KEEP FEEDING PROFITS THE BEAST. WHAT COULD GO WRONG?

Posted on October 7, 2010 by thebellyofthebeast

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

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

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

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

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

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

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

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

Now what?

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

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

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

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

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

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

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

BIGLAW’S GLASS IS 44% FULL

Posted on September 23, 2010 by thebellyofthebeast

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

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

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

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

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

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

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

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

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

My friend put the issue squarely:

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

Yes, I do.

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

ABOUT THOSE BIGLAW ASSOCIATE SATISFACTION SURVEYS….

Posted on September 9, 2010 by thebellyofthebeast

The 2010 American Lawyer survey reports the lowest overall level of associate satisfaction since 2004.

The firms faring poorly will take comfort in standard disclaimers: response rates are low and negatively biased; survey questions are flawed; the poll captures attitudes from a generation of young attorneys who feel entitled. We all know the list. Lawyers specialize in explaining away bad facts and sometimes the critique is valid.

But before lower-ranked firms throw these results into a sea of self-serving rationalizations, they should consider the criteria by which others did quite well: relations with partners and other associates, interest in and satisfaction level of the work, training and guidance, policy on billable hours, management openness about firm strategies and partnership chances, the firm’s attitude toward pro bono work, compensation and benefits, and the respondents’ inclination to stay at their firms for at least two more years.

Now correlate each factor to the metrics that dominate today’s Biglaw business models — billings, billable hours, and associate/partner leverage ratios, all of which produce equity partner profits. For too many, the relationship is inverse. The absence of a metric by which firms hold partners accountable for associate satisfaction means that it gets ignored.

What’s the solution? Pay them more money? They won’t object, but according to a recent survey published in the Proceedings of the National Academy of Sciences, additional income beyond $75,000 a year doesn’t increase happiness. (http://www.pnas.org/content/early/2010/08/27/1011492107.full.pdf+html?sid=61f259ad-92a2-470f-b218-23537d8e2972)

How about just telling them to suck it up and push through to a better day? Doesn’t time cure all ills? Another NAS study suggests that our sense of global well-being is U-shaped. We start at a high point around age 18, move down until 50, and take a major upward turn until 85. (http://www.pnas.org/content/107/22/9985.abstract?sid=61f259ad-92a2-470f-b218-23537d8e2972) This comes from a 2008 telephone survey asking 340,000 people how they felt on the day the researchers called them. No attempt was made to control for health, employment, marital status, or anything else. It’s just a cross-sectional slice of the population at a moment in time. In short, draw conclusions at your peril.

Still, it’s interesting to compare these results with recent evidence about the happiness life-cycle of many Biglaw attorneys.

There no need for melodrama or hyperbole. Many lawyers of all ages have fulfilling careers and lead satisfying lives. Generalizations are always treacherous. Within and among firms, there are always exceptions to whatever is typical or predominant.

But the big picture can be informative. In the ABA’s 2007 survey of the profession, about 60% of attorneys in practice fewer than 5 years said they would recommend a legal career to a young person. That’s not exactly a ringing endorsement; however, it’s better than more senior attorneys’ views. For those practicing more than 10 years, it dropped to 40%.

Of course, “more than 10 years” covers lawyers from 35 to 90. So it’s difficult to know if the data support a U-shaped theory. They lend some credence to the notion that there’s a steep slide for people in their 20s, 30s, and 40s. But is there an uptick when attorneys hit the mid-century mark? That’s not clear — and it seems like a long wait.

It’s not all bad news. In the ABA survey, 84% found the practice of law to be intellectually stimulating. When I’ve invited lawyers of different ages and stages of their careers to make guest appearances in my undergraduate course on the profession, Biglaw attorneys spoke enthusiastically about tackling cutting-edge legal problems. Then they heard this question:

“What has been your happiest time as a lawyer?”

Here are some answers:

A 20-something senior associate: “Certainly not now. My life is not my own. I’m billing long hours in the hope of becoming a partner. Then I’ll gain more autonomy and control.”

A 30-something non-equity partner: “Life was easier when I was an associate. But I work hard now because I think things will get better if I make equity partner. Of course, that’s a big ‘if”.”

A 40-something equity partner: “I never realized how good I had it as an associate. Now I feel pressure to bring in clients so I can justify my equity compensation; that process never ends. You think that becoming an equity partner means you’ve crossed some finish line, but that’s when the race really begins.”

A 50-something equity partner: “I don’t know what I’ll do when I’m not a partner in my firm anymore. I haven’t had time to think about what’s next for me. Now, when I consider that prospect, the future becomes a source of anxiety.”

I don’t know to what extent these attorneys’ comments represent their respective demographic groups in Biglaw or elsewhere. But it’s no surprise to me that surveys consistently find practicing lawyers to be among the least satisfied workers and that attorneys in large firms today have the most difficulty finding the upward leg of the U-shaped happiness curve, assuming it’s out there.

The Biglaw business model has provided some of its attorneys with a lot more money than their predecessors. Career satisfaction that contributes to overall happiness?

That’s more complicated.

INTERVIEWING SEASON — THE MORE THINGS CHANGE…

Posted on September 1, 2010 by thebellyofthebeast

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

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

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

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

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

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

Can a student influence the exercise?

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

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

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

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

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

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

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

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

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

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

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

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

ALONG CAME LAW FIRM MANAGEMENT CONSULTANTS

Posted on August 27, 2010 by thebellyofthebeast

In the final analysis, Biglaw leaders have only themselves to blame, but they didn’t stumble into the world of misguided metrics on their own. They paid outside experts to guide the way — and they’re still doing it.

Thirty years ago, few undergraduates went to law school because they thought that a legal career would make them rich. For example, most students at Harvard with that ambition were on the other side of the Charles getting MBAs; the river formed a kind of natural barrier. The law was something special — a noble profession — or so most of us believed.

Particularly in large firms, nobility has yielded to business school-type metrics that focus on short-term profits-per-partner. The resulting impact on the internal fabric of such firms is depicted in my legal thriller, The Partnership (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1) But other collateral damage includes the decline of mentoring that produced great lawyers in my baby boomer generation. (See my article, “Where Have All The Mentors Gone?” – http://amlawdaily.typepad.com/amlawdaily/2010/07/harpermentors.html).

