Tag Archives: Law Firm Leadership

Attorney Laterals, Featured, Lateral Moves, Market News

Overwhelming Demand for Legal Services: Implications for Attorney Job Searches

Law firm deal and case volumes have grown dramatically in 2021.  The increased demand for legal services has reshaped the law firm compensation and hiring landscape, with firms struggling to retain and expand their mid-level associate ranks.  Law firm associates are now in the driver’s seat, with many new factors to consider.

Increased Demand, Increased Hiring

The demand for legal services, particularly for Am Law 200 corporate transactional practice areas, has been unprecedently strong this year.  As the Economist recently noted, “Nearly 16,000 {M&A} deals involving at least one American party have been announced in the first six months of this year, roughly half as many again as in the same periods in 2016–20.”  U.S. M&A deal value in the first half of 2021 was 264% greater than the first half of last year according to Forbes.

The deal influx has sharply increased demand for junior through mid-level law firm corporate associates.  According to Leopard Solutions data, there were 1,375 lateral corporate associates hired into Am Law 200 firms in the U.S. in the first seven months of 2021.  This is a 163% year-over-year increase compared to the first seven months of 2020, when just 523 U.S. lateral corporate associates were hired into Am Law 200 firms in the U.S.

Base Compensation Increases Have Not Been Uniform

In an environment of exceptional demand for junior through mid-level associates in busy transactional practice areas, as well as for commercial and patent litigation associates, firms have had to make changes to recruit and retain top talent­.  Base compensation is on the rise: the new associate market salary scale ranges from just over $200K (first year)­ to $365K (eighth year).

The salary scale increase has boosted compensation across the board.  Notably, some previously below-market firms are moving to full market lockstep, with some firms in cities such as Atlanta instituting New York market salary scale for the first time.  Large firms that remain below the current market salary scale tend to fall into three categories.  Many firms have increased first-year associate salaries to $202.5K or $205K but pay between $15K and $25K less than market for mid-level and senior associates.  Most of the below-market Am Law 100 firms are in this first category. The second category includes firms that are on (or slightly above) the 2018 market scale, which paid salaries ranging from $190K to $340K.  A third category consists of firms that fall below the 2018 scale and start first-year associates at a base salary range of $160K to $180K.

In this new landscape, the income disparity between associates at market and below-market firms has expanded.  Prior to 2021, Am Law 200 and regional firms paying below-market compensation were still relatively close to the market salary scale, often paying slightly compressed salaries for mid-level and senior associates and year-end bonuses 15% to 30% below-market.  Associates at below-market firms were generally receiving base salaries in the range of $15K to $20K less than peer associates at their same year level at market compensation firms.  That disparity has now widened to more like $30K to $35K.  Notably, in the months leading up to the June 2021 market salary scale increase, some below-market firms had just increased their compensation to be more competitive with the previous 2018 market salary scale, only to have the market scale increase again.  Factoring in special bonuses (which many below-market firms are not distributing), and market year-end bonuses, we are now looking at well over six-figure compensation discrepancies.

Admittedly, there are often some upsides to working at a firm with below market compensation, such as better work-life balance, more client contact, better partnership prospects, and/or substantive responsibility on cases and matters.  However, for some associates, the compensation gap now may be too significant to justify staying.  The reality is that many firms at or near the current market salary scale offer associates a reasonable schedule and the aforementioned non-pecuniary benefits.

Special Bonuses, Signing Bonuses, Retention Bonuses, and More

In this tight labor market, base salary increases are just one component.  Firms have paid special bonuses to associates, ranging from $12K (first year) to $64K (eighth year).  Firms are also seeking to recruit and retain top talent with a range of signing and retention bonuses, not to mention more flexible approaches to remote work.

Consistent with previous years, firms are addressing the disincentive for lateral associate candidates to leave behind their annual bonuses at their current firms.  Most firms are offering true-up signing and/or guaranteed year-end bonuses totaling or exceeding the amount of lateral hires’ anticipated year-end bonuses.  Firms that were previously reluctant to offer true-up signing or guaranteed bonuses are now offering this benefit out of the gate.  In addition, firms are offering non-pro-rated special bonuses (first and second tranches distributed in the spring and fall, respectively).  This incentive can particularly attract associates at non-special bonus firms to start on or before special bonus distribution dates.  One caveat is that firms generally will not pay special bonus tranches to lateral associates who have already collected a bonus from their current firm.  In other words, no double dipping.

