7 ms·

The modern law firm: not all partners are created equal, data and billings rule

68 points by troydavis 7y ago

taurath 7y ago
Isn’t any job for life basically gone now? It’s the clarion call of the millennial generation - don’t expect loyalty from any company you work with or for. My understanding is that those with law degrees see a ton of competition in the market, because it’s such a prestigious professional calling on the order of doctors but with better work environments. Why wouldn’t it affect those at the partner level?
- NotSammyHagar 7y ago
  There might be new competition now at a certain level, but there's also the oversupply of lawyers and the continual closing of law firms all across america. Those are kind of competing stories about what is happening.
  - mwnivek 7y ago
    The bimodal distribution of salaries [1] might support the idea of different stories at different levels within the legal world. Note this bimodality seems to have appeared around the year 2000 [2]. [1]: https://www.nalp.org/salarydistrib https://www.nalp.org/salarydistrib [2]: https://www.biglawinvestor.com/bimodal-salary-distribution-curve/ https://www.biglawinvestor.com/bimodal-salary-distribution-c...
    - danjayh 7y ago
      Aren't these salaries for new grads? I wonder if the gap between the high earners and the low earners narrows with experience.
  - mamurphy 7y ago
    >There might be new competition now at a certain level, but there's also the oversupply of lawyers and the continual closing of law firms all across america. Those are kind of competing stories about what is happening. Can you rephrase so I can understand what you mean? "There might be competition on some level" BUT "there's also the oversupply of lawyers" -- that means that all the lawyers are competing with each other because there are too many. How are "the lawyers are competing" and "there is an oversupply" competing stories? An oversupply would lead to increased competition.
    - NotSammyHagar 7y ago
      Sorry, messed up with a typo I couldn't edit later. There is an oversupply of lawyers and law schools and law firms have closed. Yet as the article talks about, there is the article which talks about some thriving law firms, so it's not all bad. There was also the real partners and the not-partners, some of whom might become partners, others that were just paid by the hour and would not become partners. So I was trying to say that it wasn't a clear story, some good things, but because there are fewer good jobs for lawyers (and fewer high paid partner opportunities) there's also bad stories. But I'm sorry, my comment was unclear.
- nimbius 7y ago
  Call me a skeptic, because I'm a mechanic by trade who's had the same job for 15 years now. Pay still goes up but your responsibilities change. The communication between you and the shop is still damn important. Owners of bigger shops are always convinced they can backfill you with an army of apprentices and day laborers. Smaller shops are always scared you'll bankrupt them. Trust is character, and competence, according to the business gurus. I spend most of my days on big issues. Stripped head bolts and stuck cylinders are still a daily thing, but I also take on breaking bad news to big customers. Telling someone their fleet of aging Mac dumptrucks all need a rebuild is a big task. Explaining it in plain English is impossible for a lot of new guys. My question is do these partners ever take on new responsibilities? Or are they just cashing a paycheck
  - Swizec 7y ago
    To summarize: If you provide more value than you cost, you’re always gonna have a job. It’s a business relationship. Ain’t nobody gonna pay you $5 if you only bring in $3. Everyone will fight to pay you $10 if you bring in $20
    - djmobley 7y ago
      Historically, partners in law firms haven’t had to add value themselves because they had junior lawyers to do that for them.
      - Danieru 7y ago
        Indeed, the deeper reason for that is how law firms are only allowed to be "professional companies", no limited liability shareholders allowed. Thus the industry could never be securitized and profits sold. Instead participating in the profits requires participating in the firm, even if only in risk and name only. This also speaks to why competition is hard to create. No outside limited liability partners means no VCes or passive investors. The closest a law firm can do is loans. Loans partners will be 100% personally liable for.
    - tsimionescu 7y ago
- dmix 7y ago
