One of the most important voices in the academic legal community, particularly on the topic of the business of law, and Biglaw in general, is Professor William (Bill) Henderson of Indiana University’s Maurer School of Law. I personally have long admired his work, and I was very pleased when he reached out to me after he had read my column on Biglaw’s “sticky seniors” problem.
At that point, I asked him if he was willing to do a written interview, and he graciously agreed, on the condition that he later have the opportunity to ask me questions. I look forward to doing so, and in the meantime I hope you find his answers to my questions as informative as I did. I’d like to thank Professor Henderson for agreeing to this interview, and for all the important work he is carrying out. As with my prior interviews, the commentary below Professor Henderson’s answers is mine alone.
AP: You got in touch with me regarding my column on Biglaw’s issues with senior partners. What are your thoughts on the issue?
You made the point in “Biglaw’s Sticky (-Handed?) Seniors” that too many large law firms are being run for the benefit of 55- and 60-year old partners. Your colorful commentary is consistent with what I am seeing in some data projects I am working out.
Indeed, your column on sticky-handed senior partners coincided with a research monograph I just finished, entitled “The Diamond Model: A New Model or the Pyramid Unraveling?” Below is the key graphic from the monograph, which compares two trend lines against one another: the percentage of lawyers in an NLJ 250 law firm with the title of Associate versus the percentage with the title of Partner.
For the last ten years, a large portion of my research time has been dedicated to the law firm market. And I have to say, when I saw this graph, I was shocked, as it was completely counter to the narrative that, until recently, the large law firm model was based on associate leverage. In fact, associates as a percentage of lawyers in large law firms peaked in 1988 – over a quarter century ago. Since then, different lawyer roles in law firms have proliferated – counsel, staff attorney, etc. – and the partnership has been split into equity and non-equity tiers, with the latter often serving de facto as permanent substitutes for midlevel and senior associates. As we discuss in the monograph, this demographic structure can be good for short- to medium-term profits — in fact, we establish that statistically. But it is not a sustainable long-term model. Rather, we interpret it as evidence of the pyramid unraveling.
By the way, I have some empathy for how large law firms got into this predicament. For the most part, large law firms are keeping in inventory what clients want. And increasingly, that is experienced senior lawyers unbundled from relatively unskilled junior associates. I doubt this is an explicit strategy of any managing partner or executive committee. Rather, it the product of 40 years in which the operative strategy was to grow in accordance with client demand – i.e., answer the phone and exercise the firm’s option on another floor of class A office space. Yet, now that demand has flattened out, large law firms have to grapple with the reality that they need a coherent strategy in order to compete for market share.
Unfortunately, the owners who functionally control these enterprises are, as you note, 55- to 60-year old senior partners. They prospered under the old order, and right when the firm as an institution needs to go in a different direction, they are enjoying peak earnings. They are also not cognizant of these broader industry-level trends—and there is no urgency for them to know, as they have enough client work to last them until retirement. Thus, if other lawyers in the firm are slow, lack of hustle rather than structural factors become the default explanation. I have heard it called the “unproductive partner” problem.
To further complicate things, these enterprises have become very large – the average NLJ 250 law firm has over 500 lawyers and 200 partners spread across 10 offices, some of which are international. It is essentially impossible to have a partnership meeting over firm-wide strategy. Yet, if the executive committee meets and formulates a long-term strategy that requires retention of current earnings to finance, the 55- to 60-year olds who essentially have to pay for it may leave the firm, leading to a Heller-Howrey-Dewey-type run on the bank.
So it is wrong to chalk up Biglaw’s problems to greed or stupidity. It is neither. All I will say is that decades of success have not prepared today’s senior partners well for the challenges ahead.
AP: It is hard to take issue with anything that Professor Henderson says in response in my question. I have two points to add here: (1) the idea that senior partners have a responsibility to the next generation of partners has taken a back seat to considerations regarding Biglaw’s current financial performance, and (2) while the size of Biglaw firms may make the development of “firm-wide strategy” impossible, at the very least partners should make a concerted effort to ensure that there is at least an actionable and sustainable strategic plan in their practice group. Of course, if firms are simply too big to be true partnerships anymore, then perhaps we need to redefine what being (even an equity) partner means in a Biglaw firm these days. Or come up with a new title for mid-career or senior lawyers who are not rainmakers.
My thanks to Professor Henderson for taking the time to share his insights. We’ll have the next installment of our conversation next week.
Earlier: Biglaw’s Sticky (-Handed?) Seniors
Anonymous Partner is a partner at a major law firm. You can reach him by email at [email protected].