Firms are also now customarily offering additional signing bonuses on top of true-up year-end and special bonuses.  Depending on the practice area, candidate, and year level, these extra signing bonuses can range from high five to low six figures.  As an industry-wide practice, this was extremely rare prior to the start of the most recent recovery in late 2020.  Signing bonuses are often contingent on a specific start date in the interest of expediting support to busy practice groups.  There is also usually a claw-back provision in the offer requiring full or pro-rata repayment if the associate departs quickly (typically within six or twelve months).

To retain associates in busy practice groups, firms are offering similarly sized retention bonus to some associates. The terms require the recipient to remain at the firm for a set duration, enforced through a claw-back clause.  Naturally, we are also seeing more law firms making counteroffers to associates who give notice, with perks including retention bonuses and partnership promotions.  We caution candidates not to entertain counteroffers for several reasons.  First, a counteroffer is unlikely to address underlying dissatisfying factors, such as the scope of practice offerings or work environment.  Second, there is a risk that the firm will hold the attempt to leave against associates in future promotion decisions.

Additionally, firms have adapted by adjusting work arrangements and offering partial or fully remote schedules to associates with coveted mid-level experience.  Some firms are offering fully remote work arrangements for associates based in geographic markets where the firm does not have a physical office, as we recently covered in more detail.  This can be especially beneficial for associates in cities with a lower cost of living, as it may offer a rare opportunity to earn New York market scale.  This may represent a six-figure salary bump, relative to the market scale where the associate resides.  (That said, fully remote work is still not the norm for most open associate positions, as we recently discussed.)

The current job market is particularly conducive for associates looking to relocate to another city or to upgrade to a more prestigious firm.  The time frame for a move to a new city is unusually flexible, with firms being amenable to associates working remotely for a significant period (often for the remainder of 2021) as they plan their move.  Associates seeking to upgrade to a higher-ranked or more desirable firm are benefitting from increased flexibility on academic or peer-firm background requirements.  We are seeing prestigious Vault 30 firms hiring associates below typical law school grade cut-offs or from more regional firms, provided the associate has the right substantive experience.  This window of opportunity to join a firm that may have previously seemed out of reach may narrow in the near future.  We anticipate a potentially more crowded associate applicant pool when firms return to the office.  Associates who prefer to evaluate firms in-person, or who favor in-person onboarding for lateral integration purposes, may enter the lateral market at that time.

While there are numerous considerations unique to each individual attorney job search, the current state of the market heavily favors lateral associate jobseekers and merits a thorough and introspective assessment.  If you are interested in hearing more about the market or are considering exploring other opportunities, Lateral Link is happy to assist.

Featured, Partner Market, Partner Tips, Tips

Is it Better to Be an Equity Partner or Non-Equity Partner?

Last week we reviewed the evolution of law firm partnership economics, from the early days of a single-tier, all-equity partnership, to the emergence of a non-equity partner track, to the increasingly complex range of current partnership arrangements. We pointed out that as the economic models of partnership have grown increasingly complex and differentiated, so have the implications for current and potential partners.

This week we’re going to delve into those implications and challenge the traditional assumption that equity partnership is necessarily more attractive than non-equity partnership. On balance, equity partnership is likely still more rewarding in most cases. But for lawyers in certain situations, non-equity arrangements can have strong appeal.

Benefits of equity

Plenty of lawyers still aspire to become equity partners, and for good reason. Equity partnership slots are increasingly scarce, and in a profession that greatly values prestige and status, securing partnership shares is viewed as the pinnacle. The equity partners of a growing and profitable firm can expect to take home an outsized share of the financial rewards. Holding equity also gives a partner a stronger voice in firm governance in the form of voting rights.

Voting rights and partner compensation are often closely connected. For example, one factor that contributes to the equity partnership’s outsized compensation share is origination credit. It is common for firms to structure origination credit formulas to reward equity partners more than their non-equity colleagues. Senior lawyers often pursue equity partner opportunities to receive greater origination credit for their matters. Having input into how the formulas that award origination credit are constructed is an example of the potential value of voting rights.

Downsides of equity 

It’s easy to focus on the considerable benefits of becoming an equity partner, but there are also some real downsides that should not be overlooked. Most notably, the boost in status that comes with being named an equity partner is paired with a sizable financial hit in the form of a required capital contribution. This contribution is typically in the range of 25 to 35 percent of annual compensation, but at some firms it can amount to 50 percent or more. Regardless, it’s a lot of money to fork over to the firm, especially for lawyers who are still relatively early in their careers. And getting the capital contribution back may not be so simple. Under the rules of many partnership agreements, the firm is not obligated to return the money until years after an equity partner’s exit. Less significant, but still worth noting: equity partners must pay for their own benefits. 

