Archive for Big Law
Is the Focus on Shareholder Value Hurting Law Firm Performance?
Posted by: | CommentsIntriguing post up today by Robert Sawhney, who asks here:
“[W]ho said that shareholder value was the primary objective of any firm? The well known and outspoken economist Milton Friedman was a vocal supporter of shareholder value as the primary objective of any firm. He claimed ‘the social responsibility of business is to increase profits’. That may be so and I am not here to argue the ins and outs of economics, but surely the objective of any business is to enhance client value and create economic value through innovation. Not only that, but economic value should be based on innovation and not destruction. Within the law firm environment and professional service firms in general, we are sorely lacking an alternative view of capitalism.”
I certainly agree with Robert that the leveraged law firm model is an entrenched system that does not do a very good job of creating economic value through innovation.
I would take issue with the comment regarding Milton Friedman, as I don’t think he would have ever said that creating value for customers through innovation is in opposition to shareholder value. Friedman’s core message was quite the opposite, mainly, that focusing on shareholder value pushes firms to compete to provide the best possible products at the most affordable prices, and they do this by innovating under competitive pressure. However, I think Robert does a strong job of pointing out how law firm path dependence creates a big problem for Friedman’s supposition, because law firms’ laser-like focus on profits per partner leads to poor, short term oriented decision making and worse allocations of resources which result in unnecessarily costly services that are often not provided with optimum performance.
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Padding the Bill – The Leverage Issue
Posted by: | CommentsLeverage is the dominant business model at large law firms, where partners seek to leverage relatively low cost salaried associates against high hourly fees and hire as many associates as possible to maximize revenues. While this model has been battered in the recent recession, I have not seen any systematic change encouraging a fundamental shift away from leverage. The biggest problem with a leverage approach is your value is measured in the number of hours you bill, not the value you provide to your clients, resulting in an incentive to pad your bill.
There’s a nice debate going on right now on this subject within the Legal Innovation Group on Linked In, you can check it out here. Here’s my most recent comments on the issue, challenging the idea that it is not easy to change the current model (it is, but there is little incentive to do so) and the supposition that managing partners often have firm wide policing to prevent padding (they usually do not):
Gary, I would have to respectfully disagree as to this point “It is not easy or obvious how to accomplish this”. Law firms, being loose federations of individual businesses, each business consisting of an equity partner with a book of business and the willingness to walk away from the firm, would need to do the following:
1. Secure a commitment from each partner with a book of business to make the clients those of the firm.
2. Impose optimized processes using Lean/Six Sigma for doing all of their work and make sure that they are followed.
3. Use knowledge management and software automation to speed up document preparation.
Frankly, Patrick is right, without fixed fees there is little incentive to take these steps, and, in fact, a disincentive to do so. But it would be a straightforward process that is already widely performed in other fields, such as software development.
And:
Chris, I would recommend caution in referring to firms where certain behavior is allowed or isn’t, as I find that firms don’t do much of a job of policing behavior internally, and often times one partner will pad a bill while another partner at the very same firm would find that ethically abhorrent. Also, speaking from the in-house perspective, it really is one’s responsibility to question bills on a regular basis from larger law firms because of this lack of policing. At small firms I find this is less necessary, as you have much more of a chance of establishing a regular relationship and better billing expectations once you’ve removed leverage from the equation.
What Michael Jackson’s Billie Jean Says About Software Spending: The Chair Is Not My Son
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I’ve always thought that Michael Jackson, belting out the chorus of Billie Jean, sounds like he’s saying, “The chair is not my son.” Of course, he’s actually saying, “The kid is not my son.” The same kind of confusion – misinterpreting words – applies in most big organizations, particularly when it comes to runaway IT spending, and is driven by different internal political agendas that lead to a waste of money.
I’m a big proponent of using out of the box thinking to reduce IT budgets, which are an incredible boondoggle at most sizable companies, including law firms. In fact, Greg Lambert from 3 Geeks and a Law Blog has an intriguing post up on encouraging open source software use in law firms right now. But pursuing budget saving alternatives is not as easy as it may seem.
