In April and May of this year, the Altman Weil consulting firm surveyed the leaders of 787 law firms with 50 or more lawyers about the state of the legal industry. After receiving responses from 218 of them (a 28% response rate), Altman Weil crunched the data and compiled it in a big law firm survey, which it published earlier this week.
The survey came out a few days ago and has been covered extensively in various legal news outlets. But we weren’t in any great rush to write about it, since it doesn’t contain much to get excited about: many of the findings are (1) gloomy and (2) unsurprising.
To turn the Nixon Peabody theme song on its head, these days it seems that “everyone’s a loser” in the world of Biglaw….
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Let’s start at the bottom of the totem pole and move our way up, summarizing the survey results and explaining why it sucks to be in each group:
- Law Students: If you’re a law student hoping to land a job at a large law firm, good luck to you. About 53% of firms reduced or discontinued hiring first years in 2009, and 38% plan to do so in 2010. Almost two-thirds of firms, or 64%, shrank their summer programs in 2009, and 54% have done so in 2010. “Many firms are continuing to be cautious and conservative in hiring. This will exacerbate the problem of new graduates being able to find positions in law firms.”
- Junior Associates: “Overall the need for inexperienced associates has decreased and may never rebound.” Almost a third of firms, 32%, expect reduced associate salaries to be a lasting as opposed to a temporary development. And Altman Weil is encouraging firms to stay the course in deflating associate comp:
In 2010 there are some indications of a return to the status quo ante in associate compensation…. This may represent a missed opportunity to recalibrate associate compensation to be more consistent with client expectations and more in line with associates’ economic contribution to their law firms.
Translation: “C’mon, partners — it’s a buyer’s market for associate talent. You have these kids over a barrel; keep ’em there. They’re all fungible anyway!”
- Senior Associates: If you’re a senior associate gunning for partnership, don’t get your hopes up. “Law firms will maintain profits per equity partner by managing the denominator — number of equity partners. Partnership in US law firms is harder to attain and will remain so.” Just look at the numbers: 39% of firms made fewer partnership offers in 2009, and another 23% plan to do so in 2010. Some 14% of firms extended their partnership tracks in 2009, and another 8% plan to do so in 2010. And these trends are seen as enduring: 63% of respondents viewed fewer equity partners and more non-equity partners as trends that “will be adopted as standard by most firms going forward.”
- Non-Equity Partners: Over 25% of firms reduced their number of non-equity partners in 2009, and over 20% plan to do so again in 2010. “We are already seeing a focus on reductions of chronically unproductive partners and non-equity partners who are unable to contribute at a high level.”
- Equity Partners: Even equity partners, at the top of the Biglaw
Ponzi schemepyramid, are not safe. In 2009, about 25% of firms trimmed the ranks of their equity partners. In 2010, about 37% either will or might de-equitize partners.
These are some of the survey’s key findings. There are several others, but they generally won’t surprise you.
For example, when it comes to alternative fee arrangements (AFAs), the survey reports that (1) they’re on the rise; (2) firms tend to be reactive as opposed to proactive in offering them (i.e., clients have to ask for them); and (3) AFAs tend to be less lucrative to the law firms than billing by the hour. But you knew all this already.
For more depressing news additional data and analysis, check out the survey itself or some of the prior commentary on it, accessible via the links below.
2010 – Law Firms in Transition [Altman Weil]
Future Remains Cloudy For Legal Biz [WSJ Law Blog]
Law Firms Express ‘Growing Enthusiasm’ for Contract Lawyers [ABA Journal]
Survey Warns of Pending Partner Bloodbath: Over 33% of Responding Law Firms May De-equitize [ABA Journal]
Study: For Law Firms, Cost-Cutting and Alternative Fees Here to Stay [Am Law Daily]