Another factor to consider is that equity partners’ voting rights are diminishing at many firms. Historically, a wide range of decisions—ranging from lateral partnership hires to office lease renewals—required a vote of the full equity partnership. As the size and geographic spread of partnerships has expanded, many firms have determined that it is more practical to delegate most decisions to a small committee or even to the sole discretion of the firm’s Chair. From an efficiency perspective, this is largely a positive development, but one side effect is reduced influence for equity partners who are not in top leadership posts. With respect to an increasingly broad set of issues, these partners are treated more like employees than owners.

When is non-equity best?

Weighing the benefits and downsides, non-equity partnership looks relatively appealing in some scenarios. The opportunity to avoid a substantial capital contribution can be a selling point to both the youngest and oldest partners. At the younger end, partners may not yet have built up enough of an investment portfolio to feel comfortable allocating such a large sum to an illiquid investment in the firm.

At the senior end of the spectrum, a departing equity partner who is contemplating one more short stint at another firm before retirement may be attracted to the simplicity of a non-equity arrangement. Partners in this situation have nothing to prove by again becoming equity partners. They may instead place more value on gaining the flexibility to invest in other ways the capital contribution that their prior firm will return to them. The opportunity to avoid assuming liability for the new firm’s debts is another benefit.

For partners in certain niche practices that do not entail a large standalone book of business, non-equity partnership can also make more sense. Practices such as Tax and Trusts & Estates often function as service providers to other practices in the firm, such that the firm’s origination credit formulas may not greatly reward the partners who specialize in these niche areas. A non-equity partnership arrangement that properly values these partners’ contributions may be the right answer.

A compromise approach: from non-equity to equity

For many partners, the best approach may be to split the difference by pursuing non-equity partnership opportunities that are likely to lead to equity partnership later. This enables the partner to delay the capital contribution hit, while preserving the opportunity to capitalize fully on client relationships as the partner’s book of business expands. Obviously, a partner hoping to go this route must first assess whether the firm offers a real and viable track from non-equity to equity. Where this pathway really does exist, it can offer the best of both worlds.

Associate Market, Featured, Market News, Newsletters, Partner Market, Team

Why Use a Recruiter in a Hot Lateral Market?

Everyone knows by now that the lateral market for law firm associates is unusually hot. Firms are routinely offering associates five-figure signing bonuses, and in some special cases bonuses are as high as $150,000. Firms are also increasing commissions for recruiters assisting with lateral placements in certain practice areas, in some cases doubling the usual rates.

With so many firms looking to hire laterals, a candidate might be tempted to think recruiters are unnecessary in this market. In the narrowest sense, that may be true: many candidates could likely land a lateral offer on their own. But the better question is: will the services of a skilled recruiter make it more likely that you will find the best lateral fit? The answer is unequivocally yes.

Who needs a recruiter?

For some lateral searches, the need for a recruiter is obvious. Partner moves are the best example. Competing offers are the only way to achieve a material compensation boost as a partner, and a recruiter plays an essential role in creating that market.

For associates, the value of a recruiter is less in stoking a bidding war and more in mitigating the asymmetry of information that lateral candidates face. As partner moves have become more frequent, the rankings and assessments available through annually updated sources such as Vault and Chambers are less likely to align with the current reality. In contrast, well-informed recruiters like Lateral Link are in a strong position to explain the market in real time. For example, we frequently know that a firm is about to gain a key partner in advance of the public announcement. We can therefore anticipate that the firm will need lateral associates in the relevant practice area and position our associate candidates accordingly. Candidates who choose not to work with a recruiter inevitably will have less information and will make less informed decisions in this highly fluid and dynamic market.

There is no downside

Candidates sometimes worry that firms will be less enthusiastic about hiring them as a lateral associate if the firm has to pay a placement fee to a recruiter. Although this concern may seem superficially reasonable, it does not reflect the market reality. To understand why, it helps to think through the economics of the law firm business model.

Associates are profit centers for law firms. For every day that a firm has fewer lawyers than necessary to meet the full demand for its services, the firm is losing profit. In a robust market for legal services, firms have a strong incentive to fill empty seats as soon as they can find a qualified candidate—in the context of the profit the firm is forgoing by not having that seat filled, a recruiter fee is basically a rounding error.

We can illustrate more precisely with a stylized example. Let’s assume that a firm seeking to hire a lateral associate expects to collect on 1600 of the associate’s billed hours, at an average rate of $625/hour. That will generate an annual contribution to the firm’s gross revenue of $1 million. Assume the associate’s base salary is $240,000 and that the firm must pay a recruiter 25% of the base, $60,000, as a placement fee. This amounts to a 6% transaction fee on the revenue the associate produces in her first year with the firm.