Among the reactions to my mentoring observations was this:

“I am particularly intrigued by your reference to the role modern legal consulting firms have played in the demise of law as a profession. This is worthy of a blog post in and of itself and I look forward to it.”

I discussed this subject in an earlier post, but it’s worth another look.

Hildebrandt Baker Robbins is the successor to Hildebrandt, Inc., one of the early pioneers in what became a cottage industry: law firm management consulting. The company’s 2010 Client Advisory includes this line:

“In our view, one of the serious misuses of metrics in the past few years has been the overreliance on profits per equity partner as the defining index of a firm’s value and quality.” (http://www.hildebrandt.com/2010ClientAdvisory)

Really? Who encouraged the use of this ubiquitous metric on which Hildebrandt has now soured? As Dana Carvey’s church lady character might say, “Could it be….Hildebrandt?”

Of course, it wasn’t alone. When The American Lawyer published its first ranking of the Am Law 50 (now grown to 100) in 1985, what was once off limits in polite company — how much money a person made — became an open and notorious measuring stick of law firm performance: average profits per partner. Greed became respectable as inherently competitive firm leaders began teaching to the Am Law test so they could gain or retain position in its annual listing.

When the 1990-1991 recession rattled a much smaller version of what is now called biglaw, the National Law Journal’s annual survey of the largest 250 firms in 1991 quoted Bradford Hildebrandt, who 16 years earlier had founded the company bearing his name:

“In most firms, current management has never operated within a recession and didn’t know how to deal with it…” (“The NLJ 250: Annual Survey of the Nation’s Largest Law Firms — Overview — The Boom Abates,” The National Law Journal, September 30, 1991 (Vol. 14, No. 4))

So who could save us from ourselves? As they watched profits slide, worried law firm leaders turned to Hildebrandt and other experts who could assist in bringing business school principles and MBA-type metrics to their big firms. By 1996, Mr. Hildebrandt himself had diagnosed the situation and offered his remedy in that year’s NLJ 250 issue:

“The real problem of the 1980s was the lax admissions standards of associates of all firms to partnership. The way to fix that now is to make it harder to become a partner. The associate track is longer and more difficult, and you have a very big movement to two-tiered structured partnership.” (“The NLJ 250 Annual Survey of the Nation’s Largest Law Firms: A Special Supplement — More Lawyers Than Ever In 250 Largest Firms,” The National Law Journal, September 30, 1996 (Vol. 19, No. 5))

With such cheerleaders at their sides, senior partners focused on the three legs supporting the PEP (profits per equity partner) stool: billings, billable hours, and associate/partner leverage ratios.

Hourly rates marched skyward — even during recessions — increasing an average of 6% to 8% annually from 1998 to 2007. Billable hours targets likewise rose. Yet talented attorneys who would have advanced to equity partner a decade earlier received their walking papers as firms increased leverage ratios, which doubled between 1985 and 2010 for the Am Law 50. (http://amlawdaily.typepad.com/amlawdaily/2010/05/classof1985.html) With a few sharp turns of the costs screw, the game was won.

The results were mixed. For equity partners in the Am Law 100, average profits soared to more than $1 million annually — and rose during the Great Recession. Yet today, attorneys in big firms have become the law’s most dissatisfied workers — even though lawyers as a group were already leading most occupations in that unpleasant race.

The law firm as collection of men and women bound together in common pursuit of a noble profession yielded to an MBA mentality that relied on business school metrics to produce more dollars — the new measure of individual status and firm success. Valued partners who wouldn’t have considered leaving in earlier times began to follow the money — eroding concepts of loyalty and shared mission that created a firm’s identity over generations.

Oh, what a mistake, Hildebrandt now urges — not unlike Harvard’s new business school dean who looks hopefully (but in vain) to the law as an alternative model that might restore integrity to that world. (See my earlier article, “The MBA Mentality Rethnks Itself?” — http://amlawdaily.typepad.com/amlawdaily/2010/05/harper1.html)

What does Hildebrandt now propose to replace profits per equity partner as the key measure of overall firm performance? Profits per employee. But it simultaneously suggests that client satisfaction ratings should replace billable hours while employee satisfaction ratings supplant leverage.

Is your head spinning over the interplay among these complicated and confusing new metrics? Hildebrandt has the answer:

“As always, we stand ready to assist our clients in negotiating through these new and uncertain waters.”

How comforting.

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

Posted on August 16, 2010 by thebellyofthebeast

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ON THE BEACH

Posted on August 6, 2010 by thebellyofthebeast

While I’m away next week, perhaps you’ll reconsider one of my earlier posts, “VACATION? WHAT’S THAT?” (https://thebellyofthebeast.wordpress.com/2010/06/28/vacation-whats-that/))

Or, you could read my new legal thriller, The Partnership. It’s enjoying brisk sales and receiving strong reviews from lawyers and lay readers alike. (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1 )

A new post will appear during the week of August 16.

MIRED IN METRICS? HAVE SOME MORE!

Posted on August 5, 2010 by thebellyofthebeast

Once a bad situation spins out of control, is there any way to corral it? When all else fails, try making things worse.

The ABA recently released its report detailing just a few of the ways that U.S. News law school rankings have been counterproductive for prospective lawyers and the profession — from driving up the costs of legal education to driving down the importance of diversity. (http://www.abanet.org/legaled/nosearch/Council2010/OpenSession2010/F.USNewsFinal%20Report.pdf)

As U.S.News now develops law firm rankings, the report concludes with an ominous warning:

“Once a single rankings system comes to dominate a particular field, it is very difficuly to displace, difficult to change and dangerous to underestimate the importance of its methodology to any school or firm that operates in the field. This, we believe, is the most important lesson from the law school experience for those law firms who may be ranked by U.S. News in the future.”

In other words, rankings sometimes function as any so-called definitive metric: They displace reasoned judgment. Independent thought becomes unnecessary because the methodology behind the metric dictates decision-makers’ actions.