There’s a fundamental internal political obstacle to surmount in encouraging companies (including law firms) to use open source software and other lower cost opportunities. I remember attending a worldwide meeting once for an organization that employed me, and after a presentation by our senior technology expert, he asked for questions. I asked whether we could radically reduce our IT budget by going to lower powered computers exploiting browser based software and open source applications. He brushed off the question. A number of our IT experts came up to me afterward and explained that, while they would love to pursue this approach, the IT department’s power base depends on the size of its budget, so IT leaders will oppose an approach that reduces the budget and thereby reduces this power. Since then, I’ve paid a close eye to the organizational dynamics that can create perverse incentives which prevent efficiency gains.
What I failed to understand when I asked the question, is that when I said, “Let’s reduce the budget and save the company money,” the IT executive heard me say, “Let’s reduce your power base, stall your career, and let non-IT experts waste your resources.” For that reason, he wasn’t interested in a good opportunity.
Instead, he was too focused on telling everyone that the chair was not my son.
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Supply Excellence’s Justin Fogarty was kind enough to cover my recent presentation at the IACCM Americas conference entitled “Alternative Fees Meet Web 2.0: How to Cut Law Firm Cost and Make Clients Happy.” The presentation uses strategic sourcing principles for procuring legal services, but really explains how to rein in costs for any services that you might need. Check out the presentation slides here (which use the amazing Prezi.com presentation software). Also, read our previous post on alternative fees here.
To capture some of that spend and have better legal representation, Jason recommends negotiating “incentives that motivate people to do better”. Meaning, structure your relationship with outside counsel so that there are either caps on fees for specific, clearly defined projects OR include “efficiency bonuses” that reward the firm for coming in under budget.
Couldn’t have said it better myself.
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Top NFL Draft Pick Player Contracts: Too Much Money?
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If you’re a football fan, you know that the NFL Draft is happening today, where teams take turns picking the best players among recent college football athletes. In recent years, guaranteed signing bonus money has spiraled out of control, with over $40 million dollars being guaranteed to this year’s top pick, Matthew Stafford of Georgia.
Many teams are complaining, and want the NFL players’ union to agree to limit compensation to draft picks. The new union director, DeMaurice Smith, has brushed this idea aside, noting that no one is requiring the teams to pay this much, and that limiting compensation is not the job of the union (check out the fees section of our procurement contract to see how you can limit compensation to vendors here).
I am sympathetic to Smith’s inclinations. Why should employees have to be responsible for stopping employers from paying more? When I used to work at a top New York law firm, starting salaries were $125,000 per year. Extra signing bonus money was paid to former U.S. Supreme Court law clerks, usually around $25,000. What if a bunch of major law firms banded together to demand that all associates sign a collective agreement to stop these same firms from paying bonus money to these clerks? Setting aside the antitrust, employment, and collective bargaining law issues here, I can’t imagine law firm associates like myself showing any interest to help the firms (check out our sales contracts that control fees here).
But let’s change the hypothetical! What if the signing bonus money, instead of being just $25,000, was substantially more? How about $100,000? $250,000? $400,000? At some point, the amount would be so great that firms would be forced to cut salaries for everyone else just to afford to pay these huge bonuses. Suddenly, staring at a lower salary, I might be quite open to helping the firms out and signing a deal to cut law clerk bonuses down to size (see how to strategically source and cut vendor service fees here).
A similar situation appears on the football front. Teams pay so much money to top NFL draft picks that they don’t have as much money left to pay everyone else, including their veteran, proven players who are much more important to the team. For that reason, I think Mr. Smith needs to give this some more thought. Who knows? Maybe he already agrees with me and is simply playing possum to maximize negotiating leverage with the NFL. After all, there are many other issues he wants the owners to concede on, so holding out on the draft bonus issue does nothing but help his negotiating stance.
Regardless, I think there’s one last thing to focus on here, and that one thing is . . . Go Rams!
