For many of us, the most credible and reliable data comes from getting our ass kicked

In his 2006 novel, Utterly Monkey, the lawyer-turned-writer Nick Laird tells the story of Danny Williams, a young man from Ireland who overcomes his working class roots to land a job at a Magic Circle law firm. Although the high pay enables Danny to rent a posh London flat, he’s rarely there. Further, Danny worries that the long hours and tedious work have permanently changed his personality, alienating the girlfriend (a fellow associate) he hopes to marry.

Danny reaches a complete breaking point, however, when he works on a deal that, if complete, will cause significant unemployment in his hometown in Ireland.  As he’s curried across town in a taxi, Danny contemplates hurling himself off a bridge. Yet, remarkably, at that very moment, Danny is also the object of envy, as the cabbie peppers Danny with questions about how his son might land a job at a prestigious City law firm.

Several years ago, David Zaring and I wrote a book review essay on Utterly Monkey and Kermit Roosevelt’s In the Shadow of the Law.  See “Young Associates in Trouble,” 105 Mich. L. Rev. 1087 (2007). Drawing upon Laird’s and Roosevelt’s days as elite law firm associates, both novels were laden with details that were both realistic and unflattering.  A good number of large firm lawyers, particularly partners, might argue that the novelists overstated the case.  Yet, David and I had access to a tremendous amount of financial and mid-career associate data from The American Lawyer. Thus, we ran the numbers.

The data were incontrovertible.  By a wide margin, associates at the most profitable firms made the most money. But it came at the price of (a) longer hours, (b) less interesting work (narrow, hyper-specialized), (c) worse associate-partner relations, (d) less transparency on finances and partnership. (d) lower overall satisfaction, and (f) a greater likelihood of leaving within two years.

Notwithstanding these harsh conditions, grads of Top 10 law schools disproportionately flock to these elite firms. David and I speculated that this preference could be explained by the superior outplacement options these firms generate.  Yet, an equally likely explanation is that a significant number of young, academically gifted people are in denial that, someday, their careers will require painful tradeoffs.  If true, we concluded that the novel format was the best way to deliver the news.

UK associate market circa 2019

Back in 2006 when Laird and Roosevelt published their novels, the markets for associate talent in U.S. and U.K. operated under different pay scales and working conditions. This is less true today.

Figure 1 is a scatterplot showing the relationship between hours and pay for newly qualified (NQ) lawyers working in large law firms with offices in the UK.  The fitline represents a correlation of hours to salary of 0.82, explaining 68% of the variance among firms.

The data come from London-based Legal Cheek, which is similar to Above The Law but focused on the UK market.  The workday figures are based on average arrival and departure times of young lawyers and trainees working in London and other UK offices. See “Revealed: Law firm average arrive and leave times 2018-19,” Legal Cheek, Nov. 23, 2018. Legal Cheek also collects and publishes salary data of newly qualified (NQ) lawyers.  See “The Firms Most List, 2019 edition.”  Among elite U.S. law firms in London, NQ salaries have been pegged to the $190,000 payscale (£143,000 on the day the UK market matched New York).

To better understand the UK market, firms are put into four buckets based on market stature and country of origin:

  • Orange = Wall Street elites and U.S. private equity powerhouses: $169,000 avg. starting salary, 11 hrs, 41 min avg workday. Three firms paying $190,000; longest workday is 12 hrs, 15 min (n=8).
  • Green = Magic Circle firms: $112,000 avg. starting salary, 11 hrs, 30 min avg workday, albeit Slaughter and May is the green dot at the center of the fit line, clocking in at 10 hrs, 38 min per day (n=4).
  • Blue = Other US/US-UK merged firms: $114,000 avg. starting salary, 10 hrs, 49 min workday (n = 16).
  • Grey = Rest of the UK-European-Australian-Canadian market: $83,000 avg. starting salary, 10 hrs, 0 min workday (n = 46).

If you look at the rough clustering by color in Figure 1, it’s obvious that U.S. law firms have fundamentally altered the UK-London market, pushing up both hours and pay into the top right quadrant.