  Law degrees, even from the best schools arent in finite supply like they used to be. Every lawyer now has tons of competition for a small amount of cases, which mostly just plea out these days. There was some literature in the past showing the legal fields prices haven't been reduced to reflect the new reality of the marketplace supply as it has an insular and protective group who want to maintain an aura of "masters of some dark arts" and maintaining their "prestigious" class which is heavily self regulated. There's a lot of pressure on smaller-time lawyers not to undercut the rest of the firms. If the prices got reduced there would be a lot more case supply to go around as lawyers would be far more accessible to the average person widening the market. It's not just going to stay the same size, just with lower rates. Instead today it's kept artificially high and while the best work is limited to a small group, while other law degree holders fade into other fields or niches. A reduction in prices and eliminating the lawyer's false perception of exclusivity and class would also reduce the amount of people getting law degrees [1] which would offset the decline in price so it doesn't entirely cannibalize itself, still being a decent middle class job. Plus there will always be some cushy law gigs available, especially in corporate law, but it will be a status no longer applied to everyone with a law degree, which limits the entire market as a result. [1] assuming we don't even further disconnect both the financial costs of an expensive education + lengthy time investments they require (aka opportunity costs) from post-graduation job prospects. Especially when compared to other degrees, industries, and alternative job training/apprenticeship opportunities.
  - javajosh 7y ago
    I'd guess that if prices fell the pressure on the justice system would grow even more, and I've heard they are already stretched to breaking. So, the government is probably also against lowering prices and making "justice" more accessible. Such an interesting, and horrible, time, when justice is de facto denied to all but the wealthiest of us. If this was explicit that would be one thing; but we still pay lip service to principles that we have long since abandoned. My belief is that the justice system, in particular jury trials, should become shorter, more frequent and exclusively online. You should be able to file a lawsuit and have it resolved in a week.
  - bradleyjg 7y ago
- nradov 7y ago
  Law firm partners don't work for a company, they are the company.
cperciva 7y ago
It sounds like the right answer the next time VCs complain about startup salaries is to ask how much the partners at their lawyers' firms take home. Total compensation in the millions per year is pretty nuts, even if it does take ten years to get there. Mind you, I think some of the salaries software developers get paid are nuts too. I don't feel like I'm worth $300k/year, but I hear plenty of stories of people getting more than that...
- harryh 7y ago
  charge more
- danjayh 7y ago
  Curious - what do the people making > 300k/year do? According to GlassDoor, even in San Francisco you have to be a director or VP to get that. Even Software Architects seem to be in the $150-$250k range, and that tends to be a high-paying post on the technical side.
  - cstejerean 7y ago
    Software engineers. But that’s $300k+ total comp, cash + bonus + stock, with a good chunk of that being stock not salary. Base salary of $300k or more is a different story.
  - patio11 7y ago
    Glassdoor is not presenting correct data; AppAmaGooBookSoft pay $300k+ at the “career level” for software developers, counting base, bonus, and one year worth of their equity grants. Every engineer who is not fired will eventually reach career level.
  - wikibob 7y ago
    Salaries of $300,000 are common among the top companies, at 1-2 promotions above entry level. See https://www.levels.fyi/charts.html https://www.levels.fyi/charts.html
hooloovoo_zoo 7y ago
I wonder if this will have a destabilizing effect on these "big law" firms. If you're compensated based on how much business you bill for, it's in your interest to poach from your "partners."
- timClicks 7y ago
  Those competitive pressures exist in all consulting firms. Although you might reap a short term payoff by poaching clients, you're unlikely to last long if your peers don't trust you.
- DannyBee 7y ago
  Speaking as a lawyer with a lot of big law friends - Big law firms did not need any help being destabilized already :) (Google around and you'll see they have been going bankrupt/etc at an accelerating rate) Something like this is just a drop in the bucket compared to the larger issues around how their client base is changing.
  - slap_shot 7y ago
    > compared to the larger issues around how their client base is changing. Can you expand that on that. Very curious.
myrandomcomment 7y ago
Did anyone else find this hard to read? The story jumps all over the place with no flow. The subject was interesting and I was reading it to compare to the valley VC structure and startup % ownership. I expected better from the WSJ.
pravda 7y ago
Can someone explain why those big profits don't get competed away? Why don't the corporate employers of the big firms negotiate better prices?
- gnicholas 7y ago
  A couple reasons: • If you have a bet-the-company litigation matter, your GC will choose an expensive, well-known firm. They may be somewhat price-sensitive, but they will be more sensitive to picking a firm that is very prestigious. That way, if the litigation doesn't go well, the GC can say: "well, I went with [super pricey firm], so it wasn't my fault we lost!" • Some lawyers are just better than others, and the legal profession has gatekeepers (bar associations) that prevent a flood of new entrants. Equally importantly, there is just a limited supply of (for example), battle-tested litigators with experience in a particular field. Ditto for seasoned corporate transaction attorneys who know your company's space. People pay a premium for that experience, and competitors can't pop up overnight because it takes decades to accumulate the experience. source: I'm a former corporate lawyer
