The brass ring of partnership – regular schedule, massive compensation, the fear and adoration of all – was supposed to be the reason associates slogged through 2,000+ hours (3,000 in my day, with no lights, no shoes, snow every day, uphill both ways, etc.) of mindless document review, due diligence, and proofreading every year. That was the deal: seven (then eight, then nine…) years of torture in exchange for job security, a hefty paycheck, and the promise of (reasonable) riches and the key to the partners’ dining room.
Sure, associates are getting laid off in massive waves, salaries are being frozen, and bonuses are less than last year. But at least there’s still that special bathroom, right? At least when you make partner you can still look back, wash your hands in the gold faucet of the private bathroom, and breathe a sigh of relief, right?
Not anymore.
In November, Jenner & Block laid off ten partners. Bye-bye, job security.
Just a few days later, DLA Piper announced it was going back to a single-tier partnership by “inviting” its 275 non-equity partners to pony up unspecified amounts to join the 300 full equity partners as owners. Now it’s pay-to-play?
Yesterday, we had both in one day: Kirkland & Ellis laid off as many as 25 partners and Clifford Chance (which had two rounds of associate layoffs in 2008) required its non-equity partners to make $150,000 cash contributions.
The English perspective on who should bear the brunt of the downturn and our thoughts after the jump.
With up to 2,000 of the 11,000+ partners at risk of losing their jobs, Slaughter & May partner Nigel Boardman is at least paying lip service to the notion that associates can’t shoulder the load exclusively:
I don’t think it follows that a downturn in work means that you cut your associates… If you have to cut, cut your partners’ profits and even your partners more than you cut your associates.
In fact, in London it’s easier to lay off partners than associates.
Cutting partners isn’t only equitable — a way to spread the pain — but it’s also expedient, because in the U.K., it’s much easier to shed a partner than an associate. Associates are salaried employees who have some protection from termination under U.K. employment laws. By contrast, partners — who are classified as owners — can typically be removed by a simple vote.
We don’t subscribe to the entitled-associate mentality. We think law firms are business and, frankly, should be run more efficiently than they have been (only a lawyer would think he’s qualified to run a billion-dollar business based on legal skill). The sewage of billable hours, stuffing in a tier of non-equity partners to protect PPP, and the general economic conditions are revealing the modern law firm structure’s many flaws.
But what really troubles us about recent events is that the promise is being broken. There has to be some reward to put associates through the long nights and canceled plans. The quid has been disappearing for years, and now the quo is fading, too. What does that leave? Yes, it’s a flawed system, but at least we knew the rules.
Were the associates shouting “NY to 190!” last year spoiled, or were they the first to understand that it was us-vs-them, take-all-you-can? Do you still want to be a partner (both meanings: as in “are you an associate who continues to want to make partner,” and “are you a partner who wants to remain such?”)
Related posts:
{ 14 comments… read them below or add one }
Riddle me this, Batman: what does the capital contribution at these firms, like CC, get you, if you are the one to make it? Is it just a buy-in for the privilege of working there, as it has been characterized in other writings cover the subject, or is this just “mass equitization” of a law firm? Someone needs to pull back the curtain on the subject.
Riddle me this, Batman: what does the capital contribution at these firms, like CC, get you, if you are the one to make it? Is it just a buy-in for the privilege of working there, as it has been characterized in other writings cover the subject, or is this just “mass equitization” of a law firm? Someone needs to pull back the curtain on the subject.
The quick answer (hence the comment, not a full-blown blog post) is “it depends.”
Is the buy-in an investment in an asset that will appreciate or depreciate? Can you pay cash? One of the common personal-finance rules of thumb is “never buy a depreciating asset on credit.” Otherwise you get caught in a shame spiral of paying interest on disappearing value.
On the other hand, if you think the firm’s fortunes will improve and you can pay cash – why not? Contrary to UK law, under most firms’ partnership agreements, it’s slightly more difficult to oust a (true) partner than an employee, which is all a non-equity partner is anyway. You’re buying yourself a bit of job security (both in the difficulty in kicking you out of the partnership and the intangible “commitment to the firm”) and all you’re giving up is the marginal ROE. In fact, you might take the belt-tightening as a sign that the firm is underpriced and it’s an opportunity to buy in cheap.
The quick answer (hence the comment, not a full-blown blog post) is “it depends.”
Is the buy-in an investment in an asset that will appreciate or depreciate? Can you pay cash? One of the common personal-finance rules of thumb is “never buy a depreciating asset on credit.” Otherwise you get caught in a shame spiral of paying interest on disappearing value.
On the other hand, if you think the firm’s fortunes will improve and you can pay cash – why not? Contrary to UK law, under most firms’ partnership agreements, it’s slightly more difficult to oust a (true) partner than an employee, which is all a non-equity partner is anyway. You’re buying yourself a bit of job security (both in the difficulty in kicking you out of the partnership and the intangible “commitment to the firm”) and all you’re giving up is the marginal ROE. In fact, you might take the belt-tightening as a sign that the firm is underpriced and it’s an opportunity to buy in cheap.
The brass ring is not “getting” tarnished; it already is. As for the lawyers managing their own business, how about an update on those law firms in Oz that went public?
Most importantly, I want that fancy background for my comments, too.
Good idea. I’ll see what I can find about the Oz firms.
I have no idea about the background. I assume it’s because I’m the admin. You might get one if you register… or you could at least give yourself a custom icon to replace that grey silhouette.
The brass ring is not “getting” tarnished; it already is. As for the lawyers managing their own business, how about an update on those law firms in Oz that went public?
Most importantly, I want that fancy background for my comments, too.
Good idea. I’ll see what I can find about the Oz firms.
I have no idea about the background. I assume it’s because I’m the admin. You might get one if you register… or you could at least give yourself a custom icon to replace that grey silhouette.
Onions, you have some onions for demanding fancy backgrounds!
Onions, you have some onions for demanding fancy backgrounds!
Most areas of the economy are going to change dramatically, and law firms will be no different. The associates who are just coming into the system and the new partners are going to be slammed by what’s about to happen (is happening?), but everyone is going to have to learn to be industrious. This isn’t a bad thing, in the end it’ll teach the younger attorneys to be quicker on their feet which will pay off in five years when 55-year-old partners are stuck in 1998 ideas of how things operate. Sucks right now, but rewriting the landscape can benefit the clever amongst us.
Most areas of the economy are going to change dramatically, and law firms will be no different. The associates who are just coming into the system and the new partners are going to be slammed by what’s about to happen (is happening?), but everyone is going to have to learn to be industrious. This isn’t a bad thing, in the end it’ll teach the younger attorneys to be quicker on their feet which will pay off in five years when 55-year-old partners are stuck in 1998 ideas of how things operate. Sucks right now, but rewriting the landscape can benefit the clever amongst us.
I agree with the sentiment but wonder whether we’ll see actual change. Think about how long this model has been in place and what it’s been through. 2001, 1997, 1991, all in recent memory and still the BigLaw model marches on. That being said, volatility=opportunity for those who take advantage.
I agree with the sentiment but wonder whether we’ll see actual change. Think about how long this model has been in place and what it’s been through. 2001, 1997, 1991, all in recent memory and still the BigLaw model marches on. That being said, volatility=opportunity for those who take advantage.