Biglaw

Mo Money, Mo Problems -- Again

The cost of Biglaw's $200K starting salaries.

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Fish gotta swim, birds gotta fly, and Biglaw firms gotta raise first-year associates’ salaries. Milbank led the charge this year, and, for the first time, incoming associate salaries will be more than $200,000. Most every major large firm has followed suit. Get out the bubbly. This is a great thing for the industry and those lucky enough to cash those paychecks, right?

Strings Attached

Not so fast. Let’s talk for a minute about what life is like for the associates who sign up for that $200K-plus paycheck. Associate life in Biglaw is largely defined by the billable hour, of which you generally need to be cranking 2,400 to 2,600 a year — if not more. That means that new salary will cost an associate roughly 50 billable hours a week on average just to stay afloat and move on to the next year.

The normal American workweek is 40 hours, or eight hours a day for five days a week. To get another 25% above that, either you’re billing 10-hour days every single day or you’re committing your weekends to the cause. Or, more likely, both.

And lest we forget, billable hours and hours spent on the job are not the same number. Do you have a commute? Add that time to the pile of what you’re committing. Do you want to eat lunch or dinner during those long days? Either eat while working at your desk or commit to longer days to make up the difference. Enjoy chatting with your coworkers, developing your skills through CLE, or performing pro bono work? I hope you enjoyed them enough to make up the hours somewhere else. The billable hour requirement at a Biglaw firm is a furnace that always needs to be fed, often to the tune of 70 to 80 actual hours a week or more committed to work.

In comparison, a typical regional firm will have a billable hours requirement of 1,900 to 2,000 hours. The NLJ 250 firm I call home, Fennemore, has an 1,850 target. That’s a 500 to 700 hour swing as compared to a coastal firm’s expectations. That kind of time could be the difference between you having a hobby, exercising, taking vacation, or not doing any of those things. It could be the difference between being happy or just existing.

That kind of time might also be what determines whether you develop a book of business to call your own. We all take our own paths to developing our client base, but not many of us stumble into our clients during work hours. Most of us have to network, develop our skill sets, and get out of the office on our own time to build those relationships. There’s not a lot of time for that when you’re trying to get 2,600 hours billed to keep your assigning partner happy.

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What’s Your Long Game?

Where do you see yourself in 10 years? If you answered “still in Biglaw,” then you’re probably wrong, at least statistically. Milbank, which fired the first shot in this year’s salary wars, elected five attorneys into its partnership this year. In an average year it brings aboard 50 to 80 new entry-level associates. That’s on average less than one partner made for every 10 new associates, before we even consider the further dilution of those numbers by laterals. Milbank’s not an outlier, either. Skadden promoted 13 partners the same year its summer associate class boasted 177 members. Overall 90% or more of Biglaw first-years will leave before making partner. In comparison, at the NLJ 250 firm I’m at, we had a summer class of seven last year and a new-partner class of four.

For those who do make it to partner in Biglaw, congratulations! You won the pie-eating contest, and your prize is more pie. Expect to continue billing an absurd amount of hours a year, as well as supervising junior attorneys, maintaining client relationships, and attending to firm managerial responsibilities.

On the plus side, you’ll start keeping more of what you brought in than you did as an associate. A Biglaw associate in New York City might easily have a billable rate of $600/hour or more. Some firms charge over $1,000 an hour for associate time. Even discounting for collections, write-offs, and other issues, it’s not outlandish to expect a firm to make $1.5 million or more (sometimes substantially more) in revenue on an associate in any given year. After your $200,000 salary and maybe another $200,000 in overhead costs, the firm clears over $1 million profit, or around two-thirds the revenue. You kept around 13% of the value you created, and all you had to sacrifice was your nights, weekends, and personal relationships.

Don’t get me wrong, that’s how law firms and most other businesses work. The owners provide the clients and resources and take all the risk, so they keep the lion’s share of the profit. But smaller market firms tend to share the wealth a bit more, usually devoting about 20% of collections to associate compensation as opposed to 13% or less in the biggest of Biglaw.

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What Are You Worth To Yourself?

If my concerns about the Biglaw salary wars can be summed up in a word, it’s sustainability. It’s been assumed since I was in law school that Biglaw associates were worked to death, and that’s why they got paid the big salaries. Those whopping salaries in turn became justification to raise associate billing expectations, which in due course lead back to more raises. I fear this last round of raises is just another step on an unseemly cycle that will continue until either we as an industry decide to stop, or (more likely) until we hit the physical limits of what a newly graduated law student can bill. The status quo won’t last, and it doesn’t seem headed anywhere good.

There’s nothing morally wrong with this arrangement. If you want to commit a few of the best years of your young life to working like a dog and forsaking everything else in pursuit of a big salary, you should be free to do so. And Biglaw should be free to pay you for the privilege. But at the end of that marathon, what do you really have? Probably poor health, damaged personal relationships, and internalized, unhealthy views of work-life balance. What you don’t likely have are a support network, a book of business, or a realistic prospect of partnership.

Before committing to signing on to a firm that promises you that giant salary, consider what that paycheck will actually cost you. Don’t let the big shiny number blind you to reality. Consider not stepping onto that endless treadmill, and instead maybe work somewhere that sees you more as a future partner and less as a present-day billable machine.

Sometimes less truly is more.

James Goodnow is the CEO and managing partner of NLJ 250 firm Fennemore Craig. At age 36, he became the youngest known chief executive of a large law firm in the U.S. He holds his JD from Harvard Law School and dual business management certificates from MIT. He’s currently attending the Cambridge University Judge Business School (U.K.), where he’s working toward a master’s degree in entrepreneurship. James is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.

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