All posts by Andrew Wood

The Decade Wrapped

As we enter the roaring twenties, we look back on how the landscape of Biglaw has changed over the last ten years – from the height of the recession in 2010 to the recent bullish market. Here are some of the significant trends in from the last decade.

1) No Longer Swiping Left On Law.

Undergraduate students are once again taking the LSAT after the test taking rate dropped to a near nadir in 2015. Though there have been rumblings of a recession – which we have yet to realize – we predict this trend will continue into the new decade if firm expansion and growth continues, providing more landing spots for incoming attorneys.

2) California Dreaming.

Firms extended their reach across the U.S., as the second wave of manifest destiny also…manifested itself. Gone are the days where a California office was seen as a luxury, a sentiment mirrored by 41 Am Law 200 firms that opened offices in Los Angeles in the last decade and another 27 and 25 firms opened office in San Francisco and Palo Alto, respectively. Texas saw firms pour in, especially towards the second half of the decade. We predict smaller markets will continue to burgeon as firms look to take advantage of the relative cost-savings compared to the expensive New York, Los Angeles and D.C. markets, and the propagation of sophisticated clients to what was previously thought of as tertiary markets continues as technology erases physical barriers.

3) Feed Me Seymour.

Lewis Brisbois rounded out the decade as the most popular lateral destination of any Am Law 200 firm, lateralling in 1,914 attorneys, or to put it in more topical terms, the same number of people who went to see Cats during its opening weekend. Their overall headcount grew a healthy 150%. Unsurprisingly, lateral movement correlated strongly with firm size, but some firms take a page from the Lakers and rely much more on lateral movement than entry level hiring.

4) Growth Is Good.

Polsinelli has “glowed up” over the last decade, increasing their headcount a whopping 2200%. In an increasingly competitive landscape, firms are bifurcating largely into two groups – the firms seeking high margin work with a lean staffing model, and a lower margin model that offsets smaller margins with higher volume. What we’ve seen over the last decade is the chasm between these two groups has risen and the middle ground that used to be well populated has become increasingly sparse. We predict as time goes on, this trend will only continue.

5)  PPP For Me.

PPP rose 33% over the course of the decade, and partner compensation rose in tandem. Associate salaries also rose to record highs, but these gains are offset by inflation and rising costs of living. Barring another recession, we predict this trend will continue into the next decade, though the pace of growth may slow.

6) To Everything, Merge, Merge, Merge.

Ten years ago, Sonneschein Nath Rosenthal and Denton Wilde Sapte combined into what would become SNR Denton, a healthy firm with a little over 1,000 attorneys. Ten years later, Dentons is a powerhouse with over 10,000 attorneys after consummating an additional 10 more mergers or acquisitions with firms with over 100 attorneys, the largest of which saw them bring on Dacheng’s 3,000+ attorneys in China. With offices spanning 78 countries, there may soon be a day where there are more countries that have a Denton’s office than those that don’t.

All You Need Is Succession Planning: Practicing In The Era Of Mandatory Retirement

As baby boomers continue to push past 65, firms are faced with the dilemma succinctly posed by Paul McCartney, “Will they still need [them], will they still feed [them], when [they’re] 64?” Partners are invaluable contributors to law firms. Their experience and business generation are the pillars that support the behemoth of Biglaw, but concerns about mandatory retirement center around two key questions: how do we safeguard ourselves against the inevitable decline of acuity, and how do we ensure that junior partners don’t pile up on the ladder to business succession if partners postpone retirement?

For the former, a plethora of research has shown that cognitive decline is slowed by mental stimulation, which law provides in spades. Pegging the retirement age to a national standard assumes uniform decline which may not be the case. That being said, the higher incidences of alcohol abuse and inadequate sleep among attorneys likely diminishes some of these gains.

For the latter, later retirements mean a logjam at the top of the business succession chain. Though the baby boomer generation opened up the ranks for a lot more partner positions, Biglaw could face a lost generation of partners who are being crowded out of clients by the late-retiring baby boomers.

Firms risk potentially alienating their junior attorneys by catering to the tried and proven. The long-term impact of such policies could be disastrous, which is why many firms are turning to succession plans to keep all parties happy.

