Money, Movies, Partner Issues, Partner Profits, Small Law Firms

Size Matters: I See London, I See France

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Ed. note: This is the latest installment of Size Matters, one of Above the Law’s new columns for small-firm lawyers.

As has become my tradition, Sunday night I watched the Academy Awards while drinking an Oscar-themed martini. While watching the three-and-a-half-hour award show, I was reminded of a few life lessons that I have learned about practicing law.

First, as I listened to the kids from P.S. 22 sing “Somewhere Over the Rainbow,” I remembered that my years at Biglaw have left me dead inside.

Second, as I saw the many beautiful (and not so beautiful) nude dresses, I was reminded of the importance of transparency in the management of a small law firm. Yes, perhaps this analogy is a stretch, but I just wanted to be able to write about the Oscars and my Black Swan-tini….

When I went through OCI one hundred years ago, the majority of the big firms would use “transparency” as a selling point. The transparency they talked about was related to partner compensation and firm profits. One partner with whom I interviewed told me that he knows exactly what all other partners make at the firm. At the time, that seemed entirely unimportant, and a little sad. I mean, why be reminded that I was so low on the income scale? Woe was me as a first year making $160,000 per year.

When I moved to my current firm, I realized that having this information about a firm’s profitability is extremely important. If I ever aspired to be a partner, I would want to know whether it was worth the personal sacrifice — not only in my time, but in my dignity (after having to tell the right partners how smart and pretty they are).

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Also, as an associate, it is important to know the financial health of your firm. How else are you supposed to know if you are being paid enough, or if you’re in real danger of getting laid off?

I do not know how much any partner makes at my small firm. I do not know what the profits were for the firm last year — or for any year. I do not know what other associates receive as salary or as a bonus. If I were advising a client on whether or not to accept an offer with the amount of information that I had (and have), I would of course tell him not to sign. But, I guess in the same way that doctors make bad patients, lawyers make bad employment decisions? Or maybe I am just a moron (although the partners here do not know this information either)? After all, I do not possess Charlie Sheen’s super special brain.

I am not alone, however; small firms commonly pay associates different salaries, and the associates are unaware of what others are making. Moving away from lockstep salaries is touted by many small firms as a way to make compensation more fair. And many small firms do not publicize certain financial information about firm profits, profits per partner, and other compensation information. I guess they figure since it is a smaller organization (i.e., more human than the machine that is Biglaw), the small firms can count on people to blindly trust. And, for an associate — where the path to partner seems pretty far off — this information may seem to be less important than how much vacation I will get or how much money I can get.

But there is no reason why such information should not be available to the associates and partners at any small law firm. (Note: please email me and let me know if there are certain reasons that I am missing. I doubt I will agree but let’s hear it.) When considering a small firm, consider whether this information should be public.

Isn’t this exactly why Elie is so angry at Ave Maria?

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Valerie Katz (not her real name) works at a small law firm in Chicago. You can reach her by email at Valerie.L.Katz@gmail.com and follow her on Twitter at @ValerieLKatz.

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