Figure 2 below rank orders the UK-London market by residuals.  A residual is the difference between an actual data point and its predicted place on the fitline. Large positive residuals reflect law firms that are paying higher salaries than might be expected based on the hours being worked.  These firms might be said to be “above market.”  Conversely, large negative residuals could be viewed as “below market” based on the relative shortness of the typical workday. Of course, as the firms can and should argue, there’s more to “market” than just salary and hours. (H/T Parker Analytics for the nice graphics.)

Re Figure 2, notice how virtually all the orange data points (Leading Wall Street / Private Equity firms) are well above market.  Indeed, their appearance is the main reason why all but one of the green data points (Magic Circle firms) are so far below market.  Half a generation ago, the Magic Circle firms set the market. The entry of the U.S. firms into London changed that.

Local => Regional => National => Global

Over the last century, the market for corporate legal services has gradually transformed from regional fiefdoms controlled by a handful of local elite firms; to a national market where the strongest and most ambitious firms opened offices in other cities; to a global market where the largest and/or most elite firms operate large foreign offices and compete for large international clients. In each instance, the prior order is obliterated by a new pay scale designed to woo the market’s perception of the best talent. Arguably, the beginning of the final stage is now playing out in London.

One of the best descriptions of the early days of this process can be found in Michael H. Trotter’s Profit and the Practice of Law (1997).  Upon graduation from Harvard Law School in 1962, Trotter joined the Alston firm, which is now Alston & Bird, an AmLaw 100 firm headquartered in Atlanta. Although hourly billing (as opposed to timekeeping) was relatively rare at the time, when the firm charged out Trotter’s time, his rate was $20 per hour. Associates were expected to work “eight to nine hours a day, five days a week and half or more on Saturday” (p. 5). Trotter’s salary was $300 per month, or $3,600 per year. In the early 1960s, this was the standard rate for a major Atlanta law firm (p. 9).

In the course of his research, Trotter located some of his old timekeeping records. In 1964, he worked 1,300 hours on behalf of clients. Most other associates were in the 1,400 to 1,500 hours range (p. 32). Trotter’s total was on the low side due to other administrative duties and civic commitments, a time allocation that was totally acceptable to all concerned. In 1967, Trotter made partner.

Regarding expectations for partners, Trotter writes:

Many partners under the age of 60 billed fewer than one thousand hours a year, and some only a few hundred. In fact, no one was counting. In the late 1960s, the Alston firm considered a recommendation of its long-range planning committee that each partner be required to bill at least eight hundred hours a year in the absence of a special dispensation. The recommendation was turned down by the management committee. (p. 6).

By the 1990s, the landscape had changed dramatically, with billable targets at most Atlanta firms set at 1,900 hours for “partners and associates alike, as well as additional hours devoted to client development and administrative matters.” Thus, the actual hours expectation circa 1995 was between 2,400 and 2,600 per year, an amount Trotter concluded was both excessive and unsustainable.

Writing nearly a quarter century ago, Trotter observes, “from the lawyers point of view, even at 1600 billable hours a year, many other worthy things are crowded out of one’s life. It cannot be in the long-term best interest of the individual lawyer to work hard and long enough to generate 1900+ billable hours a year, year after year. In fact, many lawyers working this hard have little time for their families, their communities, or themselves” (p. 83).

That said, the increased time commitment did wonders for associate pay.  From the early 1960s to the mid-1990s, entry-level salaries for Atlanta associates increased from $3,600 to $60,000 — a growth rate over four times faster than inflation (pp. 65-66 & fig. 4.1).

What happened was the advent of a national market for legal services. In a passage that predicts exactly where we are today, Trotter writes:

One reason why the major firms are marketing their services over the country is that there is not enough demand in local markets for specialized legal services to support even a small department of high-quality specialists. Consequently, most of the major firms are trying to broaden the market for their services, a trend that is converting the United States and the entire world into one large market for legal services. (p. 200).

Since Trotter wrote his book, associate salaries have more than tripled. Likewise, hours quotas have drifted upwards. A new pressure, however, is the expectation that lawyers stay connected 24/7.  When Trotter wrote his book, email and cell phones had not yet become a ubiquitous part of law practice.  Arguably, many of us are now at risk of becoming the proverbial boiling frog.