Roughly half of Am Law 200 firms have some mandatory retirement policy. Not all stipulate retirement at 65 — most range roughly from 63-68, with different protocols as to how to deal with retiring attorneys. Some firms will transition partners into counsel positions where they can practice while transferring their clients and work to younger partners with longer runways, and others broach the topic of the impending retirement a year or two in advance to ease the partner’s transition out of the law firm.

Not all policies are made equal. Some firms advertise a mandatory retirement age but are willing to skirt it for rainmakers or make other “special exceptions.” That being said, many firms openly embrace lateral partners beyond the mandatory retirement age.

The drop-off in practicing attorneys from age 65 to age 70 is precipitous, especially compared to the U.S. overall population. One slightly confounding variable is the fact that 91.4 percent of partners over the age of 65 are male, who represent a lower percentage of the 65+ population.

Major Am Law 200 firms vary in their commitment to enforce mandatory retirement ages. Some firms take a strict approach to mandatory retirement, like Bradley Arant and Knobbe Martens, who have almost no attorneys over 65 years of age. On the other hand, Holland & Knight, Greenberg Traurig, Duane Morris, and K&L Gates tend to eschew the mandatory retirement requirement.

Promoting partners and associates to create a path to leadership positions, or rewarding them with lucrative client relationships, are efficient ways to seamlessly transfer responsibility to younger lawyers. At the same time, moving client relationships to younger partners also puts the firm at risk. Unless the firm feels the partner is loyal, or at least loyal enough, the firm may not want to transition the relationships too early in a partner’s career.

While the distribution of aging lawyers is trending upwards, firms may have to rethink their insistence on mandatory retirement and succession planning. Relying on a firm mandatory retirement deadline hurts both the lawyer and the firm, especially if there is no succession plan in place. Firms are wiser to ease the severity of the rule and instead impose a soft transition period on a case-by-case basis during which the lawyer could operate in a mentoring capacity to facilitate a smoother transfer of responsibility and relationships.

Executing a proper plan easily solves the dilemmas brought about by mandatory retirement. While identifying an aging leadership problem is helpful, creating and executing an actual plan is a necessity. If your firm needs to benchmark their leadership, or wishes to learn practices to cope with mandatory retirement, my colleagues at Lateral Link are happy to share their suggestions and help you craft a game plan based on their real experience with and knowledge of the Am Law 200 law firm market.

Is It Time For You To Move (Cities)?

Those who watched enviously as their friends and coworkers jetted off to escape last winter’s onslaught of sleet, snow, or storms, can attest that wanderlust should qualify as a basic tenant of the human condition. The desire to move is not novel, but it is becoming more feasible and commonplace as technology innovates in tandem. The days of practicing with one firm for your entire career are long gone. The intracity lateral movement that replaced it, laid the foundation for the accelerating intercity lateral movement we see in the lateral market.

The idea of uprooting your life and practice for an untested lifestyle can be daunting. Firms are aware of this, and look at your ties to the region for assurance that you will stay long-term. In general, firms want to see that you have lived in your new potential city before, or that you have family or another compelling reason to be there. The stronger the ties, the better, but tenuous ties can be overcome with the right packaging. It is becoming more and more popular (and completely acceptable) for attorneys to move simply for a lifestyle change.

Firm openings in markets like Austin and Houston are attracting associates from other major markets, who seek relief from their comparatively onerous costs of living. New York associates in particular are having a hard time justifying the seemingly exponential differences in costs relative to most other major cities. For associates not on the partner track, the cost savings alone can be a parachute at that precipitous drop into the unknown “next”.

Using data from the Council For Community and Economic Research, we can see how disparate these differences really are.

Given the near ubiquitous nature of last year’s salary raises at AmLaw 200 firms in major markets, the relative purchasing power of associates across the U.S. wildly varies. The equivalent of $500,000 in New York gives you the same purchasing power as $200,000 in Houston. The differences in locales cannot be compared strictly on a monetary level, as geographic differences also yield other benefits besides, for example, the option to give obscene amounts of money to James Dolan to watch the Knicks tank.

Vaguely generalizing, what money cannot buy you in law – outside of college admissions apparently – is opportunity. Historically, an associate in New York City has had the opportunity to work for some of the largest and most prestigious clients. The potential gains in partnership are massive, but the lifestyle demands can be equally severe in magnitude.

