpart: Lawyers believing their own press releases–and acting the role.

Send the purveyors (and victims) of such hubris into the world and what do you expect? More than most occupations, lawyers learn from role models and mentors. The culture that undermines morale at many large firms isn’t self-limiting. The prevailing business model often rewards “crappy partner” behavior and rarely penalizes it. External incivility is one byproduct of that internal ethos.

Large firms aren’t solely to blame for incivility; far from it. But for good and ill, they exert vastly disproportionate influence over the profession. Among other failings, the prevailing big law business model isn’t helping the cause of civility. Tellingly, here’s one commenter’s sad advice on how to avoid becoming a crappy partner:

“Please say please and thank you.”

I wonder what their mothers would say.

GREED ATOP THE PYRAMIDS

Three recent reports are more interesting when read together: the National Law Journal‘s annual headcount survey at the largest 250 law firms, the Citi Law Firm Group’s third quarter report on law firm performance, and the Association of Corporate Counsel/The American Lawyer (ACC/TAL) Alternative Billing 2010 Survey.

The headline from the NLJ 250 item: a 1,400 drop in 2010 total attorney headcount. This qualified as a welcome improvement over the far deeper plunge in 2009. Associates took the biggest hit, accounting for about 1,000 of the eliminated positions.

That doesn’t sound too bad, until you realize that it’s a net reduction number. As 5,000 new law school graduates got large firm jobs, many more — over 6,000 — lost (or left) theirs. This simple arithmetic suggests an unsettling reality: The relatively few who land big law jobs may discover that keeping them is an even more daunting challenge.

In some respects, that’s nothing new. Long before the Great Recession began, attrition was a central feature of most large firm business models. In 2007, lucrative starting positions were plentiful, but big law’s five-year associate attrition rate was 80%. Some of it was voluntary; some involuntary. The survival rate for those continuing the journey to equity partner was exceedingly small.

That takes us to the Citi report. The only really good news now goes to top equity partners: For them, big law’s short-term profit-maximizing model remains alive and well. The formula remains simple: Firms are imposing increasingly strict limits on equity partnership entry and, according to Citi, charging clients higher hourly rates overall as some partners remain busy with tasks that less costly billers performed previously. (Equity partners have to keep their hours up, too.) Amid the bloodshed elsewhere, average equity partner profits for the Am Law 100 actually rose slightly in 2009 — to $1.26 million. Not bad for the first full year of the worst economic downturn in a century.

But even that remarkable average masks growing wealth gaps within equity partnerships. One law firm management consultant observed, “Before the recession, [the top-to-bottom equity partner compensation ratio] was typically five-to-one in many firms. Very often today, we’re seeing that spread at 10-to-1, even 12-to-1.” That is stunning.

While maintaining leverage and increasing hourly rates, the third leg of the profits stool likewise remains intact: billable hours. As business picks up, firms are hiring fewer associates than in earlier recovery periods. Under the guise of transparency, some newbies are hearing that they have to meet monthly billable hours targets in addition to the annual requirements reported to NALP.

The ACC/TAL survey reveals why: Earlier rhetoric surrounding the new world of alternative fees was largely empty. Hourly billing remains king of the fee-generating hill. As another Am Law survey confirmed, simple discounts from regular hourly rates accounted for 80% of so-called alternative fee arrangements last year.

The pressure to bill hours is increasing. Unfortunately, it remains an important, albeit misnamed, productivity metric. Indeed, rewarding time alone is the antithesis of measuring true productivity, which should focus on the efficiency of completing tasks — not the total number of  hours used to get them done.

As one law firm management consultant told the NLJ, “We’re finally seeing the bottom of the legal recession…There’s been a reset. There are fewer lawyers producing more work and more revenue.”

When the Am Law 100 profit results come out in May, Citi’s prediction will come true: As the economy continues to sputter and young law school graduates worry about their prospects, overall average profits per equity partner will follow their steady upward trajectory.

Law firm management consultants might say all of this results from increased productivity that the “reset” of big law has produced. That’s one way to put it. But the the growing spread between highest and lowest within equity partnerships — coupled with the plight of everyone else — may reveal something more sinister: The worst economic downturn of modern times has provided protective cover to greed atop the pyramids.

LAW SCHOOL DECEPTION

Last Sunday, the NY Times asked: Are law schools deceiving prospective students into incurring huge debt for degrees that aren’t worth it?