6% of the year equates to just over three weeks. If relying on a recruiter enables the firm to fill the seat 22 days sooner than it could have otherwise, the firm will come out ahead. Sure, the firm could refuse to work with recruiters, advertise vacancies on its website, wait for candidates to apply directly, then sort through the applications to identify the promising candidates. But in the current hot market that would be a totally irrational strategy. The fact that firms are not just willing to work with recruiters right now but are in many cases increasing the fees that they offer is proof of this basic economic logic.

In summary, there is no downside to using a recruiter and plenty of upside. Firms will not shy away from hiring you due to the placement fee. And you will benefit from non-public information about the market, increasing your likelihood of landing with the firm that best fits your unique selection criteria.

Featured, Market News, Newsletters, Partner Market, Team

Evolving Partnership Economics: The Equity and Non-Equity Models Are Starting to Blur

The “partner” title holds undeniable cachet in law firms. Elevation to the partnership is treated as a key professional milestone. But in the current law firm landscape, the fact that a lawyer has been designated a partner often conveys very little about the economic arrangement between that lawyer and the firm. A few firms have a single tier of partnership, but the majority have at least two. In some firms there are as many as four tiers, each with a different set of benefits and obligations.

The traditional equity model

In simpler times, partnership meant equity partnership. If you made partner, you received an ownership interest in your firm and the right to vote on firm governance matters. In exchange for that equity interest, you were required upon joining the partnership to contribute a lump sum of capital. The firm held onto your contribution for the duration of your partnership tenure, and upon your retirement from the partnership, you sold your interest back to the firm and reclaimed your capital. As for annual compensation, longer tenured partners typically took home a larger slice of the pie than the newly elevated, but no partner was paid a fixed salary. As the general fortunes of the firm rose or fell, all members of the partnership rode the wave together.

At a few major law firms the traditional model remains largely intact. Firms like Cravath and Debevoise are the purest examples: they continue to have only equity partners and to pay lockstep, seniority-based partner compensation. Firms such as Davis Polk have done away with lockstep compensation but still feature an all-equity partnership. However, firms committed to awarding equity to every partner comprise a shrinking minority of the legal industry.

The non-equity alternative

As early as the 1970s, some law firms began to introduce a bifurcated partnership model: there were equity partners and non-equity partners (sometimes described as income partners or non-share partners). Non-equity partners did not become owners of the firm, did not have full voting rights, and were not expected to contribute capital. Instead, they effectively were paid a salary. Becoming a non-equity partner meant you received the “partner” title but not the partner economics.

In some firms, the non-equity partnership tier was pitched as a stepping stone to equity partnership. The intermediate non-equity tier was a conceit designed to lengthen the track to true partnership while providing some social capital in the interim. It enabled lawyers who were effectively still senior associates, as traditionally defined, to market themselves externally as “partners.” Delaying the elevation of some senior associates to equity partnership by a couple of years may have been helpful for firm economics in the short term, but there is always the next generation of associates rising through the ranks. So the notion of non-equity partnership as simply a way station on the track to the equity tier was never especially credible, and before long, non-equity partnership became a common terminal status for many lawyers.

Blending equity and non-equity

The distinction between equity and non-equity partnership has become increasingly blurred at many firms. For example, several firms in the Am Law 100 now require non-equity partners to contribute capital. This is sometimes sold as a means of giving non-equity partners “skin in the firm game.” But in a world where only a small proportion of non-equity partners are likely to ascend to the equity ranks, one can understand why non-equity partners would be unenthusiastic about the capital contribution trend. They are being required to bear a burden of equity partnership with no guarantee of receiving the corresponding benefit.

Some firms are creating multiple partnership tiers (sometimes called compensation bands), with each tier featuring its own combination of rights and obligations that may not neatly correspond to either the equity or non-equity models. Perkins Coie has four tiers. The lowest tier is similar to the standard non-equity model, in that partners in that tier are paid a straight salary. The higher tiers are differentiated both in the level of compensation offered and in the voting rights afforded to the partners in the tier.

As the economic models of partnership have grown increasingly complex and differentiated, so have the implications for current and potential partners. In our next installment, we will explain how non-equity partnership can be a superior option for lawyers in certain scenarios.

Featured, Tips

So You Want to Lead Your Firm? Be Careful.

Global Chair. Head of Litigation. Office Managing Partner. Those are some nice sounding titles, right? In a profession that emphasizes prestige and status, it isn’t surprising that many high-achieving partners aspire to lead their firms. For a partner who has achieved success at each rung of the Biglaw hierarchy, the pinnacle of leadership may seem like a natural next conquest. But if you’re in a position to reach that pinnacle, you should ask yourself two questions before accepting the appointment. First, why do I want this job? Second, is the timing right?