How do we characterize these changes?

If you’re like me and want to influence lawyers for the collective good, this question really matters. Over the years, I’ve observed two distinct ways commentators have characterized the profession’s inexorable drift toward higher pay at the price of much longer hours.

The first is to focus on the choices and tradeoffs that lawyers seem to be making and condemn them as a moral failure. The best example of this approach is Patrick Schlitz’s famous law review article, “On Being a Happy, Healthy, and Ethical Member of an Unhappy, Unhealthy, and Unethical Profession,” 52 Vand. L. Rev. 871 (1999).  At the time Schlitz wrote the article, he was on the faculty at Notre Dame Law. Shortly thereafter, he left Notre Dame to help found University of St. Thomas School of Law in Minneapolis. The goal was to create a legal education infused with Catholic values. In 2006, Schlitz became a federal judge in Minneapolis.  According to Google Scholar, Schlitz’s article has been cited 638 times.  It’s also the most requested reprint in the history of the Vanderbilt Law Review, suggesting it struck a nerve with lawyers.

This topic is very timely for me because in my Legal Profession’s class at Indiana Law, we just completed a section of the course book with an excerpt from Schlitz’s article. Imagine you are a 1L in my Legal Professions class and you read the following excerpt from Schlitz’s article:

If you’re going into private practice – particularly private practice in a big firm – you’re going to be immersed in a culture that is hostile to the values you now have. The system does not want you to apply the same values in the workplace that you do outside of work (unless your rapaciously greedy outside of work); it wants you to replace those values with the systems values. The system is obsessed with money, and wants you to be, too. The system wants you – it needs you – to play the game. …

[N]o  matter which big firm you joined, there is a good chance that working at the firm will make you unhealthy, and even better chance it will make you unhappy, and it almost 100% chance that it will make you unethical.

As a 1L, how are you processing this? I have a lively class, but no one wanted to engage with the material. It was absolute crickets. Yet, I think I know why.

My Legal Professions class has long included a “card sorting” exercise designed to help young people identify their career values. This year, similar to many past years, the top four values, in order, were work-life balance, high earnings, honesty and integrity, and challenging problems.  Friendship, family, and stability also made the Top 10.  Now imagine that Schlitz, a Harvard Law grad who clerked on the U.S. Supreme Court and is now a federal judge, told you that the most established path to high earnings (and repayment of educational loans) will cause you to shred almost everything else on your Top 10 list of values. That’s quite a blow.

A second way to characterize the unhealthy drift toward higher pay at the price of much longer hours is to listen to what those inside the “system” are saying. That is what Larry Kramer, then dean of Stanford Law, did back in the mid-2000s as he made the rounds talking to his alumni.

In his “From the Dean” column in The Stanford Lawyer, Dean Kramer acknowledged the recurring dire themes: soaring billable expectations, clients refusing to pay for associate training, the explosion on lateral hiring, higher associate attrition, and a diminution in a sense of firm culture and community. Kramer then writes:

Does anyone actually want this? The lawyers, managing partners, and general counsels I meet are deeply concerned about what’s happening. Yet they feel unable to stop it, powerless to resist the stifling market forces that drive their decisions. And for good reason, because the problems are complex and exist at every level. Students say they want a better work/life balance, yet invariably choose the firm that ranks highest in The American Lawyer’s list of the top 100 law firms. Having spent their lives learning to collect gold stars, they apparently find it impossible to stop—something we (that is, law schools) make easy by forcing most of them to graduate with a mountain of debt. …

I have no answer to this. At least not yet.

Kramer, “From the Dean,” Stanford Lawyer at 1, Fall 2007.

Market power

In antitrust law, we worry about the accumulation of too much market power.

Yet some legal scholars have argued that market power is a precondition of lawyer independence and the upholding of strong ethical norms. See, e.g., Ronald J. Gilson, “The Devolution of the Legal Profession: A Demand Side Perspective,” 49 Md. L. Rev. 869, 916 (1990) (“[A] necessary condition for professionalism is market power.”); Milton C. Regan, Jr., “Law Firms, Competition Penalties, and the Values of Professionalism,” 13 Geo. J. Leg. Ethics 1, 4 (1999) (“[S]ome respite from market demands is a necessary, but not sufficient, condition for fostering noneconomic values.”). This is not a crazy supposition. In fact, it’s the reason the U.S. Constitution grants judges lifetime tenure and prohibits a reduction in their salaries. See Art. III, § 1.