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Alternative Rocking Lawyers: They Might Be Giants
Posted by: | CommentsOne of my fondest memories from Washington University (in St. Louis!) was jumping up and down in a throng of thousands of students while we belted out “Istanbul Not Constantinople” during an outdoor concert by the alternative rock band “They Might Be Giants” (I was sad to recently learn that they didn’t write this great song, but only covered it; it was written by Nat Simon and originally performed by The Four Lads). Here’s a telling lyric for lawyers:
“Why did Constantinople get the works? That’s nobody’s business but the Turks.”
Alternative rock bands like They Might Be Giants originally emerged because they didn’t fit into any of the genres established by the recording industry/radio axis of musical power, even though listeners yearned for something different. Alternative music also flowed from punk rock, which itself emerged out of a negative reaction to the dominance of disco and other overly sentimental musical styles. The music business, like any other, is subject to market forces. And if an entire industry is not catering to its customers’ desires, then a new, young Turk player will emerge to do so, subverting and reinventing the old Constantinoplesque industry along the way.
Triggered by this NY Times article, people in the legal world are currently wondering if law firms will end the billable hour model and move to flat fees and other alternative approaches (click here for a list of articles on this topic). Many partners at major law firms are extremely fearful that they are looking at significantly less profits if they switch to alternative fees. I actually think that partners do not have to accept a drop-off. They do, though, need to fundamentally restructure the way they do business to make the same or more money than they have with the traditional approach. And they are tremendously resistant to do so.
I used to be an in-house lawyer at a Fortune 500 company. On one occasion I had a real estate law firm pitch me. The partner asked, “What can we do to get your business?” I said, “I think a lot of the word processing and the back and forth on contract versions is a big waste of time. I’d love to see a firm that uses contract creation automation software, and has all of its typical contracts and likely negotiation positions loaded into the software for automatic drafting, using a regularly updated knowledge management system. I’d also love it if you had an extranet to store all contract versions so we can skip the old email trap of zapping countless drafts back and forth that leads to version control nightmares. And I’d like you to bill me a flat fee determined up front for each matter.”
He blinked hard, swallowed, and said, “What else can we do?”
His question revealed the tremendous resistance to change in the legal world, where firms are stubbornly committed to a business model that does not meet their clients’ desires for better efficiency and predictable charges. The irony is that if a firm emerges that would actually embrace an alternative approach, it would have a huge competitive advantage in the marketplace and, in the long run, would make more money by growing its business. At some point a full service law firm or outsourcing legal services company will step up and seize this competitive advantage (we’re already seeing up front flat fee alternatives from partners like Jay Shepherd of The Shepherd Law Group, a highly regarded Boston employment law firm).
The biggest problem this new player would face is that all of the most desirable clients, major American corporations, have internal legal departments that choose which firm to hire, and all of these departments are populated by lawyers who used to work for law firms following the traditional model. They’ve all been conditioned to believe that billable hours, unpredictable budgets, and lack of efficiency are par for the course, so they won’t be interested in hiring this new player. Who will then?
Procurement. Right now, almost everything a major company buys, from cardboard boxes to management consulting services, is handled by a strategic sourcing manager who limits the number of vendors and uses that leverage to negotiate improved quality and lower cost. These procurement managers are chomping at the bit to control legal services, but, so far, most law departments have fended them off by making the law seem too mystical to tame. These managers would be the new player’s target market. If the law department tries to fend off their desire to hire, then the company will have a showdown. The arbiter will be the Chief Financial Officer, who, as long as she complies with the law, is almost always more powerful than anyone in the legal department.
And Chief Financial Officers love savings. And Istanbul. Not Constantinople.
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Slap Shot Savare: An Interview with a Sports Law Expert
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Here at WhichDraft.com we are die hard St. Louis Cardinals fans. When people ask me what happened in 1982, I say, “I had my Bar Mitzvah and the Cards won the series!” And when it comes to the Cardinals, no, we’re not referring to that scurrilous football team that abandoned our home town way back in the day. I must admit, though, that it does almost bring a tear to my eye, after rooting for the football Cardinals lo those many years, that they just finally won their first playoff game since 1947 and almost won the Super Bowl. Alas, all this happened after they departed the Gateway City (home, by the way, of the most beautiful botanical gardens on earth; if you get a chance, you really must see them somday, then have a special at Amighetti’s).