Realities of law firm leadership

Successful law firm partners are accustomed to interacting with powerful corporate executives. Watching their clients run companies or in-house legal departments naturally encourages some lawyers to think, “hey, I could do that!” And what better way to prove it than by chairing their firm?

It’s important to recognize that the power wielded by a Managing Partner is materially different from that of a CEO. Companies are fundamentally hierarchical organizations, and although the most effective CEOs will inspire employees to align with the CEO’s vision, the reality is that a CEO can act unilaterally where necessary. Reporting lines are clearly delineated, and team members who resist directives from senior leadership are unlikely to last long. Moreover, employees who quit are rarely in a position to take a substantial portion of the company’s business with them.

Compared to a CEO, a Biglaw Chair is generally in a weaker position to drive change unilaterally. We can all think of examples of exceptionally powerful Managing Partners—often these are founders of their firms with their names on the letterhead. But in the more typical case of a partner who rises up the ranks to assume the role of Chair, the experience of leadership is more herding cats than giving orders. Partners are owners, and they feel entitled to a real say in the firm’s direction. This is especially true of the rainmakers, whose power is reinforced by their ever-present ability to take their book of business elsewhere. In contrast to the efficiencies of hierarchical corporate structures, law firm leadership entails a slower, more collaborative, and constrained process.

Another notable difference between CEOs and Biglaw Chairs is that Biglaw leaders frequently are not the highest-paid members of their firms. CEOs are generally assumed to have outsized responsibility for the financial performance of their companies, and their outsized compensation reflects this. In a law firm, the dynamic is different. A Managing Partner plays an important role in ensuring smooth operation of the firm, but revenue is generally credited principally to the decentralized business development efforts of individual partners. (Recall the analogy we recently drew between law firm partners and franchise owners.) Outsized compensation is earned through rainmaking, not through leading the firm in an administrative capacity.

Before agreeing to become Chair, you would be wise to take a step back and reflect on why you aspire to firm leadership. It is a challenging job, and compared to practicing full-time, you aren’t likely to earn a premium for assuming a top leadership post. Make sure you look beyond the title when assessing the desirability of these roles.

Pitfalls of an early rise to the top

Presuming you are under no illusions about what leadership will entail and you have decided that you want the role, the second critical issue is timing. Star partners often ascend to the top of their firms as soon as the opportunity presents itself. This makes perfect sense on one level—who knows if you’ll get a second chance at a later date? But if you are offered the opportunity to lead your firm as a mid-career partner, it’s important to think through the potential pitfalls.

The main risk is that you’ll come to the end of your leadership tenure and will be poorly positioned to resume your practice. If you expect chairing the firm to be your last job, you don’t have to worry about giving up your book of business. But if you take on the leadership role as a mid-career partner, with the expectation of practicing for another decade on the back end, you need to be mindful of the difficulties of reintegrating into full-time practice.

The nature of the risk depends on whether the Managing Partner role is a full-time job. If you are expected to devote your full attention to leadership, you will necessarily have to hand over your practice to other partners. And if you do that, you shouldn’t expect to get it back several years down the line. Transitions of this sort tend to be sticky: by the time you return to the scene, your clients will be accustomed to dealing with those other partners and may not see a benefit in switching back to you. In an era in which firms increasingly prioritize profitability above all, you will struggle to return to your pre-leadership position of strength without a robust book of business.

If your firm expects you to continue to practice part-time while in leadership, the risk of losing your client relationships is mitigated, but your practice may still be impaired. Your competitors will be focused solely on building their books, whereas you will be distracted by your firmwide responsibilities. Remember: fancy titles are nice, but your long-term value to the firm derives from your ability to grow and maintain your practice.

You should assume that taking on the Chair role is effectively a retirement plan. If that makes you uncomfortable, it’s probably best to delay the job for now.

Featured, Tips

Parents in Law Firms: Taking Stock of Pandemic Burdens and Retention Risks

Being a parent in Biglaw has always had its challenges, but we saw these challenges rise to new heights during the pandemic, especially for women.  Even in the best of times, the legal industry has had an uninspiring record of retaining and promoting female lawyers: the National Association of Women Lawyers’ 2020 survey found that just 21% of equity partners were women.  But with many women in law straining to maintain intense practices while bearing the brunt of a pandemic-induced increase in childcare demands, even that modest progress may be in jeopardy.