As regional fiefdoms gave way to a national marketplace for legal services, substantial market power was lost. Since then, lawyers and law firms have been competing their way back to a secure economic position. Before that happened, however, the legal market became global.  Because the ensuing competition forces terrible tradeoffs with real human costs, it appears, at least from a distance, that the entire legal profession has lost its moral compass.

Yet, the real solution is coming up with a credible vehicle for lawyers to regain some measure of market power, and institutional safeguards to ensure this power is used for the public good. In a globalized world, that is challenging. Yet, that is the endpoint that we lawyers should be aiming for.

Getting our ass kicked by existential issues that can’t be avoided

Law students invest a lot of time and money to get a legal education. Thus, it follows that legal educators have a duty to provide high-quality information to help students chart their future careers.

After 17 years of teaching, and a decade teaching professional responsibility, the only strong advice I’m willing to give is that one’s life and career will inevitably require many tradeoffs and, to ease that ever-present burden, all of us are at immense risk of self-deception, seeing what we want to see. That is why I emphasize fact gathering, fact testing, and feedback loops as essential parts of 21st century practice.

That said, many of us learned the most important, foundational lessons by getting our ass kicked.  To drive home the point of tradeoffs and existential lessons, below is an email I received from a former student nearly a decade ago — an email I’ve held onto because it educated me. At the time, the former student was a top-ranked associate at one of the “orange” firms in Figure 1.

[In response to my query on how things are going at the firm:]

I have no clue whether it’s this place or big law generally, but … the demands and pressure are not easy.  It really has changed me and not in a good way.  I’m stressed, less personable, less ambitious and generally less human.  I used to be laid back, gregarious in some ways, full of ambition and very sympathetic to people.  I’m already noticing my starting to treat jr people the exact same way I said “I won’t ever do that,” but timing, stress, etc make it that way (though I get why they treated me that way now).

I think [the work allocation system] contributes to how awful it can be too b/c no one really knows what you’re doing for other people.  Turning down work is great, but partner A doesn’t care about partner B’s fiefdom.  I notice in Asia w/ smaller office and where there really isn’t [the work allocation system], I get more sympathy re other matters bc we all know what’s going on w/ each other.  Not enough to let people not F-up wknds, evenings and vacations, but more than [at the home office].

I write this on a plane to the US after working til 3am last night and bringing 3 batteries for my cptr a 15 hour flight so I can work as much as possible (a particularly bad stretch the last month).  My 3rd battery is now dead, and I’m moving on to delegating a bunch of work to people via BB messages that will all send once I land.  I’ll land and 2 people jr to me will have emails sent their way that will probably ruin their wknds, or at least their Wed-Fri evenings.  I don’t have enough hrs in the day to get my work done and still see [my spouse and child] a decent amt, so I feel no guilt about sending the emails/delegating.

So, [the firm] stinks.  But it’s the devil I know.  It pays well.  I can’t remember being worried about money in a long time.  The people are good to work with…it isn’t their fault clients have demands and that the work is a combo of boring and stress.  Sometimes they could push back more, but only so often.  Part of our hourly rate (and my pay)  is hazard pay for unpredictability.

So….that’s my thoughts [on your question}.

My student got his/her ass kicked. That said, s/he learned a lot, make a lot of good friends, and soon found his/her way to job s/he loves and is very much a complete person who is a loving spouse, parent, and friend. Good sometimes comes from bad. Because I’m not omniscient, I can’t and won’t advise against orange firms.  But I am willing to listen to what’s important to my students, ask questions, and share my own experiences.

Finally, I am very interested in helping to build new institutions that reduce the number of harsh tradeoffs for lawyers and the people we serve.  Fortunately, I know many other lawyers who feel the same way. We are in the process of finding our way out of this wilderness.