Since 1985, many big firms have become living examples of the phenomenon. That year, The American Lawyer published its first-ever Am Law 50 list of the nation’s largest firms. Most firm leaders now teach to the Am Law test, annually seeking to maximize revenues and average profits per equity partner. The resulting culture of billings, billable hours, and associate/partner leverage ratios begins to explain why surveys report that large firm lawyers lead the profession in career dissatisfaction.(http://www.abajournal.com/magazine/article/pulse_of_the_legal_profession/print/) Without a metric for it, attorney well-being — and the factors contributing to it — drop out of the equation.

Courtesy of U.S. News, large firms now stand on the threshhold of more metrics. Will they make working environments of firms that have succcumbed to the profits-per-partner criterion worse?

It depends, but more of yet another bad thing — rankings — could produce something good — forcing individuals to sift through contradictory data, think for themselves, and make a real decision. But that can happen only if U.S. News produces a list of “best law firms” that bears little resemblance to the rank ordering of the Am Law 100 in average equity partner profits. Such contradictory data would confuse newly minted attorneys and force them to develop their own criteria for decision.

The American Lawyer itself provides a useful example of the possibilities. Eight years ago, it began publishing the Am Law “A-List,” which has gained limited traction as a moderating influence on the Am Law average profits-per-equity-partner metric that otherwise dominates decision-making at most big firms. The A-List’s additional considerations bear on the quality of a young lawyer’s life — associate satisfaction, diversity, and pro bono activities. The myopic focus on short-term dollars still dominates decisions in most big firms, but the A-List has joined the conversation.

What methodology will U.S. News employ in evaluating law firms? If it follows the approach of its law school ranking counterparts, many firms will game the system, just as some law schools have. (See my earlier article, “THE U.S. NEWS RANKINGS ARE OUT!” (https://thebellyofthebeast.wordpress.com/2010/04/16/the-us-news-rankings-are-out/)) But misguided and manipulatable metrics aren’t inevitable.

Talent is essential for any successful firm, large or small. Other qualities — collegiality, mentoring, community, high morale accompanying a shared sense of professional purpose — make a workplace special. Can the U.S. News find ways to measure those qualities?

That’s the challenge. But I fear that students won’t bother focusing on the U.S. News methodology or its flaws. More likely, whatever rankings emerge from the process will provide — as they have for so many deliberating the choice of a law school — an easy final answer.

Ceding such control over life’s direction to others is rarely a good idea. There is no substitute for personal involvement in deciding the things that matter most. That means asking recruiters tough questions, scrutinizing the lives of a firm’s senior associates and partners, and finding role models who are living a life that a new attorney envisions for her- or himself.

In the end, the current large firm business model and its self-imposed associate/partner leverage ratios will continue to render success — defined as promotion to equity partnership — an elusive dream for most who seek it. For those who become dissatisfied with their jobs, time passes slowly. So everyone joining a big firm — even a person intending to remain only for the years required to repay student loans — has ample incentive to get that first big decision after law school correct.

So why would intelligent young attorneys let U.S. News’ self-proclaimed experts make it with something as silly as a ranking? Probably for the same reasons that they relied on U.S. News to make their law school decisions for them three years earlier.

Someday, maybe there will be a U.S. News formula for choosing a spouse. Then won’t life be simple?

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

Posted on July 30, 2010 by thebellyofthebeast

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

One came from “Recovering Attorney,” who wrote:

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

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

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

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

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

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

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

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

Thanks for these thoughtful contributions.

DEADLY SERIOUS

Posted on July 26, 2010 by thebellyofthebeast

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

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

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

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

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

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

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

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

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

Then came the unavoidable wave that began in early 2009.

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

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

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

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

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

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

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

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

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

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

I promise a lighter article next time.

VACATION? WHAT’S THAT?

Posted on June 28, 2010 by thebellyofthebeast

While dining out recently, my wife and I noticed a young couple at a nearby table. Their respective BlackBerrys mesmerized them; they rarely looked up or at each other. Even the arrival of entrees barely interrupted technological trances. During the hour-and-a-half we were there, they spoke only a handful of sentences.

According to a recent front page NY Times article, there’s a scientific explanation for such unsociable behavior. Unfortunately, the report filled two interior pages of the paper, which meant that it wasn’t likely to sustain the attention of those most needing its insights. Yes, I’m looking at you, my fellow lawyers, but you’re not the only culprits.

Young adults face a special challenge. If BlackBerrys and text-messaging feel familiar to you millennials, could it be related to the fact that you had Gameboys as kids?

Here’s a summary of “Hooked on Gadgets, and Paying a Mental Price”:

1. Technology has reduced the need for direct human interaction. That produces important efficiencies, but it also inflicts collateral damage. For example, what was once considered family time has become parallel play on handheld devices. That’s what was happening with the couple seated near us at the restaurant. At another nearby table, a teenager and his younger sibling likewise lost themselves in their gadgets while preoccupied parents did likewise.

2. Multi-tasking is a myth for all but 3% of the population. The vast majority of us can do only one thing at a time reasonably well. Don’t blame me; that’s how the human mind operates.

3. When you try to multi-task, you become less efficient at juggling problems.

4. Multi-taskers are more sensitive to incoming information and, therefore, more easily distracted. But brains attempt to adapt. That can create problems, especially when the urge to remain plugged in assumes the attributes of an addiction. “The scary part,” notes Stanford professor of communications Clifford Nass, “is they can’t shut off their multi-tasking tendencies when they’re not multi-tasking.” Once the mind becomes attention deficit disordered (ADD), it gets bored more easily.

5. According to a recent poll, 30 percent of those under age 45 thought that cellphones, smart phones, and personal computers made it harder for them to focus.

All of this adds up to more stress — especially for lawyers and other professionals. So why do it? When economic historians revisit the stunning productivity gains of the 1990s and early 2000s, one big chunk will turn out to have been illusory. Specifically, technology facilitated the conversion of leisure time into working hours.

The legal profession epitomizes the phenomenon. In biglaw, productivity has become synonymous with billable hours, period. Don’t take my word for it. Here’s what legal consultant Hildebrandt Baker Robbins said in its 2010 Client Advisory to our profession:

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

In other words, the billable hours imperative destroyed the wall separating work from everything else. Especially in large firms charging ever-increasing rates, clients understandably expected their attorneys to be on-call — 24/7. As client-billed time became a key metric for evaluating talent, senior partners demanded bigger sacrifices all the way down the food chain. (“Keep your hours up,” they urged — and still do.)