  - C1sc0cat 7y ago
    That's true, some one with my level of experience in tech in say labour law can command a vastly greater salary. Its why Cherie Blair earned 10x what her husband Tony Blair did when he was Prime Minister. Cherie Blair is an expert in complex labour law BTW.
  - patentatt 7y ago
    Underscoring the value of “battle-tested” lawyers is the implicit and very real factor of hidden information. These top litigators have tons of it, relationships and reputations with judges and courts, knowledge of poorly documented procedures, etc. it’s not that they’re smarter or better lawyers than anyone else, just a most protected class of people who have done it before. And the only way to be admitted to the club is to work under someone in the club. It’s protectionism through bureaucracy at its purest. The drivers of this, of course, are the judges. Who through hubris and incompetence foster these conditions. It’s not that they’re in on the game, really, it’s just that they’re dictators of their own court and have no motivation to make their courts accessible to anyone, and feel empowered to punish clients represented by attorneys that don’t know their preferred formats and fonts. It’s a silly situation that should be dealt with
bradknowles 7y ago
The traditional law firm pattern is that the Partners at the top are “rain makers”, and its their job to find and bring in new business. That’s it. In the middle layer, we have Associates. The senior Associates work closest with the Partners, and supervise the junior Associates. But they’re too busy learning how to “make it rain” and supervising clueless junior Associates to do any real work. The junior Associates do most of the real work that involves stuff where a law degree would help. Below that, you have legal secretaries, etc... In essence, the amount of real legal work you do goes up as you go further down the stack, but also you get lower pay. All the money the Partners make has to be paid for somehow! In essence, it’s a Ponzi scheme. And you know who the only people are who make any real money in a Ponzi scheme, right? There are law firms that get rid of the unnecessary overhead, and where you have Partners doing real legal work, but charging the same rate as the larger firms do for their junior Associates. And those Partners are still taking home a much higher percentage of what they bring in, because the firm has much lower overhead. Those Partners choose to work this way because it gives them more control over their work-life balance. They’re done being the General Counsel of some financial services company with over 22 trillion Euros of assets under management, and want to have some time they can spend at home on occasion with their spouse and their cats. Or travel for pleasure, or any of those other things “normal” people might want to do. Get rid of the Ponzi Scheme law firms. Find one of the smaller firms with a high concentration of very talented lawyers who don’t want to have to deal with the “big law firm” kind of shit.
- grenoire 7y ago
  In all fairness, big or small, that's firm hierarchy in law, finance, and accounting and control. The fairness of pay and average competency might be better in smaller ones, but it's just what it is (as unfortunate as that is). I deliberately chose a small financial consulting firm, and my experience has been really good for now, contrary to my friends', but the pay structuring is just the same everywhere.
- AmericanChopper 7y ago
  I know it’s a bit of a meme to call things a Ponzi scheme on HN, but what you’ve described isn’t even close to being a Ponzi scheme. If a big legal firm stops hiring associates, it’s not going to run out of money, it’s just going to stop growing. It’s also not an especially accurate description of how they work. Business development takes up proportionally more time for senior partners, but you have to have a lot of other management responsibilities before billables stop mattering. Juniors will generally be more concerned utilization, but they’ll also be billing for a lot less.
rland 7y ago
No surprise at all. They heydey of litigation is over -- everything settles, what doesn't goes to arbitration, and the sliver of work that doesn't go to arbitration goes to trial. In the meantime, the market is absolutely flooded with new grads who are eager to live the life. In addition, the old guard is retiring later. At the same time, there is a tremendous amount of legal work to be done in our ultra regulated economy. The end result is pretty predictable. Salaries are abysmal. Associates compete brutally with each other to handle mind numbing hours of document review 7 days a week. Trial experience is very rare making it difficult to move up and do 'real' litigation. I think the starting salary for an attorney fresh out of school in my city is around $40-50k, 60-80hr weeks. Hardly what most people imagine when they go to law school!

