Biglaw, Money, Partner Issues, Partner Profits

Biglaw’s Unwritten Purpose

Summer is supposed to be relaxing. Biglaw partners are familiar with the concept of summer relaxation, primarily from hearing about other people relaxing. Sample July client exchange: “No rush on that project, we are heading up to the Cape for the weekend, and when we get back we are taking the kids for a week to Basque country for a wine and ham festival. Actually we might hit Marbella on the way back for the weekend. Tell the other side I’ll be available after Labor Day for a deposition. Let my secretary know if there are any emergencies. Thanks. I’ll buy a bottle of Priorat for us to share when we win this case.”

In Biglaw circles, this summer has been anything but relaxing. By now, everyone has an opinion on the New Republic article that announced to the literate masses the upcoming end of Biglaw. Hard-thinking Biglaw lawyers have already forming opinions on the various opinions circulating around the Biglaw water cooler. (We need an industry conference to hash all this out, maybe with some clients to give their input. The electronics companies have CES; we needs a massive industry event of our own.)

Back to the end of Biglaw. The media, consistent with our human tendency to draw generalizations based on examples that are outliers, is very skilled at highlighting human interest stories at the margins of an issue. So in the New Republic article, we were treated to a description of the impact of a Biglaw firm’s glories and travails on rainmakers (who, if London-based, apparently have the pull to get an audience with the royal baby’s nanny at minimum) and displaced associates — people on opposite poles of the Biglaw power spectrum. Interesting stories, and easy to write about.

Ultimately, however, we need to explore the purpose of the grand Biglaw experiment before we can proclaim whether it has succeeded or failed. And for that we have to look at how Biglaw has treated perhaps its most important, if much-maligned, constituency: the service partner….

When we focus on the prospects for service partners at the majority of Biglaw firms, the forecast is grim — but only if one presumes that one of Biglaw’s main functions is to allow excellent lawyers with no business development skills the ability to earn increasingly outlandish sums in perpetuity.

Back when the demand for top-shelf legal services outstripped the supply, that was possible. But in recent months, two managing partners (for those who refuse to believe the litany of consultants and “new normal” proponents who have been saying for years that Biglaw faces serious challenges), from prominent and unquestionably Biglaw firms (Weil Gotshal and Mayer Brown), have confirmed that we are no longer operating in such a world. And one of those firms (Weil) has publicly (though we know it happens privately all the time) unveiled a new response to the declining demand that Biglaw faces — partner pay cuts, of a serious and measurable nature.

It is hard to generate sympathy for near-millionaires who are under-producing relative to their putative partners. And many service partners (as in never having generated any business of their own) at major Biglaw firms enjoy high-six figure incomes on a yearly basis. That fact can be considered one of Biglaw’s greatest successes. Moves like Weil’s, especially if copied by more firms, present a great challenge to the Biglaw “social contract,” and in so doing do more to signal the potential “end of Biglaw” than yet another story about the law school bubble. Because in an important way, Biglaw is all about the service partner. Put another way, the story of Biglaw’s success is the story of how today’s service partners (even at middling firms) can earn more than yesterday’s rainmakers (at even the most prestigious firms). The end of upward mobility at many firms for service partners, then, is the best current evidence of the end of Biglaw. Even the fact that service partners are now considered at “risk” underscores how frayed the Biglaw fabric has become.

Unfortunately for service partners, their greatest joy (compensation) is the source of their greatest potential misery. The Biglaw bloat is primarily in service partner compensation. One factor that has always served to elevate service partner compensation is that firm management is usually composed of lawyers who were either always service partners, or know their impending post-management destiny (try rebuilding a practice after five years as a firm chair), and thus had the requisite desire for a soft landing — and the means to ensure it. So it was easy to take money from the rainmakers and reward those who were client-poor but billable-hours-rich. And make them actually rich. But with Biglaw under stress, harder questions are being asked. Or should be asked. Such as why (considering compensation is a Biglaw firm’s biggest expense by a large margin) should service partners make so much? How many of them would quit if paid half of what they were currently making?

But what about service partners’ important role in client retention (as opposed to client origination), you ask? No doubt it is important, and Biglaw saves some of its most outsized rewards (see partners at elite lockstep firms who primarily service institutional clients — client retention is the foundation of their contribution to their firm’s success) for those who can demonstrate a measurable contribution to client retention efforts. The problem for many service partners is that they can not make that claim. In short, they are just as fungible as the third-year associates they are so quick to assert control over.

The centrality of the upward mobility “promise” for service partners in Biglaw is underscored by the paramount importance that Biglaw firms have attributed to maintaining the status quo in that respect. Staff and associate layoffs, assigning 346 lawyers to one secretary, perk “management” (read: removal), and commissioning feasibility studies for moving back-office operations to locations 300 miles from the nearest international airport are best understood not as insurance against losing rainmakers (they leave for better offers all the time anyway), but as service partner compensation protection exercises. As in saving the inevitable service partner compensation cuts for last.

So how does one differentiate when trying to make a prognosis about the short-term prospects for any one Biglaw firm? Focus less on how it treats its big rainmakers, and more on how drastic the efforts are that it needs to undertake in order to protect its middle class (especially its older equity service partners). That tells a truer tale. Longer-term? Take a very close look as to how the firm is treating its future rainmakers. The ones it needs to invest in. Chances are, that picture is a bleak one. And that is why the end of Biglaw is a real possibility, and not just a headline.

Is there something wrong with service partner compensation at Biglaw firms? Let me know your thoughts by email or in the comments.

Earlier: Which Way Will You Run? Some Thoughts On The New Republic Article About Mayer Brown


Anonymous Partner is a partner at a major law firm. You can reach him by email at atlpartnercolumn@gmail.com.

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