Of course they are. The U.S. News is an aider and abettor. As the market for new lawyers shrinks, a key statistic in compiling the publication’s infamous rankings is “graduates known to be employed nine months after graduation.” Any job qualifies — from joining Cravath to waiting tables. According to the Times, the most recent average for all law schools is 93%. If gaming the system to produce that number doesn’t cause students to ignore the U.S. News’ rankings altogether, nothing will.

My friend, Indiana University’s Maurer School of Law Professor Bill Henderson, told the Times that looking at law schools’ self-reported employment numbers made him feel “dirty.” I assume he’s concerned that prospective students rely on that data in deciding whether and where to attend law school. I agree with him.

But an equally telling kick in the head is buried in the lengthy Times article: Most graduates who achieve their initial objectives — starting positions in big firms paying $160,000 salaries — quickly lose the feeling that they’re winners. Certainly, they must be better off than the individuals chronicled in the article. What could be worse than student debt equal to a home mortgage, albeit without the home?

Try a legal job with grueling hours, boring work, and little prospect of a long-term career. Times reporter David Segal summarized the cliche’: “Law school is a pie-eating contest where first prize is more pie.”

These distressing outcomes for students and associates aren’t inevitable. In fact, they’re relatively new phenomena with a common denominator: Business school-type metrics that make short-term pursuit of the bottom line sterile, objective, and laudable. Numbers prove who’s best and they don’t lie.

Law school administrators manipulate employment data because they have ceded their reasoned judgment to mindless ranking criteria. (“[M]illions of dollars [are] riding on students’ decisions about where to go to law school, and that creates real institutional pressures,” says one dean who believes that pandering to U.S. News rankings isn’t gaming the system; it’s making a school better.)

Likewise, today’s dominant large firm culture results from forces that produced the surge in average equity partner income for the Am Law 50 — from $300,000 in 1985 to $1.5 million in 2009. Leveraged pyramids might work for a few at the top; for everyone else — not so much.

The glut of law school applicants, as well as graduates seeking big firm jobs to repay their loans, leaves law school administrators and firm managers with no economic incentive to change their ways. The profession needs visionaries who are willing to resist perpetuating the world in which debt-laden graduates are becoming the 21st century equivalent of indentured servants.

Henderson calls for law school transparency in the form of quality employment statistics. I endorse his request and offer a parallel suggestion: Through their universities’ undergraduate prelaw programs, law schools should warn prospective students about the path ahead before their legal journeys begin.

Some students enter law school expecting to become Atticus Finch or the lead attorneys on Law & Order. Others pursue large firm equity partnerships as a way to riches. Few realize that career dissatisfaction plagues most of the so-called winners who land what they once thought were the big firm jobs of their dreams.

A legal degree can lead to many different careers. The urgency of loan repayment schedules creates a practical reality that pushes most students in big law’s direction. If past is prologue, the vast majority of them will not be happy there. They should know the truth — the whole truth — before they make their first law school tuition payments. Minimizing unwelcome surprises will create a more satisfied profession.

Meanwhile, can we all agree to ignore U.S. News rankings and rely on our own judgments instead of its stupid criteria? Likewise, can big law managers move away from their myopic focus on the current year’s equity partner profits as a definitive culture-determining metric? I didn’t think so.

MEASURING VALUES

In a recent NY Times column, David Brooks wrote about the future of our nation, but one observation applies to big law:

“In a world of relative equals, the U.S. will have to learn to define itself not by its rank, but by its values. It will be important to have the right story to tell, the right purpose and the right aura. It will be more important to know who you are.” (http://www.nytimes.com/2010/12/14/opinion/14brooks.html?_r=1&ref=opinion)

Large law firms, too, have become a world of relative equals. That has been an unintended consequence of the transformation from a profession to a business. In pursuit of rank, too many managers rely on B-school-type metrics — billings, billable hours, leverage ratios — as definitive measures of worth. They use them as substitutes for independent judgments based on values that are less easily quantified.

Behavior follows incentives. Partners jockey for internal position and managers focus myopically on short-term profits. They believe that favorable Am Law rankings will distinguish them but, Brooks argues, similar thinking would be a mistake for our country over the long-run.

It’s equally true for big firms. High-paying clients assume that only the best and brightest lawyers will work on their matters. But to attract and retain those attorneys, even the self-described top firms will have to offer more than money. In that contest, values will separate the biggest winners from everyone else.

Of course, in the very short-term, top graduates respond to the urgency of school loan repayment schedules. But as the novelty of a steady paycheck fades, the superstars will yearn for something else. They’ll understand that a firm’s “make more money” mantra limits its vision. For most, it fails to offer long-term career satisfaction. Indeed, the prevailing model doesn’t even contemplate long-term careers for the vast majority of new hires.

