All the recent posts on the business of law attracted the attention of a brandname partner at an even bigger brandname law firm. This person is not only a tiger in litigation but is sought after as a visionary on trends in both global legal systems and the profession of law. I am thrilled that this legal analogue of the late Peter Drucker agreed to reflect on the raw realities of the business of law at this time. As we know, many associates, partners and law students are in high agita about their employment - and career path.
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Brandname partner at leading global law firm talks candidly about the business of law, off the record:
"Jane, those who truly understand law firm economics and who have good memories know that typically law firms trail the economy going into a recession and lag when the economy comes out of a recession. In a famine, the weak die off first. The Am Law 100, with its list of Profits Per Partner, forever changed law firm management and hiring. It is of course noteworthy that most firms claim that the Am Law list had the numbers attributable to their firm all wrong but they then believe the numbers for every other firm.
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"Associates are buying a lottery ticket where they will work huge hours and probably not make partner."
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"There are a few firms that have a niche where they can bill premiums on big deals and their numbers are huge since their ratio of partners to non-partners is highly leveraged. They can and do pay associates a lot because associates are buying a lottery ticket where they work huge hours and probably not make partner. They get paid extra for living that kind of risk. If they do make partner, the pay is astounding. When most of them don't, they usually wind up placed in good in-house jobs. When the deal flows soften, the partners at those firms tend to get ruthless in firing associates and are often ruthless in fighting with each other. For the young JD who is just chasing bucks, be an investment banker. You don't work any harder. It is also a lottery ticket but the upside is even bigger.
"On the plaintiff side there are the contingent fee firms where one can make huge number (less so after tort reform and society beginning to see how awful these guys - Lerach, Scruggs - were) but this guys aren't interested in building lasting institutions and mentoring young people. The associates there tend to know the deal. They want to get some experience, learn the tricks, then set up their own shops where they can be the next generation of contingent-fee kings - maybe.
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"Watch which firms have partners who play golf with each other, who send baby gifts to associates and who still have big name cases and clients. These are markers for other things."
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"There a few, and probably only a few, really big firms who have stability, national or global footprints and a practice that has balance so that when one part of the firm is not busy, another part is busy. M&A falls off, bankruptcy and restructuring goes up. They tend to have good quality and have survived that aging and death of the founders without blowing apart. And that is one of the key markers of which firms achieve 'institutional' status. Can they endure and grow after the hotshots who founded them disappear? Do they have low partner attrition? Do these folks like each other? Watch which firms have partners who play golf with each other, who send baby gifts to associates, and who still have big name cases and clients. Those are markers of other things.
"Then there are a lot of wannabes. How can a young lawyer tell who are the wannabes and nevergonnabe firms? A few indicators come to mind.
"If the firms are on belated push to do mergers and seem to be pairing up with other firms which are similarly struggling, beware. If two sick people get married, the result is usually not a healthy couple. If the firms say they have a lot of offices but have a system where each office is a separate profit center and lawyers push for work based on what is good for their own office or income formulas and not what is good for the clients, they are not likely to be around long. If the firm keeps changing management people and all of a sudden are making non-equity partners out of senior people, if respected older partners are leaving without happy party send-offs and if there are unceremonious firings of groups of associates and secretaries, then beware. If The Firm has no mandatory retirement age, cannot match moves in starting salaries in their own communities or cannot attract lawyers from great clerkships (with whatever bonuses are getting paid), beware. Those are signs of financial distress. It's not always about money, but sometimes the money-related indicators are markers for other problems, like quality issues, declining client base, bad partnership agreements, or lack of leadership.
"The strange thing here is that a young MBA can usually look at the balance sheet of a company before he or she signs on. Associates and star law grads can't usually get to see their firm's numbers to make a reasoned observation about whether the firm os going up or is headed into the sink. Some law firms are sensible enough to have good balance sheets while others have amazingly stupid systems where the firm is borrowing to pay partners' draws and borrowing against future collections and naked projections of how much revenue there might be in a year."
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Other partners are welcome to comment on or off the record about the BUSINESS of law. Please contact Mgenova981@aol.com.
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