The increasing portability and globalization of business also means that New York is not as dominant a hub of business as it once was. Their corporate hegemony has diminished in light of the rise of powerhouse practices in what were once considered secondary markets. Start-ups and blue-chip tech companies are a large part of the impetus behind the growth of corporate and IP practices in Palo Alto, San Francisco and in particular Silicon Beach in Los Angeles. The opportunity exists in most major markets now to be the top partner in your practice.

As all attorneys know, the process of moving states can be long and arduous. The most significant of these roadblocks is the state bar. Navigating the seemingly convoluted rules that govern the admission process for each state can seem insurmountable, but it is not nearly as bad as it seems.

One of the rationales behind the system, is that it discourages attorneys from cherry picking the easiest bar exam, and then practicing in another state. The implementation of the Uniform Bar Exam (UBE) has restored some order to this chaos. Those who have sat for it in the 33 states that have implemented it, know that it is not as uniform as it sounds. States have different criteria for passing rates, supplemental essay questions, and in some cases, additional classes required for admission. Additionally the exam has an expiration date that varies by state. Regardless it is a good step in the right direction for a national standard that increases an attorney’s ability to move or spread their practice to another state.

Navigating a cross-border lateral move can seem difficult. The rules for admission differ greatly by state. For states like California that have no reciprocity with any state, often a shortened bar exam (Attorney’s Examination) is available for attorneys who have practiced for at least four years.

Generally, the requirements for being hired are the same for local and out-of-state attorneys. Practicing in different markets can confer advantages that attorneys in that market do not have access to, like the ability to work on substantial matters or the ability to work with certain partners or within a certain prestigious practice group – similar to how every assistant coach for the San Antonio Spurs gets hired as a head coach.

Additionally, when moving cities, the conversation shifts from explaining why you are unsatisfied with your current firm, to why you want to settle in that particular city. It is in essence, a fresh start.

Moving your practice to another state is a difficult process, and one that you need not take alone. My colleagues have worked with hundreds of attorneys relocating not only across state lines, but international borders as well. Partnering with a recruiter lets you focus on the personal aspect of a relocation while we handle the business side – helping you negotiate a relocation package and navigate the cross state complexities that arise during cross-border moves. Firms take our relocation submission seriously, because we stake our reputation and our business on successful lateral moves. If you are interested in relocating, or simply moving your practice to another firm, feel free to reach out to our recruiters at Lateral Link.

12 Resume Tips From A Legal Recruiter

As a legal recruiter, I review numerous resumes each week to assist my candidates with the substance and presentation of their one-page life summaries. Here are twelve tips to avoid common resume mistakes:

1. Make certain the most important information jumps off the page. Assume no one will read your resume word for word. Write your resume for the interviewer who pulls your resume off the printer and skims it on their way back to the office. Use bullet points, boldface, headings, and logical and consistent formatting to highlight and structure the important points.

2. Be concise. This is related to tip #1. You want the most important content to jump off the page, but every word on your resume should serve the purpose of showing that you are the best candidate for the specific Stick to one page.

3. Know your resume. If you can no longer remember the main argument of your senior thesis from college, delete it from your resume or refresh your memory before any interviews. You must be prepared to talk intelligently about anything and everything on your resume. You must be prepared to articulate a deep dive into your legal work experience, including any underlying legal issues your matters unearthed.

4. Tailor your resume to the specific job. Keep in the forefront of your mind that you are applying for a legal job. Do not just “update” your resume by adding to the same document you first created 20 years ago. Delete information that is no longer relevant to a specific job—remember, every wordshould serve the purpose of getting you this job. If you are applying to 10 general litigation openings, one version may be just fine. However, if you are applying to some general litigation spots and some patent litigation openings, you may want to have two versions of your resume.

5. Give concrete details when describing your legal experience. Instead of asserting that you are a capital markets lawyer, write that you have “drafted the underwriting agreement as lead associate, representing the underwriters in the offering of $300 million in floating rate notes by a large U.S. manufacturing company.” Even if you have a separate sheet for representative matters, it may be helpful to include a few bullets points in your resume to showcase this experience. Remember from Tip #2, every word counts. Do not use neutral words, where a more positive word would convey more meaning. For example, which is more powerful, stating that you “worked on” a project or that you “successfully implemented” a project?

