Does the Coronavirus Spell Doom for Biglaw?

The rise of the novel coronavirus has the world on edge as it struggles to mitigate what might be a devastating global pandemic, or a more severe seasonal flu. 

Nonetheless, we can have preparedness without panic. Firms are already adopting measures to combat the spread of the virus. Dentons, which famously swallowed up the 4,000 strong Chinese firm Dacheng in 2015 has temporarily closed its Wuhan office and many Biglaw firms are directing their attorneys in China to work remotely. Orrick, Norton Rose, Duane Morris, and Baker Botts are either canceling or imposing restrictions on their upcoming conferences and retreats in the U.S. and abroad. 

In Shanghai, Quinn Emanuel and Squire Patton Boggs are reimbursing attorneys for taxi expenses should they have to travel to their offices to dissuade them from taking public transportation. In Milan, Biglaw firms Baker McKenzie and Squire Patton Boggs are encouraging their attorneys to work from home as the virus spreads in Italy, and Baker McKenzie has closed their London office after one employee returned from Italy sick.  

Justin Flowers, our Principle in Hong Kong has been monitoring the situation closely since the outbreak. He notes that the initial panic has mostly subsided, and despite market turmoil, there is a feeling that the gears are shifting and a return to normalcy has begun. On Monday, many firms in Hong Kong and Shanghai are expected to begin implementing return-to-work policies and Beijing will likely follow suit. 

Across the globe, other countries are enacting isolation measures; Japan announced schools will close for at least a month to reduce transmission of the virus. Schools in China have already closed, affecting 200 million children. The U.S. is taking a more reactionary approach, waiting for cases to appear before closing down communal spaces. 

Forecasting how the virus might impact Biglaw relies on a myriad of assumptions. Currently, the Dow Jones is plummeting in response to the virus’s corporate shrapnel. Thursday saw the largest point drop in the index’s history. The ripple effect could be wide-reaching – China’s carbon footprint has dropped 25% compared to the same period last year, reflecting the slowdown in factory production in China. 

Supply chain disruptions have already had a tangible effect on companies with major footprints in China like Apple, whose stock is down 16.4% from its record high in mid-February, and has reported slowdowns in their Chinese factories. Unlike many of its peers, Apple’s reported cash reserves of $250 billion dwarfs even Smaug’s river of gold in the Lonely Mountain, a prescient policy harkening back to Apple’s near bankruptcy in the late 1990’s. For the rest, the hope is that the rhetoric surrounding the coronavirus will be mostly sound and fury, similar to the H1N1 outbreak of 2009 that stirred up visions of global doom. 

Forecasting what the disease progression might look like has been difficult. As of right now, there are 51 countries with confirmed cases of the virus. There have been many attempts to quantify how contagious and how deadly the virus is. On Monday, an article published in the Journal of the American Medical Association (JAMA) gave an update on the severity of the disease. Using data from the Chinese Center for Disease Control and Prevention, they found that the overall case fatality ratio (CFR) – deaths per cases confirmed by RT-PCR or other assays – was 2.3%. Compared to the CRR of Middle East Respiratory Syndrome (MERS) (9.6%) and SARS (34.4%), the disease is assumed at this point to be much less deadly. What distinguishes the coronavirus (SARS-CoV-2), is how rapidly and widely it is spreading. Even though the disease is presumably much less deadly than both MERS or SARS, it has already led to more total deaths because it is spreading much quicker. 

There have been many attempts to quantify the infectivity of SARS-CoV-2, but the limited datasets and differences in statistical modelings have created a wide range of proposed outcomes. Epidemiologists use a measure calledR0(R naught) to estimate the spread of a disease. R0, also known as the basic reproduction number, tries to measure how many new cases one case of the virus will cause. Currently, most models estimate the basic reproduction number to be between 3-5, substantially higher than the WHO’s estimate of 1.4–2.5.

Should the virus continue to spread in the U.S., we expect Biglaw firms to institute isolation policies and encourage their attorneys to work from home. The good news is that technology has made remote working more productive than ever. In fact, recent studies have shown that remote employees are more productive. Deal flow may slow if market turbulence continues, but we expect firms will maintain their status quo in billings and laterals by introducing flexible solutions and realigning priorities. 

We have had lateral candidates seeking to expatriate from China, asked to observe a 14-day domestic quarantine before interviewing to ensure the virus is not spread. As an interconnected recruiting firm with a global full-service platform, we make use of a plethora of different technology platforms including a proprietary video conferencing solution to facilitate the type of effective communication that twenty years ago, was only possible by sharing an office. We will work with our law firm clients to ensure their strategic goals are accomplished, even in the wake of a worsening pandemic, by offering our technology platform and comprehensive services in coordinating remote attorney interviews and by offering flexible solutions through our sister company Bridgeline Solutions to help firms scale their workforce as needed. 