So we were excited when Matt Savare, an expert on sports endorsement contracts, kindly made himself available for an interview with WhichDraft.com.
Matt, tell us a bit about yourself. Where do you work and what are your practice areas?
I practice at Lowenstein Sandler, which is a nationally recognized full-service law firm with approximately 270 attorneys in Boston, New York, Palo Alto and Roseland.
At Lowenstein, my passion lies in entertainment and sports law, with a particular emphasis on endorsement deals. On the sports front, I have assisted clients in negotiating and executing over 50 endorsement and personal appearance deals for famous athletes and celebrities. I have also helped litigate several high-profile entertainment cases, do quite a bit of work on copyrights and trademarks, provide general licensing advice to the firm’s media and entertainment clients (such as special effects software companies and companies in the social networking space), and counsel clients on information privacy.
I am also the Secretary of the NJ State Bar’s Entertainment Sports Law Section and an active member of the ABA’s Entertainment and Sports Law Forum. I frequently write and speak on various entertainment issues, including film law, product placements, and the right of publicity. My Lowenstein bio has links to most of these articles. On a personal level, I am married with three great (but loud) children, who take up most of my free time.
Tell us about one of your favorite sports experiences.
I have four that immediately come to mind. My first, by far, is my second year playing soccer when I was probably about six years old. Our team, the Kings, went undefeated, untied, and unscored upon. We were awesome! My second favorite is the 1994 Stanley Cup Finals, when the Rangers broke the 54-year curse. I do bleed red and blue. The next two are a tie: the 1986 and 1990 Super Bowl championships for the Giants. I loved those teams, and both playoff runs were special, because I watched them both with my father, who is literally insane over the Giants.
How did you become interested in sports contracts and negotiations?
I became interested as an outgrowth of my general interest in entertainment law. I draft and negotiate endorsement and appearance deals, which collectively are often more lucrative than a player’s contract to play his or her particular sport.
What are some of the typical issues negotiated when a young player starts excelling and is seeking his first huge deal?
For player contracts, most of these issues are already handled by the league’s collective bargaining agreements, such as minimum and maximum salary. It also varies across the various sports. For example, in a football contract, one of the main issues is how much of a player’s contract is going to be guaranteed in the event he gets injured. The duration of the contract is also heavily negotiated in some sports. For endorsement deals, the typical issues for the players are: what are they endorsing, for how long, how much are they going to be paid, what type of exclusivity arrangement is the marketer requesting, and what are the provisions of the morals clause. Given what we’ve recently seen with Kellogg’s dropping Michael Phelps, the specific language in a morals clause is very important, and it’s often one of the more heavily negotiated elements in an endorsement deal.
According to ESPN, Anquan Boldin “accused the Cardinals’ management of lying to him by promising a new deal and not following through. He said at the time, and repeated later, that he would never re-sign with the Cardinals.” We see these kinds of headlines all the time. Can you give us a behind the scenes idea of what may have gone wrong for this star young wide receiver and what are the possible outcomes?
Boldin is an amazing receiver, and I wish the Giants had him. I don’t have inside knowledge about his situation, but more generally, I don’t think it serves anyone’s interest when the player openly criticizes his or her team. In my opinion, the player should not inject him or herself into the negotiation and certainly not publicly, because doing so risks alienating the front office, but more importantly, the other players. That’s the last thing that a player should want to do. The agent is being paid to handle these types of situations, and the player should let the agent do his or her job. When the rhetoric gets as heated as it has in Boldin’s case, a possible outcome is for each side to tone it down a bit, reconcile their differences, and sign a deal that each side can live with. Or, while it’s less likely in football, the parties can part ways via a trade. Trades are obviously more common in baseball, hockey, and basketball, but as we’ve seen with the Stephon Marbury situation, those don’t always end in trades either, especially when the player has such a lucrative deal, which no team seemingly wants to assume. It also gets very complicated with leagues’ specific salary cap rules and the collective bargaining agreements.
Last but not least, who is your favorite player of all time and why?