Laptops, cellphones, and BlackBerrys have been aiders and abettors. After all, who can credibly claim to have been unavailable for any longer than it takes to visit the bathroom?

So the next time you tell yourself that you’re taking time off, spend a moment contemplating what that really means. Meanwhile, if you’re seeking my insights over the upcoming long holiday weekend, perhaps you’ll consider one of my books.

They’ll have to suffice because this blog will be idle until July 9. I’m taking an old-fashioned vacation: no computer; no BlackBerry; no cellphone. (Well, okay, I’ll take my cellphone so other family members can reach me in case of emergency; no one else has the number.) Sounds just like your vacations, right?

WHO’S LAZY?

Posted on June 23, 2010 by thebellyofthebeast

My new novel, The Partnership, has led to some interesting conversations with other lawyers, especially biglaw partners.(http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1)

“Here’s the problem with young associates today: they’re lazy,” barked a middle-aged man at a recent dinner party that I attended. Soon thereafter, he revealed his occupation: partner in an Am Law 100 firm.

“They feel entitled. They want to make the big bucks, but they don’t want to put in the hours,” he continued indignantly.

Biglaw partners say that a lot. Many regard themselves as special in ways that few young people today ever can be. It’s a form of magical thinking that rationalizes hubris, bad behavior, and arbitrary decisions.

“It’s more complicated,” I suggested after confessing that I’d recently retired after 30 years in a big firm that he respected. “For the last three years, I’ve taught an undergraduate seminar that has given me a different perspective. Ultimately, my students inspired me to write my latest book.”

“How so?” he asked.

“As you know, law school has long been the last bastion of liberal arts majors who didn’t know what to do next. Once they got there, the pressure to get a high-paying job at a big firm began. But most students heading that way had no idea what their lives at such places would be like. When reality struck, many didn’t like it.”

He nodded.

“That’s one reason lawyers are among the most dissatisfied workers in our society. It’s also why, before the Great Recession, the five-year associate attrition rate from big firms exceeded 80%.”

“I didn’t realize it was that high,” he interjected.

“Contributing to all of this is the business model that has overtaken most large firms over the past 20 years,” I continued. “It requires associate and non-equity partner attrition to increase leverage ratios and enhance equity partner profits. Being a good lawyer doesn’t mean the firm will have room for you as an equity partner. The resulting behaviors have dramatically changed the culture of most big firms.”

“You’re right,” he said as he inadvertently moved to his own unhappy plight. “People don’t understand what it means to go from 1,600 to 1,800 to 2,000 billable hours a year. Once you become a partner, it’s even harder. You can’t bill all of the time you spend on client development, but those hours are just another form of work.”

“We agree,” I suggested. “The job turns out to be much different from what most undergraduates expect, insofar as they have any expectations at all. In fact, even as an equity partner, your firm’s increased billable hour requirements have changed your job while you held it, right?”

“True,” he admitted.

“So you’re a victim of the MBA mentality of misguided metrics, too. When reality clashes with young attorneys’ idealized expectations, you have a prescription for psychological disaster. Factor in a business model that myopically focuses on a few metrics — billings, billable hours, and leverage — and look at the result.”

The biglaw partner then revealed his secret: “My son is thinking about going to law school. I told him to stay away from big firms.”

“You’re not alone,” I assured him. “The most recent ABA study shows that 60% of attorneys practicing 10 years or more advise young people against a legal career. As a group, biglaw attorneys are the most dissatisfied; public sector lawyers are happier.”

The senior partner nodded. Long ago, he confessed, his career began in government.

“So we’re back where you started this conversation,” I suggested, “– associate motivation.”

“How so?”

“When an entering class of, say, 50 new associates figures out that only 10 of them will be around five years later and maybe two or three will eventually become equity partners some unknown number of years after that, how does it affect their behavior? How would it affect yours?”

“Partners would say I was lazy,” he laughed. “I think I’m going to enjoy your new book. I’ll get a copy for my son, too.”

FOR BIGLAW SUMMER ASSOCIATES ONLY…

Posted on June 13, 2010 by thebellyofthebeast

You’re thrilled, and understandably so.

In an impossible job market, you came up a winner. The summer associate offer rate for all firms dropped to its lowest level since NALP started gathering such statistics 17 years ago. But you worked hard, got good grades, and listened to tips from hiring partners describing what they wanted in a new lawyer.

You scored big. In compensation, it’s a summer job like none you’ve ever had. Your most pressing concern is whether there will be a repeat of last year’s dip in the full-time job offer rate for summer associates — 69% compared to 90% in 2008. So now you’re heeding advice that ranges from proper attitude to correct attire. At least there is some encouraging summer associate etiquette news. According to one biglaw hiring partner, “indiscretion happens with alcohol, but people understand that. You usually have to knock a partner out cold for it to be a career-ending event.” Whew! That’s a relief.

Anticipating a favorable next step, you hope that your full-time job offer at the end of the summer is real. You don’t want to wind up like the more than 60% who planned to start their careers at large law firms immediately upon graduation this year, only to be deferred into 2011 and 2012. You can’t bear to think about some of your predecessors who received offers of full-time employment after their successful 2008 and 2009 summers, only to see them revoked outright a few months later.

You’re focused on making sure the firm likes you. There’s no time to consider other things — including whether you like the firm.

Here’s a suggestion: think about those other things now, even if only briefly.

At a recent Cubs game, I was talking with a fellow biglaw refugee. He’d practiced in a large law firm — not mine — for more than 25 years before retiring two years ago.

“What questions should today’s biglaw summer associates ask?” I began.

“It depends on what they want,” he suggested. “They probably fall into one of two categories. The first group consists of those wanting good training, needing a decent salary to pay off their student loans, and planning to do something else when that debt is gone. A second group wants to make a career at a big firm; they think they’re in for the long haul.”

“OK, so what should someone in the first group investigate?”

“That’s easy,” my friend responded. “Mentoring. How is the training? Will they have opportunities to develop skills that make them better lawyers?”

“How about the second group — the ones who think they want a large law firm career?”