On a personal level, I experienced these struggles first-hand, and I don’t even practice law anymore.  With two young children at home, two working parents, and little to no outside childcare help (the nanny market is almost as crazy as the lateral attorney market, but that’s another story), I found myself drowning in unchartered waters (hello e-learning)!  Even when splitting the days with my husband so we could both work part-time, it was virtually impossible to get any work done while trying to balance the unreasonable and insatiable demands of my children.  Thankfully, things have normalized a bit since the start of the pandemic, and for the first time in over a year, we are finally in a place where we have somewhat of a routine and the kids are out of the house for most of the day.  But I will never get that 15 months of my life back, and neither will the thousands of other attorney-parents.  It’s hard to quantify the career damage actually caused by COVID-19, but we do have some data which shines some light on this issue. 

The toll on careers

A recently released American Bar Association survey gives some indication of the impact of pandemic stress on women and parents.  The survey was administered in October 2020 to over 4200 ABA members, of whom 43% identified as female.  It revealed that female respondents were significantly more likely than men to have taken on additional childcare during the pandemic (on top of the already unequal load that they were bearing pre-pandemic).  Women were also more likely to report that, relative to a year earlier, they found themselves thinking more often that it would be better to work part-time or not at all.  42% of female respondents said they more often or much more often thought it would be better to work part-time, not full-time.  37% more often or much more often thought it would be better to stop working.

These effects were particularly stark for parents of the youngest children.  53% of women with children age 5 or younger reported thinking it might be better to work part-time than full-time.  If these parents are having doubts about maintaining their current practices, the threat to firms’ future gender diversity at the senior levels could be significant.  After all, these women are the future of firm partnerships—if the firms can retain them.

How are law firms responding?

Some firms have stepped up to provide parents with additional resources during the pandemic.  In particular, firms have sought to ease some of the burden of online schooling, with support such as paying for tutoring sessions and loaning hardware for employees’ children to use.  Firms have also bolstered internal peer support networks and sponsored sessions with external well-being coaches.

Going forward, firms may wish to consider making some of those measures permanent.  Respondents to the ABA survey requested assistance such as back-up childcare and tutoring support, stipends to help defray childcare and elder care costs, parental support workshops, and adding more months of paid parental leave that can be taken to cover childcare gaps.

To the extent parents remain on the fence about whether to stick with their legal careers, firms will need to think creatively about retention strategies.  One obvious target for improvement is flex-time and part-time work arrangements.  These are hardly new concepts, but prior implementations have been uneven at best.  Too often, parents—and especially women—receive the implicit message that taking advantage of these programs will permanently damage their career trajectory.  This reduces participation and makes those who do shift to a more flexible schedule stand out even more.  Even in situations where part- or reduced-time schedules are implemented, it’s often the case that these attorneys end up working full-time hours, without the full-time salary, further disincentivizing these types of arrangements.  

Law firms need to commit to changing the culture around these programs and demonstrating that careers can thrive both during and after a stint of modified workload.  If the pandemic has taught us one thing about work, it is that there are multiple ways to achieve the necessary output.  Firms should extrapolate from the pandemic experience and embrace a range of flexible models.  Not only is this the humane thing to do, but it’s also a smart competitive move in a tight talent market.  Firms should be eager to continue to capitalize on all of the training they have invested in their female lawyers.  This is a much less expensive path than driving out parents and then trying to replace them with lateral hires.

How can Lateral Link help?
At Lateral Link, we are in constant conversation with partners and associates at Biglaw firms, mid-size firms, and boutiques all over the country, so we have reliable information on which firms are most supportive of parents.  All firms claim to support women and parents, but the reality is that some execute on those promises more effectively than others.  If your firm is not offering the support you need, we encourage you to explore your options.  A long-term law firm career is not for everyone, but if you’re feeling burned out, it’s worth learning about alternatives to your current firm before making a decision to leave the law.  Please feel free to reach out to me or any of my colleagues to discuss your unique situation.

Associate Market, Featured

Biglaw Associate Salaries and Cost of Living: An Imperfect Correlation

With Biglaw offices reopening and office attendance soon to be expected at most firms (at least for part of the week), many associates are contemplating their post-pandemic Biglaw futures and considering their options. It still remains to be seen whether the exodus from large, high-cost cities during the pandemic will end up being a momentary blip or a permanent shift. But even assuming the migration to lower-cost locales partially reverses, the relative advantages of living in different parts of the United States remain front-of-mind for many associates.

A move from a high-cost city to a lower-cost one is a particularly good deal if you can continue to earn the same compensation. But it may be a tougher call if it comes with a salary cut. That’s a trade-off that employees of some major tech companies are currently weighing. Facebook and Google have both taken a relatively flexible approach to the post-pandemic workplace, allowing employees to request office transfers or permanent remote arrangements. But there’s a catch: pay localization. Facebook and Google have thus far declined to explain publicly how they will recalculate the salaries of employees who move. But judging from the approach of companies like Stripe, base salary cuts of around 10% are likely on the table.