On February 3, the Rangers retired number 9 in honor of Adam Graves. Watching the ceremony and reading all about Graves proved to me that he is probably the most deserving of being anyone’s favorite player. I always admired him on and off the ice. He was the consummate team player. He would go out on the ice one shift and score an important goal, and then fight the other team’s goon on his very next shift to stick up for Messier (who really needed no protection) or Gretzky. If you ask anyone familiar with the Rangers, he was certainly not the most skilled player, but there was no one that worked harder or cared more than him. Graves was an honorable, humble, and selfless man, who volunteered more of his time than anyone I know. The other day, I spoke with a friend of Graves, and asked him: “Is Graves really as nice a guy as he’s portrayed?” The answer was quick and unequivocal: “He’s even nicer.”
His friend went on to explain that after many games, Graves would go unannounced to children’s hospitals to surprise the sick kids. It also doesn’t hurt that he still holds the Rangers’ record for most goals in a season!
In many ways, I like to think I share some of Graves’ positive traits. When I played soccer, I was not the most skilled player. I was not blessed with speed and, for anyone who has ever seen me, you know I’m not blessed with size. Whatever I achieved on the field was through learning about the game, thinking faster than other players, and working my butt off. The same is true in my legal career. I give 100% every day and work hard for the firm and my clients. Graves did the same, night in and night out.
Thanks, Matt. Best of luck on your practice.
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Wanna Buy the Brooklyn Bridge? No? How About a Law Firm?
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In 2007, May, Slater & Gordon, a large Australian personal injury law firm, made history by becoming the first law firm to sell stock to the public. United Kingdom law firms are not far behind. To my knowledge, no U.S. law firm has done the same, and, except for the District of Columbia, a non-lawyer is banned from holding equity (under the widely adopted American Bar Association Model Rule 5.4) by state bar associations in all 50 states.
When it comes to law firms selling stock, Law Practice Magazine points out:
“The first reaction from many people is to question why anyone would invest in, or buy stock in, a law firm . . . The most frequently raised objection is that it could influence lawyers to put financial considerations ahead of the needs of the clients. Some opponents also believe that it will raise even more ethics issues.”
The Georgetown Law Center for the Study of the Legal Profession has published a thoughtful series of letters on this subject. The letters note the widely held U.S. fear that law firm partners, to please their outside shareholders, would make decisions that would hurt their clients but provide better short term results, referred to as “practicing to share price.”
Additionally, some fear that lack of outside investment means a talent drain for law firms. In the Georgetown letters, Bruce MacEwen (the blogging force behind Adam Smith, Esq.) notes:
“This state of affairs leaves law firms at a competitive disadvantage when it comes to recruiting and retaining talent. Lawyers can be lured by private equity, hedge funds, investment banks, management consulting, and even plain old corporate clients offering stock options. Also, “C-suite” executives in law firms cannot be compensated at levels equivalent to their peers at similarly-sized corporations. Last and most obvious, ordinary income receives the most onerous tax treatment of all forms of potential compensation.”
To me, I think this risk of losing lawyers to companies should not be the reason to open up law firms to outside investment. After all, in-house lawyers in corporate America actually make less, even with stock compensation, than most lawyers at top law firms. And the enormous compensation of top executives is often due to incestuous relationships with consulting firms that tell boards of directors to pay officers handsomely so that the officers will in turn give the consulting firms more business. Runaway compensation levels caused by conflicts of interest need to be redressed, not equaled. Moreover, because law firms are so poorly run, it is hard to imagine a non-law firm wanting to poach a top equity partner and pay her better than her current compensation.
Believe it or not, I’m not against outside investment in law firms (and neither is MacEwen). And I agree that there is a serious ethical concern here. But that concern is not that lawyers will compromise their clients needs. Instead, outside investment would force firms to do a better job of serving their clients. Law firms defy economic rationality: in what other industry do the best companies pay everyone exactly the same, embrace massive annual attrition, and often do nothing to hold on to their best performers? Knowledge management is used ineffectively (if at all), and there’s hardly anyone using Six Sigma, Lean and other proven methods to provide superior service at cheaper rates. With savvy investors behind the scenes, we would start seeing more firms come under pressure to respond to widespread client complaints, associate complaints, and general unhappiness with the legal profession. An effective response would give a firm a huge competitive advantage in the marketplace. Despite most lawyers thinking the opposite, I think outside equity will be the ultimate intersection of the profit motive and ethics.