The most ambitious and talented new graduates are already beginning to understand the game. As greater knowledge of what lies ahead empowers students to make better decisions, firms viewing their own missions merely as maximizing this year’s equity partner profits will lose the values contest for the next generation’s talent. It won’t happen this year or next, but it will happen.

What are the winning values? Here are some suggestions:

Resisting the deceptive simplicity of short-term metrics. Embracing efforts to shed light on a troubled business model. Requiring decency in all human interactions. Punishing bullies. Providing young lawyers with mentors, training, and opportunities because even the best internal programs are no substitutes for the real thing. (Pro bono programs can help as they advance other important values.) Creating a reality that matches more closely students’ prelaw expectations of what being a lawyer would mean.

Offering realistic prospects for long-term careers. Without tolerating mediocre performers, implementing decision-making processes that minimize the impacts of internal politics and clashing personalities in determining the fate of human beings. Providing meaningful and candid reviews while also jettisoning arbitrary barriers that the leveraged pyramid model imposes on equity partnership entry. Advancing all who deserve promotion.

Conquering the billable hour and its death-grip on associate compensation. Finding a way to measure attorney productivity that rewards those who complete a task efficiently — and penalizes those whose long hours produce big client billings based on diminishing (or negative) returns.

To secure their firms’ futures, thoughtful partners will accept modest reductions from the staggering personal incomes that they’ve enjoyed in recent years. Those willing to make the investment will reap great dividends. Large firms depend uniquely on the wisdom, judgment, and intelligence of their attorneys. The best new graduates will flock to firms cherishing values consistent with a satisfying career, even if it means less money (although in the long-run, it probably won’t).

As for the rest? Much of big law will continue pursuing the highest short-term dollar — wherever it is and whatever its cost to others, their institutions, or the profession. Such is the power of greed. But those who measure everything they value risk creating an unpleasant world in which they value only what they measure.

“IT’S A WONDERFUL [BIG LAW] LIFE?”

‘Twas the week before Christmas when all through the firm,

The coming New Year caused every body to squirm.

Associates awaited the annual time,

When they’d learn of a bonus, oh so sublime.

***

The seasoned had worked a lot harder this year,

As dreams of a partner’s life blurred hope and fear.

Equity partners were again in a squeeze:

They ate what they killed. Who was ever at ease?

***

As happens whenever there is a recession,

Clients sought value; their lawyers fought depression.

While pondering how most large law firms had changed,

I overheard rustling, peculiar and strange.

***

The holidays! I remembered at last.

Hard to believe, one more year had now passed.

Whispers foreshadowed the annual display,

“The Chairman is here…he’s in town for the day.”

***

Chance and fortuity determine one’s fate,

Except for our Chairman who thought himself great.

A new breed of leader who’d come to the fore,

How much is enough? He will answer you: “More.”

***

I sprang from my desk for a glimpse of the man

Who’d been somewhere warm; he was sporting a tan.

With a custom made suit, crisp shirt, and red tie,

I knew in a moment that this was The Guy.

***

He walked not alone but with minions galore,

They seemed like a dozen, but there were just four.

The group strode by briskly – as followers massed,

I stepped forward slowly. Who cares if I’m last?

***

“The large conference room,” I heard someone say,

“That’s where the Chairman will speak this grand day.”

I dutifully followed the gathering throng

To where The Great Man was to sing us his song.

***

As dry mouth with oral argument arises,

I feared he’d be off’ring unpleasant surprises.

He was dressed to the nines – impressively so.

I prayed that he’d speak his piece quickly and go.

***

With the crowd settling in to hear his remarks,

I knew what was coming – pure brimstone and sparks.

“It’s that time again,” he began with a cheer,

“As we near the end of our firm’s fiscal year.”

***

“Get bills out at once and then follow them through.

Be relentless with clients; be tough; be true.

If our profits decline, it’s trouble for all,

Money binds us as one – without it, we’ll fall.”

***

He turned to associates, awaiting the news,

Another bad year? They looked closely for clues.

They all knew the truth: The firm’s profits still soared.

But what partners share their great wealth with the horde?

***

“We’re a business,” the Chairman silenced the joint.

“All else is, well, really quite outside the point.

It takes a whole team to keep the wheels turning,

Billed hours are key – although some call it churning.”

***

“Billables – that is the firm’s soul and its heart,

That means you associates must all do your part.”

As this aging hypocrite climbed the ladder,

Mentors told him that his hours did not matter.

***

I hoped he was done, but alas he was not:

“Associate morale is stuck deep in a pot.