Part of strategic realignment will likely come with an emphasis on bankruptcy, restructuring, litigation, and labor & employment if demand for corporate work slows. Typically, we see these countercyclical practices buoy firm financials in times of recessions. Assuming we actually do see a recession, firms will pivot their lateral hiring strategy to emphasize these practices, which could impact junior attorneys. 

Lateral Link recruiter Jon Kahn who survived three recessions as a Biglaw partner and associate retooled his practice to survive the recession. As corporate work dried up in the early 1990’s, Jon was forced into Fried Frank’s litigation practice to save his career. Unhappy in the practice, a recruiter approached him and brokered a deal for Jon to join Cahill Gordon as a capital markets attorney, after taking a small experience haircut. We have a long track record of success in moving associates across practice areas and we are happy to help if you are considering a move to another firm or another practice. 

If you are an experienced attorney looking to lateral, time is of the essence. Firm administration is preoccupied with plotting their strategic response to different potential outcomes of the virus life cycle. Consequently, submitting an unsolicited resume right now for a lateral move is a waste of time. We are finely attuned to our law firm client’s needs across the U.S. and globally and we are happy to help you navigate the lateral market in this uncertain time. At the end of the day, though these may be trying times, the world is not ending, and Biglaw will subsist and as the early Am Law 200 reports indicate, thrive. 

Will Your Firm Make You Partner?

If, over the last twenty years, you prognosticated that each subsequent year would be more difficult to make partner than the previous year, you would be just about right.

Over the last twenty years, law firm leverage – the ratio between equity partners and all other attorneys – has increased every year, bar two. During this period, the number of equity partners has increased by a paltry 27%, while the number of “all other attorneys” has increased by nearly 77%. This has tilted leverage to a new high of 3.144 – up 57% from 2.13 in 1999.

For senior associates vying for partner positions, firms have become increasingly focused on business potential and less so on an associate’s ability to outclass others in the courtroom or at the negotiating table.

In the days of yore, the partner track in Biglaw was oftentimes a reward for consistent competence and professionalism. In an era of PPP and RPL, most firms (other than the Cravath, Wachtell, or Simpson Thacher types) are less likely to promote associates unless they see real revenue-generating potential. A failed promotion represents a substantial opportunity cost in comparison to the fees accrued in a lateral partner search, making the relative certainty of a known and battle-tested commodity much more enticing for many firms.

This growing bottom-heavy structure is an increasing impediment to partnership prospects. Because competition for limited partnership slots is so fierce, associates have to deliberately grow their practice with partnership in mind the minute they step foot in their first firm.

There is no one “right” way to become partner, and we see many of our clients take diametric routes to partnership, however, there is perhaps no factor more important to consider on your route to partnership than if you are at the right firm.

No two firms are alike, and ultimately chasing prestige or pay on the road to partnership can lead to a fatal jackknife off the track. Firms have certain reputations for being promotion or lateral adverse, and lateral metrics back these assumptions.

One telling metric is to determine the ratio of partner promotions to partner laterals.

The data – aggregated from the last two years – is heavily right skewed, with most firms preferring to bringing in lateral partners in lieu of promoting associates. What does this mean for you? Oftentimes, the best way to be promoted, is to move firms.

Another useful metric is looking at how a firm’s recent promotions compares to the number of associates they have. In an ideal world, we would track each associates outcome over a representative period, but that data is not available. However, since associate ranks are relatively stable year to year, we can generalize from the available data.

One important thing to note, is that these are percentages for a two-year period, meaning that Honigman didn’t promote 40% of their attorneys to partner over the last year. A larger period was chosen to avoid any idiosyncrasies in any one year of data. Nonetheless, the metric can be valuable in comparing firms. The distribution for this metric is much more normally distributed, though still somewhat right-skewed.

The last metric we chose to look at was the partner to counsel promotion rate. As leverage has increased, firms have co-opted the counsel role to punt on making the difficult decision of whether to promote an associate to partner, or to discard the investment they have made in an attorney by letting them go. That’s not to say everyone who is a counsel is a counsel for that reason, but its use in this manner is trending up. By looking at the ratio of partner promotions to counsel promotions for any given year, we can see whether a firm is particularly inclined towards promoting to one role over the other.

