All posts by Michael Allen

Jason Rindenau Joins haistack.ai As The Managing Director

haistack.ai is thrilled to announce the newest addition to our team, Jason Rindenau, as the Managing Director of Haistack Law Firm. With a rich tapestry of experiences that blends the rigor of legal practice with the creative flair of the entertainment industry, Jason stands out as a multifaceted professional ready to bridge the gap between technology and the law.

Jason’s passion for law was ignited by his interests in the entertainment industry including a stint as a contestant on Jeopardy! during his high school years. He felt he had found his community among these attorneys practicing in the entertainment sphere and, with encouragement from his mentors, he pursued law at New York Law School where he obtained his J.D. His love for the debate podium that he fostered in high school eventually led him from law school to pursue a career first as a legal recruiter and, upon moving to Florida in 2019, as a litigator. 

Beyond his legal pursuits, Jason is an avid traveler, reader, and writer with a penchant for blogging about his adventures. While studying in Australia in college, he was even a cast member of the NBC show Junior Year Abroad. More importantly, he is a devoted husband and father of two beautiful children.

One of Jason’s most profound experiences was a trip to Poland during college where he interviewed individuals who assisted in rescuing Jewish families during the Holocaust. This journey culminated in a documentary film called The European Village Project about these individuals’ brave efforts to save lives during World War II. 

At haistack.ai, Jason will leverage his diverse experiences, from his deep understanding of the legal profession to his creative engagements in the entertainment and travel sectors, to foster meaningful connections with law firms. His unique background makes him exceptionally suited to understand and address the nuanced needs of our legal clients, ensuring that haistack.ai remains at the forefront of innovation in legal technology.

We are excited to have Jason on board and look forward to the dynamic perspectives and insights he will bring to our team. Please join us in welcoming Jason Rindenau to the haistack.ai family, and schedule some time with Jason to learn more about what haistack.ai can do for your firm.

Breaking Open The Black Box Of Partner Compensation

In 2023, the news broke that Cravath, one of the famous hold-outs of the adoption of a non-equity partnership structure, was moving ahead with the two-tiered system, with rumblings that Paul Weiss might join this year. We wrote many years ago about the glut of senior associates facing an impending exit from Biglaw as the colossal baby boomer population that largely comprises the partnership ranks continued to work later and later than their predecessors. It seems to be a partial answer to this dilemma, firms are leaning more and more toward non-equity tiers of partners to retain these talented lawyers. This is evidenced by the increasing rate at which non-equity positions continue to be replenished, per Thomson Reuters’ analysis. Unsurprisingly, as a whole, the number of non-equity partners has grown from 19,289 in fiscal year 2012 to 26,888 in fiscal year 2022.

The implications of this restructuring are yet to be fully realized vis-a-vis the pay of equity partners. As salaried partners focus on servicing rather than generating work, non-equity partners are fixed costs that are baked into the firm’s overhead. As sharers of company profits, equity partners have seen their average compensation rise as net profits continue to soar. The average equity partner compensation has risen from $1,513,442.26 (adjusted for inflation) in 2012 to $2,079,240 in 2022 per ALM.

A law firm’s compensation model for partners is oftentimes as mysterious as Amelia Earhart’s disappearance. When partners look for new firms, they generally have a shortlist of expectations, such as a good culture, strong practices and platforms, stable finances without too much debt, stellar reputations, and last but certainly not least, healthy compensation. Achieving this can be difficult in practice. We track compensation structures across and beyond the Am Law 200 and hardly any firms have the same structure. Between firms, origination, and working credits vastly differ in their compensation, structure, and scaling, which means you can become severely undervalued if you choose a firm whose compensation formula is a poor fit for your book of business.

This antiquated notation that the compensation scales linearly with a book of business from firm to firm is easily dispelled by graphing originations vs PPP.

The reality is, that in the age of both shifting partnership structures with the rise of non-equity partnership ranks and mercurial and mysterious compensation formulas, approximating your business’s value on the open market is a daunting task.

Nonetheless, at every value for originations, some firms significantly outpace others in performance for equity partner compensation. For firms with a formulaic compensation model, there is not much wiggle room to influence your numbers, the positive is you will have a clear idea from the outset about your take-home 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 the 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 on unless you create one for yourself. One of the best ways to do this is to work with a veteran legal recruiter who, using knowledge of different firm compensation structures, 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 conflict checks are few and far between, and difficult to find on your own.