So you’ll each get a bonus matching our peers,

And we’ve formed a committee – they’ll dry your tears.”

***

“I can’t promise mentors, good training, or more,

But you’ll out-earn friends for whom life’s less a chore.

You still have school loans that will not go away.

So happy or not, you will all want to stay.”

***

“Remember the job that you have in this crash,

Your unemployed friends would take on in a flash.

Keep making me rich – as much as you’re able,

What else can you do? Wash dishes? Wait tables?”

***

“Lest you think that I’m heartless, greedy, or crass,

I’m running a business, not being an ass.

A handful of metrics rule everything now,

Billables, leverage, the pyramid – Wow!”

***

His message delivered, he soon left the floor.

He picked up his iPad and walked out the door.

But I heard him exclaim as he vanished from view,

“Keep those hours rising – your worst enemy is you!”

—— Steven J. Harper, December 2010

*****************************************************

Thanks to all of you, the editors of the ABA Law Blawg chose The Belly of the Beast as one of the 100 best blogs of 2010. To be selected from more than 3,000 in the ABA directory is humbling, especially for this novice blogger.

Happy Holidays – and please return in the New Year! I will.

THANKSGIVING

“Your articles are sometimes ‘edgy,'” my friend suggested wryly.

I took it as a compliment. He was referring to my more pointed critiques, especially of misguided metrics that often supplant reasoned thought. A frequent target has been big law’s resulting transformation over the past two decades: Most firms now maximize short-term equity partner profits at the expense of other values — collegiality, community, mentoring, career satisfaction, efficient lawyering, long-term institutional vitality, and even the profession’s unique identity.

But it wasn’t always so, and that’s why my large firm career figures prominently in the following list of things for which I am thankful:

— A spouse (the same one who put me through law school), children, and family who helped me maintain perspective. “The law is a jealous mistress” (Story, J.), but I’ve tried to practice what I’ve preached. When it was time for firmwide work-life presentations, I was the go-to partner. Those waiting for me at home were the reason.

— A rewarding career. I joined Kirkland & Ellis immediately after graduation because it promised litigation associates engaging colleagues, great training, challenging matters, and exciting courtroom experiences. I stayed for a long time because it delivered on all counts. When I was young, my ambition was to be the civil trial lawyer version of Perry Mason. Starting with a first-chair jury trial as a third-year associate, I got close enough to enjoy my work while making some lifelong friends. It was a much different time.

— A financial surprise. My job enabled my “second act” — writing books and these articles. All current large firm equity partners who graduated after 1970 should admit that their incomes have vastly exceeded their wildest law school dreams. Unfortunately, many are big law leaders who have decided that they’re entitled to such extraordinary wealth. To preserve it, they’ve used misguided metrics to create firm environments undermining attorney satisfaction and the profession’s core values. Younger lawyers have borne the brunt of the billable hours/leveraged pyramid culture, but they’re not alone. An ABA poll taken shortly before the 2008 economic collapse reported that 60% of attorneys practicing 10 years or more said they would urge a young person away from a legal career. Big firm lawyers are the unhappiest and the metrics-driven business model shoulders much of the blame.

— Readers who understand that criticism comes from caring. Interpersonally, it would have been easy for me to take my accumulated marbles from a lucrative career, buy a boat, and sail silently into the sunset. But that pesky person in the mirror would still be waiting every morning.

— Readers who confirm that I’m not alone. As a critic of large firms’ increasing use of simplistic metrics to displace important qualitative judgments about human value, I assumed that I was an outlier. The overwhelming feedback from intelligent, thoughtful, and varied readers — associates, academics, consultants, lay persons, and even big law partners — has convinced me that I’m writing what many of you think. Thanks for letting me know.

— Readers who understand my motives. I aim to improve the profession and assist those who are considering it as a career. An accomplished attorney famously observed, “Sunlight is the best disinfectant.” My tiny flashlight seeks to illuminate the path for those who might want to follow, but who haven’t yet paid the $150,000 entry fee. I’m not trying to dissuade anyone from becoming a lawyer, or even from pursuing a large law firm career. My goal is a happier profession; revealing truth that might help bridge the gap between expectations and reality can’t hurt.

Finally, I’m thankful for the courage of Aric Press and Dimitra Kessenides at The American Lawyer. In recent months, they’ve run 20 of my articles in Am Law Daily, even though my positions challenge many of their constituents’ attitudes and behavior. They’ve trusted me with their audience and amplified my voice.

If I’ve made some big law managers squirm and other people think, well, then I’m thankful for that, too.

WORK-LIFE BALANCE MONTH

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

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.