These three metrics on their own are useful, but to give them more power, we calculated how many standard deviations away from the mean each firm was for each metric (z-score). Since larger values correlated with a higher propensity for making partners, we summed each z-score, giving each metric an equal weighting, and created an index to determine the relative preference of each firm for promoting inwards. The index is hampered by the fact that the distributions are not perfectly normal, but the overall trends should give you an idea how your firm ranks relative to others.

Many firms pass up the opportunity to promote a partner-material associate. The list of reasons you may not make partner is exhaustive, from short-term firm finances to relatively strong competition in your class year, but just because your firm does not appreciate your prospects, does not mean that another firm will not. I and my colleagues at Lateral Link are happy to help you determine your chances of making partner at your firm, and help you make an informed decision in this vital stage of your career.

 

Job of the Week: Complex Litigation Opportunity in D.C.

An elite mid-sized firm in D.C. is looking for two associates for its Complex Litigation practice:

  • One Junior Associate (Class of ‘17 to ‘18) and;
  • One Mid-Level Associate (Class of ‘14 to ’16).

The ideal candidate will have stellar academics and be familiar with bankruptcy and/or creditors’ rights. 

Why should you consider this position?

  • This highly regarded firm is mid-size in structure but has the experience and essence of a boutique;
  • It is ranked by Vault.com among the “Top 150 Under 150 [Attorneys]” and “Best Midsize Law Firms for Hours” and;
  • The firms litigation group recently landed two major cases, the firm is offering a substantial signing bonus to attract the right candidate! 

If interested, please contact Kristina Marlow at .

Former Akin Gump Litigation Co-Chair Joins Lateral Link

Lateral Link, a prominent legal recruiting firm with offices across the United States and Asia, announced today that David Comerford, the former Co-Chair of Akin Gump’s Litigation Practice, has joined as a Senior Director in their Philadelphia and Washington D.C. offices. His focus will be on placing partners and groups into top law firms throughout the Northeast and Mid-Atlantic.

Per Comerford, “Lateral Link offered an efficient, collaborative, nationwide platform that embraces the realities of today’s legal market.  Without artificial geographic or practice limits, Lateral Link takes a practical approach that maximizes recruiters’ assets to the mutual benefit of lateral attorneys and law firms. In addition, the people I met at Lateral Link are down to earth, have practiced at the highest level with some of the biggest and most prestigious law firms in the world, and are 100% committed to providing first-rate service.”

Comerford holds a B.A. in History from the University of Virginia and a J.D. with honors from Rutgers University School of Law.  During his 22 years at Akin, he held many leadership roles, including membership on the Partner Admissions Committee, Co-Chair of the Litigation Practice, and Partner-in-Charge of the Philadelphia office. In those positions, Comerford vetted hundreds of partner candidates, analyzed strategic and firm culture fit, and helped integrate lateral partners into the firm. “I was fortunate to contribute to the continued evolution of a great firm in many ways, including through organic and lateral growth. For my next act, I wanted something that similarly would bring the satisfaction that comes from helping people build something, while leveraging my assets of experience, market knowledge, network, and judgment,” he noted.

Ryan Belville, Co-Managing Principal of Lateral Link, added “David is a fantastic addition to the team. His background, appetite to build, and breadth of network all sync perfectly with our growth plans in the Northeast.”

As a high stakes Commercial Litigator, Comerford helped businesses and individuals solve complex problems and protect their brands and assets, for which he received recognition by The Best Lawyers in America for Commercial Litigation, Chambers USA: America’s Leading Lawyers for Business for Securities Litigation, Pennsylvania Super Lawyers and the Irish Legal 100.

Comerford brings with him to Lateral Link 28 years of BigLaw experience and trusted judgment to help partners, associates and law firms find their next great opportunity.

About Lateral Link

The major Am Law 200 and specialty firms partner with Lateral Link as their go-to legal recruiter. With offices in over a dozen cities across the United States and Asia, Lateral Link’s established relationships and reputation position the firm to attract and deliver the best legal talent. Over the past fourteen years, Lateral Link has completed thousands of successful placements as a best-in-class legal recruitment agency.

Cracking Open The Black Box Of Partnership Compensation

As a general rule of thumb, partner compensation does not scale linearly with book of business.

A law firm’s compensation model for partners is oftentimes as mysterious as the whereabouts of Jimmy Hoffa. When partners look for new firms, they generally have a shortlist of expectations, such as good culture, strong practices and platforms, stable finances without too much debt, stellar reputations, and last but certainly not least, healthy compensation.

There is a common misconception that the compensation scales linearly with book of business from firm to firm. The reality is, very few firms abide by lockstep models, and PPP does not scale linearly with partner compensation either. As we see, average compensation as a percentage of your book of business decreases as originations increase.