68 points by troydavis 7y ago

Isn’t any job for life basically gone now? It’s the clarion call of the millennial generation - don’t expect loyalty from any company you work with or for. My understanding is that those with law degrees see a ton of competition in the market, because it’s such a prestigious professional calling on the order of doctors but with better work environments. Why wouldn’t it affect those at the partner level?

NotSammyHagar 7y ago
There might be new competition now at a certain level, but there's also the oversupply of lawyers and the continual closing of law firms all across america. Those are kind of competing stories about what is happening.
- mwnivek 7y ago
  The bimodal distribution of salaries [1] might support the idea of different stories at different levels within the legal world. Note this bimodality seems to have appeared around the year 2000 [2]. [1]: https://www.nalp.org/salarydistrib https://www.nalp.org/salarydistrib [2]: https://www.biglawinvestor.com/bimodal-salary-distribution-curve/ https://www.biglawinvestor.com/bimodal-salary-distribution-c...
  - danjayh 7y ago
    Aren't these salaries for new grads? I wonder if the gap between the high earners and the low earners narrows with experience.
- mamurphy 7y ago
  >There might be new competition now at a certain level, but there's also the oversupply of lawyers and the continual closing of law firms all across america. Those are kind of competing stories about what is happening. Can you rephrase so I can understand what you mean? "There might be competition on some level" BUT "there's also the oversupply of lawyers" -- that means that all the lawyers are competing with each other because there are too many. How are "the lawyers are competing" and "there is an oversupply" competing stories? An oversupply would lead to increased competition.
  - NotSammyHagar 7y ago
    Sorry, messed up with a typo I couldn't edit later. There is an oversupply of lawyers and law schools and law firms have closed. Yet as the article talks about, there is the article which talks about some thriving law firms, so it's not all bad. There was also the real partners and the not-partners, some of whom might become partners, others that were just paid by the hour and would not become partners. So I was trying to say that it wasn't a clear story, some good things, but because there are fewer good jobs for lawyers (and fewer high paid partner opportunities) there's also bad stories. But I'm sorry, my comment was unclear.
nimbius 7y ago
Call me a skeptic, because I'm a mechanic by trade who's had the same job for 15 years now. Pay still goes up but your responsibilities change. The communication between you and the shop is still damn important. Owners of bigger shops are always convinced they can backfill you with an army of apprentices and day laborers. Smaller shops are always scared you'll bankrupt them. Trust is character, and competence, according to the business gurus. I spend most of my days on big issues. Stripped head bolts and stuck cylinders are still a daily thing, but I also take on breaking bad news to big customers. Telling someone their fleet of aging Mac dumptrucks all need a rebuild is a big task. Explaining it in plain English is impossible for a lot of new guys. My question is do these partners ever take on new responsibilities? Or are they just cashing a paycheck
- Swizec 7y ago
  To summarize: If you provide more value than you cost, you’re always gonna have a job. It’s a business relationship. Ain’t nobody gonna pay you $5 if you only bring in $3. Everyone will fight to pay you $10 if you bring in $20
  - djmobley 7y ago
    Historically, partners in law firms haven’t had to add value themselves because they had junior lawyers to do that for them.
    - Danieru 7y ago
      Indeed, the deeper reason for that is how law firms are only allowed to be "professional companies", no limited liability shareholders allowed. Thus the industry could never be securitized and profits sold. Instead participating in the profits requires participating in the firm, even if only in risk and name only. This also speaks to why competition is hard to create. No outside limited liability partners means no VCes or passive investors. The closest a law firm can do is loans. Loans partners will be 100% personally liable for.
  - tsimionescu 7y ago
dmix 7y ago
Law degrees, even from the best schools arent in finite supply like they used to be. Every lawyer now has tons of competition for a small amount of cases, which mostly just plea out these days. There was some literature in the past showing the legal fields prices haven't been reduced to reflect the new reality of the marketplace supply as it has an insular and protective group who want to maintain an aura of "masters of some dark arts" and maintaining their "prestigious" class which is heavily self regulated. There's a lot of pressure on smaller-time lawyers not to undercut the rest of the firms. If the prices got reduced there would be a lot more case supply to go around as lawyers would be far more accessible to the average person widening the market. It's not just going to stay the same size, just with lower rates. Instead today it's kept artificially high and while the best work is limited to a small group, while other law degree holders fade into other fields or niches. A reduction in prices and eliminating the lawyer's false perception of exclusivity and class would also reduce the amount of people getting law degrees [1] which would offset the decline in price so it doesn't entirely cannibalize itself, still being a decent middle class job. Plus there will always be some cushy law gigs available, especially in corporate law, but it will be a status no longer applied to everyone with a law degree, which limits the entire market as a result. [1] assuming we don't even further disconnect both the financial costs of an expensive education + lengthy time investments they require (aka opportunity costs) from post-graduation job prospects. Especially when compared to other degrees, industries, and alternative job training/apprenticeship opportunities.
- javajosh 7y ago
  I'd guess that if prices fell the pressure on the justice system would grow even more, and I've heard they are already stretched to breaking. So, the government is probably also against lowering prices and making "justice" more accessible. Such an interesting, and horrible, time, when justice is de facto denied to all but the wealthiest of us. If this was explicit that would be one thing; but we still pay lip service to principles that we have long since abandoned. My belief is that the justice system, in particular jury trials, should become shorter, more frequent and exclusively online. You should be able to file a lawsuit and have it resolved in a week.
- bradleyjg 7y ago
nradov 7y ago
Law firm partners don't work for a company, they are the company.