Tech workers may not like it, but the reality is that paying lower salaries in lower-cost cities has historically been the norm for many industries. That’s also true of the legal industry, to a point. But Biglaw is an anomaly. Top firms largely ignore cost of living and instead pay associates the “New York” rate in several “major” markets, including the Bay Area, Los Angeles, Chicago, Houston, Boston, and DC. On a cost of living basis, paying New York salaries in San Francisco is justified. In Houston? Not so much.

It’s good to be a Houston Biglaw associate

A November 2019 NALP analysis of median private practice first-year associate salaries relative to cost of living found stark differences in associate buying power. NALP calculated that Houston first-year associates enjoyed 2.4 times the buying power of their New York counterparts. Chicago associates were at 1.9 times the New York baseline. Meanwhile, first-year associates in cities like Miami, Portland, and San Diego were found to have less buying power than their New York peers.

The NALP survey looked at private practice salaries overall, rather than Biglaw salaries exclusively. If the analysis had been limited to Biglaw offices, the results would surely have been somewhat different. But the broader point is unassailable: associate salaries are poorly correlated with cost of living.

Billing rates are a key driver

If cost of living isn’t driving associate salaries, what is? The answer is billing rates. Houston and Chicago may not be high-cost cities, but they have plenty of clients willing to pay firms top-dollar rates. Viewed from that lens, paying top salaries in these markets seems fair: associates are being compensated for the value they create. Over time, as clients become more accustomed to the notion of top legal talent being based in regional cities, we may see more lawyers being paid New York rates in cities across the country. Biglaw firms in markets like Kansas City and St. Louis, for example, have raised their first year associate salaries up to 30% this year, significantly narrowing the salary gap.  That’s not to say that median associate salaries in secondary cities will rival the New York level. But for lawyers with top-flight credentials, geographic arbitrage may become increasingly possible and alluring.  

As we discussed last week, however, we aren’t quite there yet. The post-pandemic market is still sorting itself out, and for most Biglaw associates, the work-from-anywhere dream is not yet a reality. Still, that doesn’t mean you don’t have options. If you are a New York or Bay Area associate tired of putting up with relatively low buying power, you may wish to consider a lateral move to Texas. Needless to say, plenty of professionals have had the same idea recently, so housing isn’t as cheap as it used to be. But at least you’ll pay no state income tax!

Featured, Tips

8 Time Management Tips for Young Lawyers

As an associate, you often have limited control over your own schedule — but there are still some actions you can take to improve your use of time and cut out unnecessary stress.

If you’re an associate, you’re probably thinking, “What?! As if I have any control over my own schedule!” And you’re right, your ability to manage your time will never be perfect.

I understand. I was an associate myself for seven-plus years. But there are still some actions you can take to improve your use of time and cut out some of the unnecessary stress.

I understand. I was an associate myself for seven-plus years. But there are still some actions you can take to improve your use of time and cut out some of the unnecessary stress.

  1. When you are given a new assignment, always ask right away what the deadline is. I can’t tell you how many times as an associate I failed to ask this important question because I said to myself, “This will take no time at all, I can do it right away,” only to have a more urgent task land on my desk — and I wished I’d asked upfront instead of begging for more time later on.
  2. Many of us lawyers are Type A personalities, and we love that feeling of completing a task and checking it off the “to do” list. But I find the easiest way to prevent procrastinating about the next task is to start it right away. Just get three minutes in, then you can take that coffee or bathroom break. When I’m jumping back into an established rhythm instead of getting my mind around a new project, it’s much easier to get back to work.
  3. Believe that there is no such thing as a huge, daunting project. Everything can be broken down into smaller, bite-sized morsels. Take on one mini-project at a time.
  4. Put everything on your calendar. I assume I won’t remember anything. I include project deadlines and my to-do list items as 30-minute calendar entries. I have repeating calendar reminders to pay my credit card bills, renew my dog’s license annually… there is nothing in my life not on my calendar because the last thing I want to be stressed about is that I may have forgotten something I need to be stressed about!
  5. I also block time for work (and personal) projects on my calendar. Even if I end up changing the start and end times multiple times, it helps me to be able to eyeball my projects for the day, estimate how long they will take, and plan accordingly.
  6. Find ways to use your down time productively. What down time? Even law firm associates have down time. Mine often came at 1 a.m. as I was waiting on a senior lawyer to send me the next mark-up. But I was determined to reclaim this time for myself. So what did I do? I started a travel blog. It was a creative outlet I could turn to even at my desk in the middle of the night. So those late nights in the office were not a complete waste in terms of my personal life. I also made a point of having dinner with a work friend almost every night, even if it was for 10 minutes at their desk or mine. If you’re not inclined to start a blog or write a novel or screenplay, use your scarce breaks to update your resume and deal sheet, work on a business plan, keep in touch with contacts (build relationships!). Or research for your next vacation! Have a plan for how you’ll use your free time so it doesn’t go to waste.
  7. Whatever your goal may be — hitting the gym a few times a week, putting together a business plan, catching up with one law school classmate each day — establish an accountability partner. It could be a friend, a colleague or even a journal. Keeping track will help keep you honest!
  8. If you’re truly feeling underwater, ask for help. Firms are investing more and more into associate life and associate development resources. Even if you’re not comfortable talking with a partner, there is likely someone you can talk with. And you can always reach out to a trusted recruiter to learn what your realistic options might be for a new job offering a better work-life balance.