For firms with a formulaic compensation model, there is not much wiggle room to influence your numbers, but you will have a good idea from the start about your take-home cash compensation. For firms with closed compensation systems, like the “black box,” a partner uses peer firms with formulaic models to benchmark what he assumes is market. Some firms are somewhere in the middle, open but subjective or semi-open and semi-formulaic. Most are closed, however.  There is not much consistency, so there is no real market to peg your value unless a you create one for oneself. One of the best ways to do this is to work with a veteran legal recruiter who can negotiate the best deal for you by creating a bidding war for your services. While it sounds easy in practice, the firms that can actually absorb your bill rates, meet your personal preferences, and clear conflicts checks are few and far between.

Although there is much uncertainty about partner compensation, here is a general rule of thumb I have seen firsthand and across the board in most regions. Partner compensation does not scale linearly with book of business. I have worked with groups of over 30 million dollars in business and with junior partners with just over a million in business and the compensation models can be much kinder to those on the lower end of the spectrum. As books of business grow larger, they require more and more support staff and overhead to maintain. The marginal compensation for a partner for each extra million dollars in business decreases almost instantaneously. There is a general efficiency ratio represented by:

A partner can only bill so many hours per year, so they need others to work on the excess work they originate. Even if a partner bills out at $1,000 an hour and bills 2,000 hours, that partner can only service two million dollars. If the partner is responsible for bringing in five million dollars, he will need several associates and support partners to help out.

When the book of business crosses the two million mark (i.e., 2,000 hours at $1,000 an hour), the actual take-home return diverges from the expected return as the single book of business starts to cost the firm more resources. This association is approximate and varies from firm to firm, nonetheless the general trend holds true in all of Biglaw. This does not mean that large books are bad, quite the opposite in fact, but it illustrates that it is important to find a firm that will not depreciate your book too drastically.

The law of diminishing returns is especially important for rainmakers when shopping for a new firm. Some firms reward books of businesses differently at the higher levels, and often times compensation is contingent on the firm’s cost structure and profit margins. Some of the most prestigious firms have low profit margins (i.e., someone in the 25 percent range), and if you have a large book of business, you may be better off going to a firm lower on the Am Law 200 list with a higher profit margin that would compensate you on a larger percentage of your book.

Cash rules when it comes to lateral partner moves, but many partners mistakenly believe that they will be more or less equally compensated at any firm. The most difficult part of partner placements is finding a firm with the right culture, with no conflicts, with a comparable hourly billing, and finally one that will fairly compensate a partner for their book of business.

We meet with every Am Law firm to learn not only about their lateral needs, but compensation structures and their platforms. We have a better sense of the factors, other than the book of business, that the firm will “weigh” for purposes of compensation. In addition, we know when the firm is willing to be opportunistic. The bottom line is that it is our job to maximize your options, and my colleagues and I are happy to help.

Looking To Be A Legal Recruiter? Lateral Link Is Hiring

Over the past decade, Lateral Link has become the prominent player in the legal recruiting industry. As we continue to grow our global footprint, we are looking to add recruiters to our San Francisco, Chicago, Washington D.C., and New York offices.

Our Success

Lateral Link has made thousands of placements with almost every Am Law 200 law firm in the nation. Not only do we have personal relationships with decision-makers at the biggest and best firms in the nation, but our exclusives with — and insider information about — some of the most desirable law firms separates us from ALL of our competitors in the field.  We are a market mover, not a follower.

Moreover, we only hire the best and almost all of our recruiters are law school graduates with extensive Biglaw experience. Here are a few of the law schools we represent.

Highest Compensation in Our Industry

We understand that hiring and retaining the best legal recruiters requires spreading the wealth.  Not only do you deserve it, but you should demand it.  Lateral Link’s recruiters earn 50-85 percent ABOVE the market.  Also, our Principals partake in real profit sharing. Our compensation formula also favors hard workers and high earners, and the more you make, the more you keep. Here’s a preview below of our compensation structure, not including bonuses and profit sharing.

Teamwork & Culture

If you have to define the legal recruiting industry, you would probably say it is a “dog eat dog world.” At Lateral Link, our recruiters find working together and collaborating on searches gives us an edge over our regional or national competition.  If you don’t have access to decision-makers and your brand isn’t opening the door in a meaningful way, why are you bringing more to a platform than what you are giving?  We encourage you to look at the contributions you make.  Is your platform really helping you?

Many Perks

We know the business aspect is important, but we also like to have a bit of fun at Lateral Link. We believe it is important to bring all of our colleagues together, from across the nation, annually at our company retreats.

If you are interested in working for us please email  or click here to apply.