cperciva 7y ago

It sounds like the right answer the next time VCs complain about startup salaries is to ask how much the partners at their lawyers' firms take home. Total compensation in the millions per year is pretty nuts, even if it does take ten years to get there. Mind you, I think some of the salaries software developers get paid are nuts too. I don't feel like I'm worth $300k/year, but I hear plenty of stories of people getting more than that...

harryh 7y ago
charge more
danjayh 7y ago
Curious - what do the people making > 300k/year do? According to GlassDoor, even in San Francisco you have to be a director or VP to get that. Even Software Architects seem to be in the $150-$250k range, and that tends to be a high-paying post on the technical side.
- cstejerean 7y ago
  Software engineers. But that’s $300k+ total comp, cash + bonus + stock, with a good chunk of that being stock not salary. Base salary of $300k or more is a different story.
- patio11 7y ago
  Glassdoor is not presenting correct data; AppAmaGooBookSoft pay $300k+ at the “career level” for software developers, counting base, bonus, and one year worth of their equity grants. Every engineer who is not fired will eventually reach career level.
- wikibob 7y ago
  Salaries of $300,000 are common among the top companies, at 1-2 promotions above entry level. See https://www.levels.fyi/charts.html https://www.levels.fyi/charts.html

hooloovoo_zoo 7y ago

I wonder if this will have a destabilizing effect on these "big law" firms. If you're compensated based on how much business you bill for, it's in your interest to poach from your "partners."

timClicks 7y ago
Those competitive pressures exist in all consulting firms. Although you might reap a short term payoff by poaching clients, you're unlikely to last long if your peers don't trust you.
DannyBee 7y ago
Speaking as a lawyer with a lot of big law friends - Big law firms did not need any help being destabilized already :) (Google around and you'll see they have been going bankrupt/etc at an accelerating rate) Something like this is just a drop in the bucket compared to the larger issues around how their client base is changing.
- slap_shot 7y ago
  > compared to the larger issues around how their client base is changing. Can you expand that on that. Very curious.

myrandomcomment 7y ago

Did anyone else find this hard to read? The story jumps all over the place with no flow. The subject was interesting and I was reading it to compare to the valley VC structure and startup % ownership. I expected better from the WSJ.

pravda 7y ago

Can someone explain why those big profits don't get competed away? Why don't the corporate employers of the big firms negotiate better prices?