“For them, it boils down to a simple question: who among the equity partners has a life that they’d want? If they can’t identify such a person, that’s a big problem. If they can, then they have to dig deeper.”

“Such as,” I pressed.

“Such as, how did the senior attorney do it? Is he or she an oddity? Did the partner succeed under a biglaw model that no longer exists? Most large firms don’t resemble what you and I joined 30 years ago. Your new book says it all.”

“And to get at that issue,” I added, “they should search for answers to these questions:

1. Excluding laterals, how many new equity partners did the firm make this year?

2. How many years did it take them to get there?

3. What was the size of their original associate class?

4. What happened to everyone else?

If the chances of capturing the brass ring are about the same as winning the lottery, at least they know the ground rules. The answers will reveal the culture and working environment of the place.”

“Yep,” he said. “And whether it’s conducive to a happy life. Your new book covers that one, too.”

But some aspects of life seem destined to remain unsatisfying; an hour later, the Cubs lost — again.

‘TIS THE SEASON

Posted on May 31, 2010 by thebellyofthebeast

As this year’s college seniors graduate, relentless pessimism about their fate abounds. I’m a glass half-full kind of guy, but it’s starting to get to me.

On May 15, the Wall Street Journal offered “A Lament for the Class of 2010.” After reciting the dreadful statistics — 17% of those age 20 to 24 don’t have a job and 2 million college graduates are unemployed — the author discussed the intense competition that new graduates face in seeking jobs as “waitresses, pizza delivery men, file clerks, bouncers, trainee busboys, assistant baristas, and interns at bodegas.”

A May 16 New York Times article provided a more dismal assessment. “Plan B: Skip College” gave graduates the bad news that they might have wasted their time and money on the degrees they’re now receiving. Great. Now you tell them.

Another Times article on May 29 described the unhappy plight of a 2005 NYU graduate who is $100,000 in debt and has few prospects.

And of course, everyone knows about the abuse heaped on the next generation of workers searching for a toe-hold on opportunity through the 21st century version of slave labor: unpaid internships.

Enough, already.

It’s true that many of the nation’s best and brightest are now receiving student loan repayment schedules along with their degrees. Even those who lack educational debt will feel the burden of an economy that deprives them of the psychological satisfaction that comes with a decent job.

Where’s the good news?

Today’s new graduates are rethinking traditionally safe career tracks that aren’t so safe anymore. The legal profession is an example.

In the 1960s, law school was a sanctuary. Deferments from compulsory military service meant three more years of academia instead of rice paddies and bullets in Vietnam. That was a pretty good deal.

When the draft ended, law school offered another kind of sanctuary — it was the last bastion of the liberal arts major who didn’t know what to do next. But it was an acceptable default solution. For a reasonable price, it offered the status of a profession and the realistic prospect of a fulfilling career.

Not anymore. Those looking to weather the current economic storm find that law school is an expensive place to seek shelter. Even worse, its earlier promises of future rewards — not only financial security, but also a satisfying career — have become suspect. In fact, many face a Hobson’s choice: surveys consistently show that today’s unhappiest lawyers work in big firms that pay the most.

That’s actually good news for the next generation of would-be attorneys. The sudden unreliability of the law as a safe path provides an opportunity to regroup. For those who are adequately informed about the experience and remain certain that it’s for them, the law is a sensible choice.

But for the rest, using law school as an excuse for three years of procrastination could be a costly mistake. With crushing debt loads, even many of those who get high-paying legal jobs will find a harsh reality that conflicts with their expectations and aspirations. From there, it’s a short trip to the ranks of unhappy, dissatisfied lawyers. We already have too many of those because the light didn’t dawn on them until they’d passed self-imposed points of no return.

So, recent graduates, as difficult as it may be, consider yourselves lucky. You’ll eventually find yourselves among the most creative, entrpreneurial generation in history because circumstances forced you to think outside the usual boxes as you pursued your passions.

I look forward to seeing the fruits of your efforts.

IT’S NOT JUST ME

Posted on May 25, 2010 by thebellyofthebeast

They acknowledge it’s a tough sell.

The co-chairman of a large, well-respected law firm has teamed with the former senior vice president and general counsel of General Electric to write an article that appeared in the May issue of The American Lawyer. The title says it all: “Noblesse Oblige: Firms must teach the younger generation what it means to be a true professional.” (http://www.law.harvard.edu/programs/plp/pdf/Noblesse_Oblige.pdf)

Here’s the first paragraph.

“Law firms have been moving from loosely managed associations of professionals to disciplined business organizations for more than a generation. This shift has caused an erosion of professional values (lawyers’ traditional commitment to enhancing society) and has increased the focus on economic return (firms’ relentless quest for escalating profits per partner).”

So how did that happen? Why doesn’t the younger generation already know what it means to be a true professional? Who have been their role models?

Better not to ask. Like me, the authors are members of the baby boomer generation that, as a group, bears responsiblity for a culture that some of us hope younger attorneys can change. In other words, do as we now say, not as too many of us did and still do.

Their suggestions start with the toughest job of all: persuading firm partners to move away from “inward-looking economics (more hours, more leverage, more profits, regardless of value)….”

For example, consider the concept of “productivity” — a bill of goods that self-styled legal consultants have sold to willing biglaw buyers for the past two decades. Increasing productivity has become a nice way of saying: “Get your billable hours up.” In the Great Recession, it has translated into layoffs so that survivors worked harder.

The authors’ approach would revolutionize most firms’ fundamental cultures. The resulting benefits would flow to partners, associates, the unrepresented, and the community.

But it all begins with a willingness to jettison the business school mentality of misguided metrics that has made profits per partner biglaw’s pervasive measuring stick — in substantial part because it has made most biglaw equity partners wealthy beyond their wildest law school dreams.

How will equity partners respond to the news that they’ll have to earn less now for the promise of longer-term non-economic gains to the profession and, I dare say, to their own improved psychological well-being?

Sophocles wrote in Antigone, “No one loves the messenger who brings bad news.”

Shakespeare’s formulations — subsequently condensed to “don’t kill the messenger” — were likewise on point: “Though it be honest, it is never good to bring bad news” (Antony and Cleopatra) and “Yet the first bringer of unwelcome news Hath but a losing office.” (Henry IV, Part 2.)