Making small changes to your daily routines may buy you only a few extra minutes each day at this stage in your career, but these actions will help you build good habits for when you do gradually take on more control of your schedule. I’d love to hear what time management tricks have worked for you!

Featured, Market News

How Did Biglaw Firms Fare Financially In 2020?

Pretty, pretty well, in terms of both revenue and profit.

Color me surprised — or even shocked. I’ve been following the American Lawyer’s early reporting on Am Law 200 law firm financials for 2020, and the numbers so far are good, even great.

Despite the coronavirus pandemic and recession that made life so miserable for millions last year, law firms did very well for themselves. Check out this table, showing the firms that Am Law has covered so far and the year-over-year change in their revenue per lawyer (RPL) and profit per equity partner (PPEP):

(If you like, you can access this spreadsheet as a Google Doc here, which also allows you to sort the firms by the change in their RPL and PPEP.)

Of the 29 firms listed above, all posted increases in profit per partner, many of them well into the double digits. The highest figure so far, a 46.6 percent increase, was reported by Crowell & Moring (which led me to declare Crowell my Law Firm of the Week last week). But the firm had plenty of company, with eight other firms posting PPEP increases of 20 percent or more.

Now, the increases in profit per partner might be somewhat understandable, given how the pandemic and working remotely led to dramatic drops in many firms’ expenses, such as rent (in some cases), utilities, travel, and entertainment. And yes, some firms did engage in layoffs last year as well.

But revenue per lawyer, which industry observers generally regard as the better metric of law firm financial health (since it’s less subject to manipulation than PPEP), also increased for almost all firms — not as dramatically as PPEP, but still significantly. In recent years, RPL growth in the low single digits has been quite common in Biglaw; but last year, if these early numbers are representative of the whole, perhaps half of Am Law 200 firms enjoyed RPL growth of 5 percent or more in 2020.

In light of these robust revenues and profits, one can understand why law firms paid out “COVID bonuses.” Take Cooley, which kicked off the trend by announcing “appreciation bonuses” in September 2020. The firm posted PPEP growth of a whopping 25.4 percent in 2020. Had Cooley not paid out special bonuses, then reported PPEP growth in excess of 25 percent, it would have had a lot of unhappy campers among its associates and staff.

Congratulations to these firms on their strong performances in 2020. People like to say that lawyers are not good businesspeople, but clearly lawyers are doing something right. The ability of the legal sector to do so well during a period of great difficulty for many other industries is a testament not just to the talent and hard work of Biglaw lawyers and staff, but also to firm leadership. So the next time you encounter one of your firm’s leaders, perhaps in a Zoom town hall rather than in a hallway or conference room, thank them for successfully shepherding your firm through some very dark days.

What do these strong numbers mean for lawyers interested in lateral moves? They indicate that now is a safe time to transition to a new opportunity. Last spring, when the pandemic was at its peak, the economy was in a recession, and law firms were very worried about how they’d fare, it was a risky time to move; candidates feared moving to firms that might hit rough patches after their arrival, threatening their job security as associates or their practices as partners. But now that the economy is on the mend and law firms are not just surviving but thriving, it’s a good time to move to a firm where you’d be more fulfilled.

If you’re thinking about a possible move, please feel free to reach out to me or any of my colleagues to discuss possible opportunities. We look forward to hearing from you.

Associate Tips, Featured, Tips

To Clerk, Or Not To Clerk?

Whether you should do a clerkship depends on a number of factors, as this handy flowchart by Abby Gordon explains.

An important question for law students and recently barred lawyers is whether or not to apply for a clerkship. My advice? It depends. Here are some questions you can answer to help you decide.

If you’d like to discuss your specific circumstances and whether or not it makes sense for you to apply to or accept an offer to clerk, feel free to reach out to me or any of my Lateral Link colleagues.