When a book of business crosses the two million mark (i.e., 2,000 hours at $1,000 an hour), the actual take-home return begins to diverge from the expected return as the single book of business starts to cost the firm more resources between associates, service partners, and administrative staff. We see this in the relatively uniform grouping in the graph above of compensations vs. originations for originations under the two million dollar mark. This association is approximate and varies from firm to firm, nonetheless, the general trend holds in all of Biglaw. It does, however, illustrate that it is important to find a firm that will reward your increased originations with congruous increases in your take-home compensation.

We meet with every Am Law firm to learn not only about their lateral needs but also compensation structures and their platforms to better service our partner clients. We use our insider knowledge to put together a holistic perspective of the best fit for your business. In addition, we know when the firm is willing to be opportunistic, and handsomely reward a lateral partner. The bottom line is that it is our job to maximize your options, and my colleagues and I at Lateral Link are happy to help.

A Detailed Breakdown Of The 2022 Am Law 100 Rankings

So how did Biglaw do in 2021, coming off its shockingly strong performance in 2020? In short: better. A lot better. Based on the financial metrics reported this week in the latest edition of the Am Law 100, the recent round of Biglaw salary increases makes perfect sense. Sure, most firms achieved record gross revenue, revenue per lawyer, and profits per equity partner. But that’s true in a typical good year. What made 2021 such a blowout is that many firms dramatically accelerated their growth rates on those metrics as compared to 2020 — a year that was itself hailed as a stunning success. Any way you look at it, 2021 was truly a year to remember for the Biglaw elite.

Collectively, here’s what the Am Law 100 achieved in 2021 (as noted by Patrick Smith in his summary of the data):

  • Total revenue: $127.4 billion, up by 14.8%. 
  • Average revenue per lawyer: $1.18 million, up by 12.5%.
  • Profits per equity partner: $2.66 million, up by 19.4%.

To appreciate just how good those growth rates are, let’s compare them to the strong growth of 2020 and the more typical rates in 2019:

Part of the impressive profit growth can be explained by attorneys working harder. Based on data from the 61 firms that submitted billing figures to the American Lawyer, hours billed rose 5.7% relative to 2020. Meanwhile, headcount in the Am Law 100 was up just 2.1%. As we at Lateral Link can attest, firms were eager to add talent in 2021, but growing the ranks was a challenge in the face of intense competition.

Let’s now take a closer look at the three key metrics — gross revenue, revenue per lawyer, and profits per partner — and the top 10 firms in each category.

Gross Revenue

Here are the top 10 firms in the 2022 Am Law 100 rankings, ranked by their gross revenue in 2021. You can access the full list here.

Kirkland & Ellis and Latham & Watkins once again led the pack, not only maintaining their #1 and #2 slots but also increasing revenue at faster rates than the other top 10 firms. The composition of the top group was fairly stable, with Ropes & Gray riding a 22% growth rate into the top 10 and Jones Day falling out of it, despite increasing revenue by 10%.

Revenue growth was strong across the board, with every Am Law 100 firm enjoying an increase (as compared to 26 firms that suffered revenue declines in 2020). Remarkably, 63 firms increased revenue by at least 10% and 18 were up by at least 20%.

Revenue Per Lawyer

Here are the top 10 firms in the 2022 Am Law 100 rankings based on revenue per lawyer. You can access the full list here.

Seven of the top ten firms increased revenue per lawyer by double digits (as compared to four in 2020). Once again, Wachtell and Sullivan & Cromwell took the top two spots. Davis Polk cooled somewhat after its market-leading 22% RPL growth in 2020. Cravath impressed with its rise from from #10 to #3 (mirroring the jump that Davis Polk achieved in 2020). Quinn Emanuel and Paul, Weiss ascended into the top 10, displacing Cahill Gordon and Debevoise.

Profits Per Equity Partner

And finally, everyone’s favorite ranking: the top 10 firms by profits per equity partner. You can access the full list here.

As always, Wachtell tops the list, this year exceeding $8 million in PPEP for the first time. Kirkland and Davis Polk each cracked the $7 million mark. Sullivan & Cromwell leapfrogged Paul, Weiss and Simpson Thacher to claim the #4 slot. Broadly speaking, the top 10 was fairly stable: the only firm to drop out was Debevoise, which grew PPEP by 10% but was no match for Latham’s 26% growth.

Overall, 14 firms now have profits per equity partner above $5 million (compared to six in 2020). Consistent with the long-running “rich get richer” theme in Biglaw, PPEP growth was strongest at the top of the Am Law 100. Whereas the top quartile increased PPEP by 22.7%, the bottom quartile of the Am Law 100 managed only a 7.7% increase. Still, no matter where their firm stood in the rankings, most Am Law 100 partners would be hard pressed to complain about 2021.

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.