6. List only current and accurate information.If you are no longer on a committee, delete it from your resume or indicate the proper date range of your participation. Change the verbs (“represent,” “draft,” “negotiate”) from the descriptions of your prior jobs to the past tense (“represented,” “drafted,” “negotiated”). No longer fluent in French? Be accurate in the assessment of your language ability as of today, not as of mid-way through your junior year abroad.

7. Show your human side. Include a few lines that show you are a human being, not a robot. Include interests so long as they are true passions and not aspirational hobbies. If nothing else, this “fluff” gives interviewers softball question material for breaking the ice. Space is a commodity, so consider lumping interests, language skills, bar admissions, volunteer work and (active) participation in professional, alumni or community organizations into one “Additional Information” section. Remember that this section is fair game for questioning. Do not list membership in a committee where your only participation is contributing to their e-newsletter click rate stats.

8. Make certain the most impressive information jumps off the page. I am often asked if you should list education or work experience first. A corollary to Tip #1, you also want the most impressive content to jump off the page. So, if you went to a top law school, list education first. If your law school was not as highly ranked, but you landed a job at Wachtell, list work experience first. In the case of a prestige tie, I would list work experience first.

9. Apply the squint test. Tape your resume to a wall about ten feet away or you hold it far out in front of you as though you’re taking a selfie. Then squint so the words are out of focus. Does the balance of black and white on the page make your eyes happy? Is there much too much dense text? Is there too much white space?

10. Proofread and proofread again. Read your resume carefully for inconsistent formatting and for typographical, spelling or grammatical errors. Then proofread again. And again. Then find a friend (or a legal recruiter) to review your resume. Nothing screams, “Do not hire me,” like an avoidable mistake on your resume.

11. Avoid unwanted social media integration. You know that photo of you in the Bahamas, wearing your bikini? Shirtless? Remember how you uploaded it to your Google profile and now you list your Gmail address on your resume? Did you know that I can see that photo of you in the right-hand sidebar of my screen as I’m emailing you? If I can see it, so can the recruiting coordinator, and so can the partner at the firm where you are interviewing. Some candidates’ Twitter feed also shows up on the right-hand sidebar of my inbox. You don’t have to stop using social media, but if you are indiscriminate or controversial with your tweets, consider setting up a separate e-mail account for the job search.

12. Use but don’t copy resume models. Look over as many model resumes as you can get your hands on. But don’t blindly copy another resume’s format if it doesn’t work for your experience. As a recruiter, I happily provide my candidates with example resumes, but I will not give them a fixed template. Every individual is different; every resume is different.

There is no one right way to design a resume, but there are wrong ways. This singular piece of paper is the key to getting your foot in the door to the next step in your career…or not. Dedicate a few hours to reworking your resume to be sure it’s the best possible representation of you. You owe that to yourself. And remember that a good recruiter is an expert on the legal industry and on the job search process. Perfecting your resume is one place where a trusted recruiter can add great value.

Top 6 Reasons Why Your Partner Compensation Isn’t Higher

If you feel like you are always fighting to make a few more bucks at your current law firm, and you wonder whether other firms would value your practice more, we have a few general rules of thumb that help explain why you are likely hitting a plateau.

1) RPL v. PPP. True to the name, Revenue Per Lawyer is determined by dividing firm revenue by the total number of attorneys (both associate and partner level). Profits Per Partner is derived from dividing firm profits by the number of equity partners. A general rule of thumb is that the closer these two metrics are, the less profits equity partners will earn from the firm’s platform; if associates on average are generating a similar amount of revenue as equity partners are receiving in profit distributions, then partners are more or less not realizing profits from increased leverage or profitable bill rates (or a combination of both). Even worse, if PPP is less than RPL, then partners are actually subsidizing the costs of associates. It is not surprising that K&E has RPL of around $1.6mm and PPP of around $5mm while Steptoe has RPL of around $1mm and PPP of around $1mm. In short, K&E partners are very profitable given the platform while Steptoe partners hit a plateau with their profitability.