And when it comes to a willingness to hear unpleasant news about average equity partner profits, those of us familiar with the profession know too well the pervasive presence of biglaw’s equivalents to Alice in Wonderland’s Queen of Hearts:

“Off with their heads!”

EARLY RETURNS

Posted on May 19, 2010 by thebellyofthebeast

No, the title of this post doesn’t refer to Tuesday’s primary election results in a handful of states, although they confirm what I’ve thought for a while. Voters are anti-incumbent, not just anti-Democratic or anti-Obama. That’s one reason Rand Paul trounced Mitch McConnell’s guy in Kentucky. But this is not a space for ideological diatribe or political spin.

Rather, today’s caption refers to personal referenda of sorts.

First, the Belly’s audience is growing.

The American Lawyer is now running some of my posts. On May 10, Am Law Daily published “The MBA Mentality Rethinks Itself?” (http://amlawdaily.typepad.com/amlawdaily/2010/05/harper1.html) I’m grateful to editors willing to air a controversial voice.

Second — and speaking of controversy — my new legal thriller, The Partnership, (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1), is selling well and generating strong reactions.

Big firm attorneys have offered these responses:

“Great read…It’s a very fair and accurate representation of large law firms. This is how we operate.”

“I enjoyed reading your novel — and was reminded how things changed over the years…and hardly for the better.”

“Great stuff…highly enjoyable.”

In contrast, non-lawyers have said:

“Now I have a more informed concept of ‘billable hours.’ Wow!”

“Your book has disturbed me. Greatly. Do lawyers really behave this way?”

Quite a juxtaposition, isn’t it? Lay persons become shocked and outraged at attorney attitudes that most lawyers themselves take for granted.

“How can we change people, so they look at things differently — without a myopic view that maximizes short-term profits at the expense of other things that matter?” the last commentator asked.

Here’s what I told him:

1. You can’t. The trends that trouble you are too imbedded; the resulting financial rewards flowing to the few are too great. Perhaps more significantly, the things that disturb you most — including undue reliance on misguided short-term metrics — aren’t unique to the legal profession. Big firm lawyers use billings, billable hours, leverage ratios, and profits per equity partner. Ask journalists, doctors, college professors, and others to describe the metrics by which they’re held accountable. Then ask them if they regard themselves as members of a profession or participants in a business enterprise.

2. Sometimes you can hold up a mirror to a person who then doesn’t like the image that appears. A book can try to do that, but it’s hard to dislodge internal rationalizations that justify a lifetime of unfortunate behavior.

3. Real hope resides with the next generation. Our kids and grandchildren will have to decide that they want things to be different. That’s what we baby boomers did, only to discover that different didn’t always mean better.

Unfortunately, without mentors and models of success that can compete with the MBA-mentality of misguided metrics now dominating too many big law firms and other once-noble professions, our progeny face a daunting task.

Now you understand the twin thoughts appearing immediately following The Partnership‘s inside title page:

“Sunlight is the best disinfectant” and “Forewarned is forearmed.”

RUSHING TO WHERE, EXACTLY?

Posted on May 14, 2010 by thebellyofthebeast

A May 12 article in the Wall Street Journal made me wince.

Among those interviewed in “Speeding College to Save $10,000” is a student who chose a small liberal arts college in Indiana because it “had a new program that would let her speed to a bachelor’s degree in just three years, saving her family $10,000.”

Her motives are understandable. College has become expensive and law school even more so. By the time they’ve finished their formal education, many law graduates find themselves chained to the equivalent of a home mortgage — but without the house.

So the solution seems obvious: unnecessary years of school are a luxury. Isn’t it better to save the expense and get on with whatever you want to do with your life? Why not accelerate your way through law school, too?

Then came a disturbing revelation:

“[S]he will have to take two courses online this summer in addition to working her usual job at a greeting-card shop…”

Online courses? At a small liberal arts college? What sort of experience is she buying with her tuition dollars? Is all of higher education destined to become the University of Phoenix?

But here’s the line in the article that really made me squirm:

“[She] wants to go to law school, and is eager to get there a year sooner… ‘this is where I want to be,’ she says. The three-year program ‘is working out perfectly for me.'”

What makes her so confident at age nineteen that a fast track to a legal career is “where she wants to be”? I hope I’m wrong, but here’s my guess: She read To Kill a Mockingbird in high school (only a year or two ago) and she finds most episodes of Law and Order engaging.

I hope she and others like her learn more about where they’re headed before incurring enormous law school debt to finance their journeys. Unfortunately, accelerated educational paths squeeze out precious time for contemplating such distractions.

The law is and will remain a noble profession in which many thrive. But others have pursued such degrees without any real understanding of what awaits them. When reality clashes with expectations, disappointment and unhappiness follow.

The profession and those seeking to enter it would benefit from providing prospective lawyers better information about their likely jobs before locking themselves onto that track. But it’s a daunting assignment.

Especially when you’re young, bad things usually happen to someone else, right?

25 YEARS…

Posted on May 12, 2010 by thebellyofthebeast

There are no other lawyers in my family. One of my sons has a rock band, Harper Blynn, that just released its new album, The Loneliest Generation. (http://www.myspace.com/harperblynn)

It’s an anthem for young adults, but it also engages my Beatles-era baby boomer mind. The album’s first track — 25 Years — resonates on many levels. Fortuitously, it also marks the end of a time span that began with the first ever Am Law listing of the nation’s largest firms.

In its 1985 inaugural appearance, there were only 51 Am Law firms. (A tie required expanding the first group from its intended 50.) For a while, the annual lists were of passing interest, mostly to the profession’s voyeurs. But eventually, the rankings assumed a status that revolutionized the profession — in a very big way.

Once upon a time, how much money a person made wasn’t the subject of polite conversation. At least in the large law firm world, Am Law changed all of that. It didn’t happen overnight, but it happened.

For many firms, a key metric became definitive: average equity partner profits. Wrapped in illusory objectivity, decisions became easier:

“The numbers don’t lie.”

As firm leaders themselves became armed with MBAs, more business school-type metrics and jargon began to displace meaningful discussion about quality lawyering:

“What are your billable hours?”