gnicholas 7y ago
A couple reasons: • If you have a bet-the-company litigation matter, your GC will choose an expensive, well-known firm. They may be somewhat price-sensitive, but they will be more sensitive to picking a firm that is very prestigious. That way, if the litigation doesn't go well, the GC can say: "well, I went with [super pricey firm], so it wasn't my fault we lost!" • Some lawyers are just better than others, and the legal profession has gatekeepers (bar associations) that prevent a flood of new entrants. Equally importantly, there is just a limited supply of (for example), battle-tested litigators with experience in a particular field. Ditto for seasoned corporate transaction attorneys who know your company's space. People pay a premium for that experience, and competitors can't pop up overnight because it takes decades to accumulate the experience. source: I'm a former corporate lawyer
- C1sc0cat 7y ago
  That's true, some one with my level of experience in tech in say labour law can command a vastly greater salary. Its why Cherie Blair earned 10x what her husband Tony Blair did when he was Prime Minister. Cherie Blair is an expert in complex labour law BTW.
- patentatt 7y ago
  Underscoring the value of “battle-tested” lawyers is the implicit and very real factor of hidden information. These top litigators have tons of it, relationships and reputations with judges and courts, knowledge of poorly documented procedures, etc. it’s not that they’re smarter or better lawyers than anyone else, just a most protected class of people who have done it before. And the only way to be admitted to the club is to work under someone in the club. It’s protectionism through bureaucracy at its purest. The drivers of this, of course, are the judges. Who through hubris and incompetence foster these conditions. It’s not that they’re in on the game, really, it’s just that they’re dictators of their own court and have no motivation to make their courts accessible to anyone, and feel empowered to punish clients represented by attorneys that don’t know their preferred formats and fonts. It’s a silly situation that should be dealt with

bradknowles 7y ago

The traditional law firm pattern is that the Partners at the top are “rain makers”, and its their job to find and bring in new business. That’s it. In the middle layer, we have Associates. The senior Associates work closest with the Partners, and supervise the junior Associates. But they’re too busy learning how to “make it rain” and supervising clueless junior Associates to do any real work. The junior Associates do most of the real work that involves stuff where a law degree would help. Below that, you have legal secretaries, etc... In essence, the amount of real legal work you do goes up as you go further down the stack, but also you get lower pay. All the money the Partners make has to be paid for somehow! In essence, it’s a Ponzi scheme. And you know who the only people are who make any real money in a Ponzi scheme, right? There are law firms that get rid of the unnecessary overhead, and where you have Partners doing real legal work, but charging the same rate as the larger firms do for their junior Associates. And those Partners are still taking home a much higher percentage of what they bring in, because the firm has much lower overhead. Those Partners choose to work this way because it gives them more control over their work-life balance. They’re done being the General Counsel of some financial services company with over 22 trillion Euros of assets under management, and want to have some time they can spend at home on occasion with their spouse and their cats. Or travel for pleasure, or any of those other things “normal” people might want to do. Get rid of the Ponzi Scheme law firms. Find one of the smaller firms with a high concentration of very talented lawyers who don’t want to have to deal with the “big law firm” kind of shit.

grenoire 7y ago
In all fairness, big or small, that's firm hierarchy in law, finance, and accounting and control. The fairness of pay and average competency might be better in smaller ones, but it's just what it is (as unfortunate as that is). I deliberately chose a small financial consulting firm, and my experience has been really good for now, contrary to my friends', but the pay structuring is just the same everywhere.
AmericanChopper 7y ago
I know it’s a bit of a meme to call things a Ponzi scheme on HN, but what you’ve described isn’t even close to being a Ponzi scheme. If a big legal firm stops hiring associates, it’s not going to run out of money, it’s just going to stop growing. It’s also not an especially accurate description of how they work. Business development takes up proportionally more time for senior partners, but you have to have a lot of other management responsibilities before billables stop mattering. Juniors will generally be more concerned utilization, but they’ll also be billing for a lot less.

rland 7y ago

No surprise at all. They heydey of litigation is over -- everything settles, what doesn't goes to arbitration, and the sliver of work that doesn't go to arbitration goes to trial. In the meantime, the market is absolutely flooded with new grads who are eager to live the life. In addition, the old guard is retiring later. At the same time, there is a tremendous amount of legal work to be done in our ultra regulated economy. The end result is pretty predictable. Salaries are abysmal. Associates compete brutally with each other to handle mind numbing hours of document review 7 days a week. Trial experience is very rare making it difficult to move up and do 'real' litigation. I think the starting salary for an attorney fresh out of school in my city is around $40-50k, 60-80hr weeks. Hardly what most people imagine when they go to law school!