2) Leverage. Leverage is the ratio of all lawyers minus equity partners, to equity partners. In essence, it describes how the firm structures its practice around its main profit makers. As long as associates are generating more than they are taking after the firm incurs their direct and associated costs, leverage will increase the profit margin for equity partners. One single partner can only bill so much time regardless of premium bill rates. For example, say a partner bills out at $1,000 an hour and collects on 1,800 hours. That is $1.8mm in top line revenue (i.e., revenue before paying for office, admin, marketing, partner compensation, and the like). Without staffing and keeping busy associates as well, partners cannot expect to earn more than 40% on the very high end from his or her time. However, if the partner keeps four associates busy at premium rates, they greatly increase their and the firm’s earning potential. If four associates bill out at $600 per hour for 2,000 hours, the firm generates $5mm topline from keeping an additional four associates busy. Since associates are compensated at around market, a bigger chunk of their RPL flows through to the equity partners, who receive a higher take on profits. Unsurprisingly, there is a positive correlation between profitability and leverage, with diminishing returns.

3) Contingency. Now we are talking potentially big gains. Many law firms just don’t have the appetite for full blown contingent work. Some firms dabble in hybrid contingent work by receiving partial payment from litigation funding that guarantees some lower billable rate and some sort of success fee kicker. We have seen some game changing wins for certain firms from taking on the right contingent matters and hedging the opportunity cost of a loss in time spent on such matters by accepting confirmed, reduced rates from a litigation fund. That said, many firms have committees that approve these kinds of alternative fee structures, and if the firm doesn’t have the appetite to entertain the risk, a partner with a potentially lucrative contingent matter, coupled with litigation funding just may find him or herself boxed out of big gains.

4) Conflicts. The bigger the firm, the more likely the conflicts. Imagine winning a matter or transaction, and you are gearing up to staff the work, just to find out that the conflict committee has decided to decline the opportunity for either business or legal reasons. For every dollar of work conflicted out, you can expect to miss out in at least twenty-five cents. Unfortunately, we have seen some partners conflicted out of millions of dollars in lost revenue that went to another firm because of conflicts. You may want to ask yourself whether the firm’s office in Abu Dhabi is working for you or against you. Conflicts are sometimes crippling and game changing.

5) Profit Margins. Although profit margin is controlled by a number of factors, the most important two are cost controls and bill rates. Some firms are just not managed efficiently. They have empty offices with long term leases, they are effectively funding pension plans, or possibly they are writing off time and not collecting on work. Either way, conservative firm management in controlling cost is a necessary element of running a lean machine. That said, lean cost controls isn’t sufficient for high profit margins. Premium bills rates, coupled with efficient staffing arrangements, are necessary to generate high profit margins unless you are a firm with one or two offices and are expected to work your own hours and keep half of an associate busy. The firms that compete on price as a measure value are limited in their ability to pay their partners, and partners at these firms will finds themselves actually subsidizing their associates, not vice versa.

6) It’s not the firm, it’s your practice. Some practices are just not all that scalable, albeit important service practices that are necessary in a full-service platform (or maybe more appropriate in boutiques). The reasons are mostly tied to bill rates and leverage. Over time we have seen T&E move to the boutiques, tax is mostly limited to servicing deals, and the like.

Your firm may offer the best platform for your practice, but for most, you likely have hit a plateau in compensation.   If you have questions on how to increase your compensation or how your business projects with other firms, my colleagues and I are happy to help. p


August Market Update

The lateral market dipped slightly as it heads into its comparative down cycle for the remainder of the year. Demand for lateral attorneys is still high, however with just three months until bonus season, some Biglaw attorneys are holding on to see how the new compensation model impacts bonus structure. The partner market remained steady with Greenburg Traurig leading the way in partner hiring after poaching multiple partners from Winston & Strawn and Husch Blackwell. Am Law 200 firms brought in an average of just one partner during the month of August.Biglaw firms brought in an average of 2.6 associates over the course of August, down from 3.6 the month before. Jackson Lewis, Kirkland & Ellis and Lewis Brisbois led the market, nabbing 15 associates each. Kirkland’s new $190k base is still enticing lateral associates to join the firm.Litigation and corporate practices grew their market share this month, accounting for well over 50% of associate movement.Using an autoregressive integrated moving average model (ARIMA), we forecasted the lateral market over the next four quarters. The model takes into account seasonal trends as well as the overall growth of the market to predict future movement. Our model predicts much of the same for the next four quarters, with the potential for a new record quarter. As usual, the model predicts a drop in movement in the fourth quarter as lateral activity slows down as associates wait for their bonuses. Consequently, the fourth quarter is often the best time for an associate to move as demand greatly outpaces supply, making it possible to jump to your dream firm, and often merge back onto the partnership track.