And the fear of lawyers “practicing to share price?” It already goes on. Most major law firms report their “Profits Per Partner” publicly. Firms do everything they can to keep that number from dropping, for fear that equity partners will quit in the face of falling profits and take their clients to a firm where profits are higher. So whenever there’s a down period, key practice support departments like knowledge management are cut (a point we’ve made before here). You’ll also see some of the best and brightest associates, of counsel, and non-equity partners shown the door. The quality of legal work suffers, and the client is left holding the bag. When the economy bounces back and work picks up again, the attorneys that are still around are usually overwhelmed. The firm quickly hires attorneys who are “good enough,” and the client receives work rife with shortcuts from non-top notch talent.
Buying stock in a law firm might seem bizarre and objectionable. But it might also make us much better lawyers.
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Torn Between 2 Lovers: Big Law Prestige vs. Microfirm Savings
Posted by: | CommentsJackie Hutter has a great post up over at IP Asset Maximizer entitled “Chief IP Counsel: Stop Discussing How Your Lawyers Bill You and Focus on the Model They Use to Provide Your Legal Services.” Tell us what you really think, Jackie!
In the post, Hutter makes an important point: clients are way too focused on begging law firms to cut their bills, without thinking about the model used by the firm to do the work. If a firm is traditional, with receptionists, secretaries, docketing clerks, and expensive real estate, then the bill can only drop so far (use our law firm matter engagement letter agreement to try, though!). But Jackie introduces us to the newer concept of the microfirm, where an attorney with Big Law experience works from home with no employees and is able to charge 50% less in some cases:
“Some might wonder how a micro-firm lawyer differs from a lawyer practicing in a . . . firm . . . setting. Well, the answer depends on whether or not the small firm or solo adheres to the traditional law firm model. If she . . . maintains the accepted staffing paradigm (e.g., receptionist, secretary, docket clerk etc.), this lawyer is still working within the law firm paradigm and cannot truly be considered a micro-firm lawyer. But if the lawyer handles her own administrative matters or outsources them to independent contractors on an as-needed basis, she fits the profile of the emerging micro-firm legal service model.”
A great example of a microfirm is entertainment law guru Thomas Crowell (picture at left). Thomas used to work in the New York Big Law world, but now runs an extremely efficient firm himself, bringing in like-minded colleagues for larger matters and charging his clients reasonable rates with excellent service.
Despite how attractive this approach may be, at many of the biggest clients microfirms have trouble getting in the door. From my perspective, the conundrum here is that the most lucrative, big kahuna company clients are uncomfortable hiring a microfirm because they lack the Park Avenue address and name recognition accoutrements. So they’re trapped between two competing desires, Big Law prestige and microfirm savings.
Additionally, clients on the legal cost warpath miss a huge opportunity to cut their bills even further, because they rarely think about their internal model used to interact with outside counsel. As we pointed out recently, clients seem to want outside counsel to cut fees, but to not make any changes to their own behavior that drives fees up. Every IP attorney that has worked on invention disclosures knows just how painful it can be and how many meetings it can take to tease out the necessary information. And clients love creating last minute fire drills at the time of docket deadlines, too. This behavior increases the bill, and needs to change if the goal is to lower cost.
So which lover will you pick, Big Law clients? Big Law, or the microfirm? To prestige, or not to prestige!
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Big Law, John Grisham and the Future of Our “Profession”
Posted by: | CommentsI was practicing law at a top 100 law firm in the New York City area when my firm recruiter asked me to interview a Harvard law student for a summer associate position. Sitting across from me, the young man reminded me of my 
prior self. Prestigious law school. Moot court success. Law journal. Published. Volunteered. Traveled the world. Spoke Spanish. I looked up from my desk. My gray desk. Surrounded by gray shelves and gray walls. He was sitting in a gray chair. He ever so slightly began slumping back. Why? He had just heard my response to his question, “What is life like here at the firm?”
