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May 08, 2007

Do You Need Another Reason To Not Be Part of Big Law?

In a recent article on Law. com "Does Your Law Firm Have What It Takes To Be Recession Proof?' (May 3, 2007) we discover the strategies that large law firms are using to protect themselves from imploding like they did in the pre-recession 1990's.

"Save for Silicon Valley and emerging company practices, the legal industry has experienced an extraordinary economic boom, enjoying 15 years of robust growth without a major recession. Many firms have taken advantage of these flush years to prepare themselves for the next bust. That's a stark contrast to the years leading up to the last law firm recession, in the early '90s. When that recession hit, depressed profits and artless associate layoffs were the order of the day. Entire practice areas were purged of their associates."

For those who read my blog on a regular basis you know that I firmly believe we will enjoy a few more years of 'perceived' prosperity before this economy tanks like it was 1929.  Now before you go calling me Chicken Little because I'm telling you the sky is falling stop and think and about all the news you have been avoiding really hearing, the collapse of the housing market, massive layoffs, dollar devalued, gas skyrocketing, savings at an all time low, people funding their monthly debt on credit cards, bankruptcies jumping dramatically.  The Dow going up is a red herring. (But that's not for this blog). That's a certain reality that most people like to avoid hearing.  Anyone who closely follows what is really going on in this country and is seriously reading the tea leaves is starting to shed excess overhead and getting ready to hunker down for a long, hard winter.  Those who are in denial fall back on," it's all cyclical."  Regardless of what you may believe, it's unusual timing for an article about how Big Law is getting dressed for recession, don't you think?

But that is not the main reason I am bringing this article to your attention.  I'm alerting you because so many students tell me they need the security of Big Law, a steady paycheck because of their financial and familial obligations.  If you 'listen' between the lines, this article, just one of many, is shouting through a bull horn, 'no security here."

"To be sure, things were different in the years leading up to the last recession. In those days, firms beefed up on equity partners. At too many firms, associates became equity partners just by sticking around for seven or eight years. Today's coin of the realm -- an "ownership mentality" -- wasn't required. Ability to service a client was enough. If rainmaking skills were there, too, that was a nice bonus. When the bust hit, a long-term, massive purge of nonrainmaking equity partners began. That purge was the tipping point that transformed large law firms from collegial partnerships to Friedman-esque, profit-driven businesses.

And for those of you who believe that Big Law will change their attitude about long, mind-numbing, hours and turn soft on your request for work/life balance:

Partnership structure. Although many firms learned their lesson the last time around and have been sparing in their admission of equity partners, there has been a worrisome trend toward multitier partnerships. They were created for at least four good reasons:

  • To softly lengthen the partnership track;
  • To allow management to make more informed up-or-out decisions about the business development skills of young attorneys;
  • To provide a career track for lawyers with narrow expertise in an area, such as tax or ERISA, that some firms need but do not want to expand; and
  • To provide a haven for highly valued partners who want to work reduced hours.

"Highly valued partners" get consideration for their work/life balance issues.  Not the associate. Or even the non-valued non-equity partners.  There is only one person who can give you what you want, steady income, security, work/life balance (whatever that equation is for you) and that is you. 

For additional reading on the dreaded "R" word - Recession, read Adam Smith, Esquire's great blog post on the same topic.

The good news is that law firms have high variable and low fixed costs.  The bad news is that your assets are elevator assets?  Yes, but in bad times that's a blessing in disguise.  It can be, and will be if the time comes, terribly painful from a human, and humane, perspective to unload idle people, but such would be the imperatives of the market, especially if your competitors are doing the same. Understand:  I take no satisfaction whatsoever in this.  But I point it out as reality, and as the ineluctable responsibility of those of you who get paid the bucks to be in charge.

So for those who truly want to go solo but are slipping back or have never left the fear zone, think long and hard about who you would invest your future security in, Big Law who is going to hunker down with a "survival of the fittest and most profitable mentality"...or yourself, with some serious elbow grease, good mentorship and thousands of other solos ready to help you build your business?

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Comments

NBlack

Interesting post, and I couldn't agree with you more--especially re: the likelihood of a recession in the near future. Too many people are too deep in debt for their own good, and soon we'll all pay the price.

And, BigLaw, like every other large business entity, care little about the little people--and associates are quite "little" in the grand scheme of things in law firms.

David Stejkowski

Excellent post. Many BigLaw firms do not even wait for a recession anymore to take the actions you mention, so when it comes, one can only imagine the potential bloodbath at some shops. At the end of the day, you are your only salvation.

Casey Khan

"The Dow going up is a red herring." Good catch, most people can't see that even if the Dow is rising, if the dollar is falling, Dow gains can be offset.

'no security here." That's exactly why I'm a second career type in law school. I used to work for big Wall Street brokerage firms, then I got involved in the world of energy market risk and trading. I was just about to take another job in the energy business with a large multinational oil company and turned it down for law school instead. I was thinking, if these guys get in trouble financially, I'll eventually be gone. I'm tired of being a commodity at the whim of the global corporate world. I wanted to run my own show, and so now here I am in Phase One of my new job, 1L.

Love your blog, keep up the good work.

Eric Hutchins

Excellent post.

And we should remember that partnership doesn't necessarily bring tenure-like job security anymore either. Just ask the partners at Mayer Brown, who axed 45 of their own in March, to raise profits-per-equity partner. I certainly wouldn't want to be an associate there.

That's not to say there aren't well-managed and associate-friendly (more or less) firms on the AmLaw 100 or AmLaw 200 (I like to think that I work for one). But I'm also not deluding myself into thinking that the cradle-to-grave job security of the early 20th century still exists in the legal profession... except perhaps in academia.

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