“What’s the leverage ratio of non-equity lawyers working on the matter?”

“What client billings comprise the ‘business case’ for promoting an attorney to equity partner?”

And now the rhetoric is simpler as the transformation from profession to bottom-line business has become complete:

“A dollar of revenue is a dollar of revenue, period.”

“I’m just trying to run a business.”

Along the way, attorneys at many firms found the road to equity partnership longer and less certain. But things played out well for the winners, although retaining that status became more challenging, too. In 1990, average equity partner profits for the Am Law 100 were $565,000. Last year, in the midst of economic recession, they were still over $1.26 million.

How did all of this affect the culture of many firms? There’s no convenient metric for measuring that impact, but try this one:

In surveys identifying those who are the unhappiest and least satisfied workers in any occupation, lawyers — especially those in big firms — consistently lead the pack. It’s a race no one wants to win.

Which takes me to the chorus of Harper Blynn’s 25 Years:

“You don’t have to go the lonely way —

— That wrecks your heart with sorrow and leaves your mind in disarray —

Don’t pretend that you don’t know –

— Twenty-five years….and nothin’ to show.”

WHEN IS BAD NEWS REALLY GOOD NEWS IN DISGUISE?

Posted on May 7, 2010 by thebellyofthebeast

One of my former undergraduate students sent me a link to a WSJ.com article on the dismal job market for graduating law students. (http://online.wsj.com/article/SB10001424052748704866204575224350917718446.html)

Of course, the focus is where it always is: on reduced hiring at the nation’s largest firms.

This is not news to most of us in the profession. Big firms started laying off associates in big numbers shortly after the financial collapse in the fall of 2008. Last year, the Am Law 100 saw its first year-over-year reduction in attorney headcount since 1993. (http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202448340864&Lessons_of_The_Am_Law_&hbxlogin=1)

Large firms always get the editorial lead on this subject, in part because that’s where most top students in the best law schools seek to begin their careers. Why they flock in that direction is a complicated question. Herd behavior accounts for some of it, but one factor has assumed overwhelming power in their decision-making calculus: When law degrees come with six-figure student loan debt, financial reality pushes graduates toward biglaw, which shows them the money.

Here’s the hitch. Few know what awaits them if they land one of those increasingly elusive starting positions. For some, the fit works. But for too many, the surprise turns out to be unpleasant.

In its 2007 “Pulse of the Profession” survey, the ABA found that big firm attorneys were unhappier with their careers than any lawyer group. Only 44% gave a positive response to the statement: “I am satisfied with my career.” (http://www.abajournal.com/magazine/article/pulse_of_the_legal_professionunhappiest)

In contrast, lawyers working in the public sector reported an overall satisfaction rate of 68%.

Getting a public sector law job isn’t easy, either. But it’s curious that the nation’s largest firms continue to dominate the discussion, even though the biggest 250 firms employ fewer than 15% of all attorneys. When you consider associate and non-equity partner attrition rates from those places, the myopia becomes even more puzzling. Very few graduates who begin their careers in such places will stay for more than a few years.

So for current and prospective law students (and attorneys who have lost their jobs), short-term unemployment could become a catalyst for reassessment that leads to longer-term personal rewards.

But I also understand human nature. In the end, the shiny brass ring will continue to blind many people. American Lawyer recently reported that as headcount and average gross revenues declined in 2009 for the Am Law 100, average equity profits per partner increased — to $1.26 million.

How, you might ask, could that happen and what does it mean for those on the inside? I have my own views; they’re in my new novel, The Partnership. (http://www.amazon.com/Partnership-Novel-Steven-J-Harper/dp/0984369104/ref=sr_1_1?ie=UTF8&s=books&qid=1273000077&sr=1-1)

28 DAYS – The Big Squeeze Continues

Posted on April 27, 2010 by thebellyofthebeast

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

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

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

You get the idea.

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

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

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

Not NALP:

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

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

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

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

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

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

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

GOLDMAN SACHS — AN INITIAL OBSERVATION

Posted on April 24, 2010 by thebellyofthebeast

Media coverage since the SEC initiated its controversial enforcement action against Goldman on April 16 has reminded me of a conversation I had a few years ago with one of my kids’ twenty-something friends.

Immediately after college, he took an entry level position at Goldman. At the time, he properly regarded his offer as the ultimate reward for a distinguished record coupled with extraordinary personal charm. He didn’t know whether GS was the beginning of an investment banking career, but he hadn’t ruled it out. The pay was good and his student loan repayment program beckoned. (Sound familiar to any recent law school grads out there?)

At first, his enthusiasm was infectious:

“I’m getting pretty interesting assignments, including travel to attend presentations with more senior people. I’m working long hours, but the money is good. It’s nice to repay my loans and save a little money.”

Two years later, he was still working 16-hour days and his BlackBerry felt like a very long leash — or a choke-collar — that he could never remove.

“Here’s the real problem,” he told me. “When I look up at the successful people above me, I can’t find anyone whose life I’d want. The pressure, stress, and long hours never end. That’s a problem.”

I told him he had his eye on the right ball: look up the food chain and decide whether anyone leads the life you envision for yourself. When he completed repaying his student loans a year later, he quit to pursue a completely different line of work. He’s making less money, but his life is better.

Maybe his story doesn’t matter because he never belonged in investment banking in the first place. Then again, maybe his story — and his observations — are not unique to Goldman or investment banking or even biglaw. Like many talented young people who would have benefitted their organizations in the long-run, short-run reality drove them away.

Who will get this message to the top of such institutions? A recent NY Times article reveals the challenge, especially to any firm that is wildly successful in its financial mission of maximizing short-term profits:

“Even insiders acknowledge that Mr. [Lloyd] Blankfein [Goldman’s CEO], a former trader, has remade Goldman Sachs. He has built a giant powered by formidable trading operations rather than by bankers who give advice to corporate clients and help them raise money. In the past, Goldman was often run by two senior executives; one from trading and one from banking. Under Mr. Blankfein, the traders have consolidated their power.” (http://www.nytimes.com/2010/04/20/business/20blankfein.html?pagewanted=1)

Is it a problem? Here’s the rest of the NY Times quotation that caught my eye:

“Mr. Blankfein has surrounded himself with like-minded executives — ‘Lloyd loyalists,’ as they are known — plucked from the trading ranks….”