I’m not sure why, perhaps it was the recent evening where I stayed up all night reordering the exhibits in a corrupt MS Word document, maybe it was the last equity partner tirade I’d been on the wrong end of. Most likely it was the promising in-house counsel position I was interviewing for, but I decided to be completely candid with the young man (for our purposes, let’s call him “Bob“).
John Grisham recently said “life in big firms has deteriorated to the point where they’re filled with very unhappy lawyers.” And he couldn’t be more right. I explained to this earnest student that there are great opportunities at law firms. You can make a very nice salary, bonuses are excellent (in good times), and free gourmet restaurant dinner delivery plus a town card ride home are pretty cushy. That said, there’s a reason why salaries are high. You need the money to pay off your astronomical student loans. The high salaries also convince you to put up with having dinner with your Dell laptop instead of family and friends. You also may be a bit crestfallen to see the tremendous gross profit on associates such as yourself (the hourly rates are so high that you actually wouldn’t be able to afford to hire yourself). Equity partners, the ones who command a big roster of clients that pay even bigger bills, rule the roost. If they want to behave in a despicable manner, such as, for instance, throwing a stapler at the head of a secretary, cursing out an associate, or commanding a paralegal to write a memo on where to find the best sushi, they can do so.
Pro bono work? Some firms are better than others, but the amount of engaging work you could do helping poor people or nonprofits was definitely limited by how bad you wanted a large bonus or to make partner someday. For the most part, firms do not see substantial pro bono work as making you partner material, no matter what their brochures say. Children? Well, the divorce rate is through the roof for lawyers, which generally is not ideal for kids, though you do have a good chance of meeting your next spouse at work since this is where you will be spending most of your time. You might want to send your kids to boarding school, or hire a team of nannies (one equity partner I knew worked until her water broke, and was back at work the day after she gave birth; she said she didn’t know what she would do without her 3 nannies).
The blood drained out of Bob’s face. He asked me if I was serious. I said I was. He asked me what time I leave at the end of the day. I said on a really great, fantastic day, I left at 9pm (somehow others did much better, trademark prosecutors often left before 7pm, amazing!). He asked me if it was better anywhere else. I said yes, but he probably wouldn’t be making anywhere near as much money (which, when you are in your mid-20s and have $150,000 of debt, is not what you want to hear).
I did mention that he could become a corporate in-house lawyer and have much better hours, or pay off his loans in Big Law and then jump to a government job/not for profit/small firm lifestyle. I noted that he could pick up some strong skills in our corporate department, along with not a small amount of resume prestige, which would serve him well in his career. But nothing I added could pick up his mood. Eventually, he wriggled up in his chair, looked me dead in the eye, and thanked me for my candor, saying that I was the first person he’d met in his many interviews who seemed to be completely honest with him. Then he walked out the door.
What does this tremendous unhappiness mean? After all, it extends far. Clients are notoriously upset with the Big Law world. Wal-Mart even froze rate hikes not too long ago. Larry Ribstein thinks that people need to wake up and realize that law is not a profession but a business. He even thinks Big Law is dead. But it’s not. Sure, right now there are some major law firms failing. And many others are paring the ranks, freezing salaries and skipping bonuses. But, at the end of the day, there will still be big lawsuits and big deals. And big companies will demand the highly responsive, constantly accessible, pristine service that Big Law is known for. Major law firms are struggling just like companies in other industries are struggling. Even though The Sharper Image went bankrupt, people will still buy gadgets. The same is true for lawyers. And almost all professions are businesses. Saying you have to be one or the other is a false dichotomy. We are a profession, and we have a higher purpose over and above the needs of our clients, which is to ensure that through honesty, fair dealing and transparency, we create enforceable contracts and support the smooth functioning of society.
However, the longer the current recession lasts, the more likely it is that small firm lawyers will lead the way with new methods to provide legal services at affordable rates that fit in client budgets. This is a point made by Carolyn Elefant at myshingle.com, and exemplified by lawyers such as Jay Shepherd who provides up front flat fee prices.
So the Bobs of the world will still have the opportunity, if they choose, to walk down the dark path of Big Law, but they hopefully will have more compelling alternatives in the future as well.
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