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Congrats,  associates!  Don’t spend it all in one place.

Cravath & Davis Polk associates are raking it in, and everyone’s got an opinion.  Here’s some data to explain how & why the new associate pay scale is a rational move in a functioning market.

Earlier this week, Cravath made waves at every trade media outlet with their 2022 salary scale:

Cravath’s announcement came on the heels of Milbank and Davis Polk each raising the stakes in the ongoing war for associate talent.  (See “Milbank Ups Associate Salaries to $215,000 in War for Talent (2),” Bloomberg Law, January 20, 2022, and “Davis Polk ups senior associate salaries in latest round of pay war,” Reuters, February 22, 2022.).  Before the close of the week, a flurry of memos followed, with a predictable roster of prestige firms matching the new top-of-market scale: Davis Polk, Paul Weiss, Kirkland, Latham, Simpson Thacher, Quinn, Skadden, Debevoise, Ropes, Shearman, Covington, White & Case, Sidley, Paul Hastings, McDermott, Boies Schiller, among others.  (See “Salary Wars Scorecard: Firms That Have Announced Raises (2022),” Above the Law, updated March 4, 2022).

Notably, Milbank has yet to respond to despite racing to first mover position in 2018 and again this year.  Also notably, Morgan Lewis is prudently sitting out the betting rounds, with a promise to monitor and match the prevailing scale once set.
Continue Reading #BadData, Part II: As the War for Talent Rages On, Let the Sorting Begin (290)

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The legal profession appears to be on autopilot.

This post is for legal market analysts who are looking for updated and reliable data on the current legal services market. Collectively, its eight graphics reveal several themes that ought to give us pause, as we (the legal profession) may not have unlimited runaway to focus on strategies related to income and profit.

Most of the underlying data come from the Economic Census, which is a detailed ongoing survey of US businesses conducted every five years (years ending in 2 and 7) by the US Census Bureau.  Because of the size and scope of the data collection effort (it’s a census, not a sampling), it takes the full five-year cycle to complete the analysis and release the findings. The final—and in my view, the most interesting—installments were published last fall.
Continue Reading Eight updated graphics on the US legal services market (285)

An honest and candid assessment of corporate legal, circa 2021

Several months ago, before we had even completed our first year of operations, Bill invited us to write a legal market year-in-review.  His reasoning was simple—our business model entails a lot of listening.  Over the past twelve months, we heard the hopes, dreams, and fears of 240 law firms and 327 law departments (corporate legal) spread over 2,600 meetings.

Perhaps you’re anticipating a conversation about what’s hot in Legal Tech and NewLaw.  And back when we accepted Bill’s invitation, that seemed like a logical direction.  Yet, much to our own surprise, we find ourselves writing a year-in-review essay that focuses on the primacy of culture and cultural adaption.
Continue Reading LexFusion’s Legal Market Year in Review (280)

Somruthai Keawjan via Unsplash

I get a lot of questions about legal market data.  Today I attempt to explain one of the most frequently asked questions: why demand and pricing seem to be uniquely uncoupled in legal markets.

By and large, 2021 was a year of anticlimactic letdowns.  In a sloggy, tiresome, gradual sort of way, most of us realized that the ravages of COVID would not be defeated in one fell swoop.

One exception has been the trade news coverage on Big Law’s bonanza.  In August, Thomson Reuters Peer Monitor rated Q2 of 2021 a record-breaking quarter in its proprietary index of law firm performance.  (Notwithstanding the battery of disclaimers and historical context provided in the fine print, many industry observers decided that this misleading picture is indeed worth a thousand explanatory words.)
Continue Reading #BadData, Part I: (Topsy Turvy) Demand for Legal Services (279)

Boomer retirements ought to be a boon for law school clinics.

The Hidden Brain podcast episode Cultivating Your Purpose begins with an effective metaphor that is well-known to aging Baby Boomers: Dustin Hoffman, playing Benjamin Braddock in “The Graduate,” is drifting aimlessly on a raft in a swimming pool, as he has been doing for weeks after graduating from college.  When Benjamin confirms to his father that he has no plans whatsoever for the future, Benjamin’s father leans over him and demands to know “what was the point of all of that hard work?” Benjamin responds, “you got me.”  Unfortunately, many Baby Boom lawyers are asking themselves the same question after they retire or approach retirement—“what’s the point?”
Continue Reading Could a purpose deficit fill unmet legal need? (273)

Millennials were already skeptical of the law firm model. Then the pandemic hit, reinforcing the legal profession’s worst tendencies. A walk through the data.

Law firm leaders generally underestimated the magnitude, duration, and impact of the COVID-19 pandemic. Like other experienced but untrained decision-makers, many law firm leaders were excessively optimistic about their firm’s prospects and conceptually limited in defining their firm’s risks.

Even the law firms that met or exceeded their financial aspirations now face a force stronger and more threatening to their business model than COVID-19: disaffected, disenchanted, and disappointed Millennial attorneys constituting nearly one-half of all attorneys in the 400 largest law firms. Thus, lawyers are very much a part of an upheaval in the nation’s workforce that Gallup calls the “The Great Discontent” and “The Great Resignation.”
Continue Reading Millennial attorneys, COVID-19, and innovation (260)

Pretty much everything was a counterintuitive curveball.

In April of 2006, more than 15 years ago, I wrote a memo to file that would go on to exert a disproportionately large impact on my thinking and career, albeit many of the lessons took years to come into focus and were far from what I expected.

The topic was Moneyball as applied to law firm associates—in essence, sketching out the data and methodology necessary to identify under and overvalued attributes of law firm associates, akin to the selection methods used by Oakland Athletics in the famous book by Michael Lewis.
Continue Reading Moneyball for law firm associates: a 15-year retrospective (257)

Lindy’s Delicatessen, 51st & Broadway, NYC (credit: Bertil Carlson, via Wikimedia Commons)

Yes. The Cravath System. The case method.  And much more.

Here’s the technical definition of the “Lindy effect“: The robustness of an idea or technology (anything nonperishable) is proportional to its longevity.

This post examines how we can observe the Lindy effect in many facets of life, including law.  Some of these are obvious, like the Cravath System and the Langdellian case method, which are both in their second century and show no signs of fading.  But are there durable aspects of life and business we are overlooking because, rather foolishly, we’re favoring what is novel, shiny, and hyped?
Continue Reading Does the Lindy effect apply to law? (244)

A slice is reserved for everyone who predicts the future of law.

Today is the debut of Anusia Gillespie’s monthly Q&A column on NewLaw Fundamentals.  See Post 243.  This post (241) is an explainer on why we are running Anusia’s series. One part of the explanation is practical.  A second part is deeply analytical and likely of more interest to regular Legal Evolution readers.  Both parts, however, are rooted in the value of humility.
Continue Reading Humble pie diet (241)

Diversity is indeed associated with higher law firm profits.  To accept this fact, the profession needs to understand why.

Figure 1 above reports expected changes in average partner compensation at different levels of racial diversity among attorneys in large law firms.  These results come from an “all else equal” model that accounts for differences in a multitude of other relevant factors, such as geography, leverage, and firm prestige.

The key takeaway? Within the large firm market, firms with higher shares of Asian, Black, Hispanic, and Multiracial attorneys (“diverse attorneys”) are paying their partners higher average levels of compensation—at about a $260K premium for the firms with the highest diverse representation.
Continue Reading Nothing not to like: diversity and law firm profitability (238)