Are such lieutenants less likely to tell the emperor the truth about his new clothes when he needs to hear it? It’s a question that many biglaw firm leaders might ponder as they strive to maximize profits per partner at the expense of other values that are less easily quantified. Maybe a biglaw episode of Undercover Boss would help.

“AND THE CHILDREN SHALL LEAD…”

Posted on April 22, 2010 by thebellyofthebeast

It was a great Star Trek episode, and not just because one of the most famous trial lawyers of his time, Melvin Belli, played a villain who tried to take control of every child on planet Triacus. The episode reveals the potency of two great powers: youth and truth.

The moral of the story endures, as I realized while reading an article in the National Law Journal earlier this week. (http://www.alliancealert.org/2010/04/20/law-students-push-schools-for-better-employment-numbers/)

The best prospects for improving the profession will come from new entrants who refuse to settle for answers that others would like them to accept. So it’s gratifying when youth seeks truth as law students start asking the right questions.

Two Vanderbilt students have realized that most law school information about graduates’ employment and compensation is incomplete — and sometimes misleading. Law schools tend to mask reality in aggregate statistical compilations that make them look good. (See Mark Twain on the three kinds of lies: “Lies, damn lies, and statistics.”)

For example, when a school reports to US News that 95% of a recent class was employed at graduation, what does that mean? For jobs that involved temporary research for a professor because nothing else was available, not much.

Likewise, when the median salary at a first-tier school is also the top of the range because many graduates went to big firms, isn’t the overall distribution meaningful? And two or three years later, what happens to the young attorneys in those firms? For too many, nothing good, according to NALP’s associate attrition data.

So two Vanderbilt students are trying to build and publish their own database of detailed information about individual students. The most encouraging aspect of the initiative has less to do with trying to collect what the law schools probably won’t divulge. Rather, it’s the fact that these students — and hopefully many others — are thinking in concrete terms about what their legal careers will actually be like.

Moving away from statistical aggregations and abstract images that don’t educate anyone about life as a real lawyer, they want specific information about their options and prospects (or lack thereof). This initial inquiry — how much individual graduates earn and what happens to them — should lead immediately to a second: what type of work are young attorneys performing and do they enjoy their jobs?

If undergraduates started this deliberative process before they took the LSAT, the profession could begin curing its worst problem: growing attorney unhappiness.

How? The profession is filled with too many lawyers who never should have gone to law school in the first place. If only they had known the truth…and then thought about it…

WILL ANYONE NOTICE ON APRIL 27?

Posted on April 21, 2010 by thebellyofthebeast

When is a partner not a partner?

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

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

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

Hmmmm…..

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

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

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

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

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

PUZZLE PIECES – Part 12

Posted on April 20, 2010 by thebellyofthebeast

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

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

Partner: “I agree.”

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

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

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

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

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

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

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

Partner: “That’s the report.”

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

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

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

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

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

Partner: “If you say so.”

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

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

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

Partner: No answer.

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

PUZZLE PIECES – Part 9

Posted on April 15, 2010 by thebellyofthebeast

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

Partner: “Yes.”

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

Partner: “That was the report.”

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

Partner: “That was the report.”

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

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

PUZZLE PIECES – Part 8

Posted on April 14, 2010 by thebellyofthebeast

Recession? What recession?

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

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

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

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

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

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

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

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

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

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

Partner: “Yes.”

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

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

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

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

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

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

PUZZLE PIECES – Part 7

Posted on April 13, 2010 by thebellyofthebeast

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

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

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

Partner: “Sure.'”

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

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

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

PUZZLE PIECES – Part 6

Posted on April 11, 2010 by thebellyofthebeast

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

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

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

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

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

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

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

Partner: “That’s what it reported.”

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

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

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

Partner: “The best will still make it.”

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

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

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

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

PUZZLE PIECES – Part 5

Posted on April 9, 2010 by thebellyofthebeast

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

Partner: “That’s what they published.”

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

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

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

Partner: “No.”

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

Partner: “Yes.”

Q: “Millions of dollars a year?”

Partner: “Yes.”

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

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

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

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

PUZZLE PIECES – Part 4

Posted on April 8, 2010 by thebellyofthebeast

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

Q: “What about money?”

Partner: “What about it?”

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

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

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

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

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

Partner: “No.”

Q: “Or partner leverage?”

Partner: “Nope.”

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

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

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

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

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

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

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

Partner: “Probably around 300.”

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

Partner: “I don’t recall.”

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

Partner: “I’m sure you’ll tell me.”

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

Partner: “Go ahead.”

Q: “$2.35 million.”

Pause.

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

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The Belly of the Beast

Steven J. Harper, Esq.

Tag Archives: unhappy lawyers

KEEP FEEDING PROFITS THE BEAST. WHAT COULD GO WRONG?

BIGLAW’S GLASS IS 44% FULL

ABOUT THOSE BIGLAW ASSOCIATE SATISFACTION SURVEYS….

INTERVIEWING SEASON — THE MORE THINGS CHANGE…

ALONG CAME LAW FIRM MANAGEMENT CONSULTANTS

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

ON THE BEACH

MIRED IN METRICS? HAVE SOME MORE!

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

DEADLY SERIOUS

VACATION? WHAT’S THAT?

WHO’S LAZY?

FOR BIGLAW SUMMER ASSOCIATES ONLY…

‘TIS THE SEASON

IT’S NOT JUST ME

EARLY RETURNS

RUSHING TO WHERE, EXACTLY?

25 YEARS…

WHEN IS BAD NEWS REALLY GOOD NEWS IN DISGUISE?

28 DAYS – The Big Squeeze Continues

GOLDMAN SACHS — AN INITIAL OBSERVATION

“AND THE CHILDREN SHALL LEAD…”

WILL ANYONE NOTICE ON APRIL 27?

PUZZLE PIECES – Part 12

PUZZLE PIECES – Part 9

PUZZLE PIECES – Part 8

PUZZLE PIECES – Part 7

PUZZLE PIECES – Part 6

PUZZLE PIECES – Part 5

PUZZLE PIECES – Part 4

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