Tag Archives: Legal Headhunter

Associate Market, Featured, Market News, Partner Market

DC Market Update: Strong Demand for Litigation, Transactional, and Regulatory Attorneys

After more than 200 years with New York as its only US office, Cravath announced in June that it will open in Washington, DC this fall. Given that Cravath has long resisted the Biglaw office expansion trend, its change in strategy is notable. Presiding Partner Faiza Saeed explained that the firm’s “clients face an increasingly complex and active regulatory environment.” Cravath’s move demonstrates an understanding that a strong DC presence is more valuable than ever — and not just for traditional regulatory counseling practices.

Cravath is not alone in reaching this conclusion. With increasing client demand in the face of an anticipated wave of enforcement actions, firms are recognizing the need to bolster their ranks in the nation’s capital, even if they aren’t new to the region. We at Lateral Link are working on numerous searches for firms opening or expanding their DC offices. Clients are acutely aware that DC is where the key regulatory decision-makers sit, and that local credibility in the unique DC market is essential.

The state of the lateral market

So what does this mean for the lateral market? In short, opportunity. We count more than 500 lateral moves in DC so far this year, and firms continue to hire at a strong pace. We have hundreds of openings for litigation, transactional, and regulatory attorneys.

Litigators are in the greatest demand, with thriving practices hiring at every level from associates to partners. Regulatory-related litigation groups — such as antitrust, white collar, and enforcement defense — are especially healthy. Firms are seeking talent in both the private and public sectors. Lateral candidates looking to switch firms are well-positioned, especially associates with two-to-five years’ experience and partners with at least $1 million in portable business. High-profile government officials are also coveted, as Cravath’s announcement illustrated: in tandem with the new office opening, Cravath hired three partners with high-level FDIC and SEC experience, including former FDIC Chairman Jelena McWilliams, former SEC Commissioner and Acting Chairman Elad Roisman, and former Associate Director of Enforcement for SEC Jennifer Leete.

On the corporate side, hiring has retreated somewhat from last year’s blistering pace, but opportunities still abound. Private equity, M&A, capital markets, and securities associates will have a plethora of options to consider, with two-to-five years’ experience again being the sweet spot. We are also filling a number of EC/VC and finance openings. For many candidates, DC might not immediately spring to mind as a top transactional hub, but this market has some real advantages for corporate associates. DC corporate teams tend to be smaller than in New York, and associates have the latitude to work across a wider variety of deals. Associates seeking a more generalist practice, plus expanded opportunities for client contact at an early stage, might want to consider a move to DC.

Naturally, much of the regulatory-related work in DC is tied to litigation and investigations. However, we also have active searches with many of the more traditional regulatory counseling practices. Banking, healthcare, energy, environment, and healthcare practices among others are seeking new talent at both junior and senior levels.

Is recession a concern?

Whether and when the economy might enter a recession is a matter of intense debate, and I’m not here to make macroeconomic predictions. But it’s worth addressing the recession scenario, as it will certainly be on some candidates’ minds. First, DC offices have continued to hire in the face of growing recession talk — if there is going to be a recession-induced hiring slowdown, it hasn’t happened yet. Second, DC law firms historically have been relatively resilient in recession periods.

Because the federal government continues, recession or not, government-related legal work continues. DC firms tend to have relatively diversified practices, which is also helpful: litigation, regulatory, and corporate practices each comprise material revenue streams for the larger DC firms. Few DC offices are excessively dependent on transactional work, the area that often takes the biggest hit in a recession. Historically, DC firms tend to be better positioned to weather economic storms than many of their peers in other markets.

A remarkable range of opportunities

The appeal of DC for a practice like antitrust needs no explanation. But it’s important to realize that the vibrant legal market here encompasses a remarkably broad range of practice areas, even some that are not tightly connected to the federal government. What is particularly striking about the current moment is that firms are hiring in virtually every practice area. At Lateral Link, we have worked with many attorneys to leverage the strong market demand to achieve their goals, whether that entails ascending the ladder to a more highly regarded firm, increasing their compensation, or both. If you are based in DC (or are open to moving here) and you are interested in taking your practice to the next level, please contact me to learn more.

Associate Tips, Featured, In-House Tips, Partner Tips, Tips

Lawyers’ Mental Health Remains In Crisis, But Awareness Is Growing

It’s hardly news to say that the collective mental health of the legal profession is under severe strain. The results of the recent ALM Intelligence 2022 Mental Health and Substance Abuse Survey confirm what has long been true: the situation remains grave.

On the other hand, there is some indication, both in the annual ALM survey data and elsewhere, that law firms are taking mental health concerns more seriously than in the past.

The 2022 ALM survey was administered to more than 3400 respondents working at law firms of all sizes. The survey pool was global, but 79% of respondents were based in the United States. Respondents were 52% female and 48% male, with less than 1% identifying as transgender or other gender. 85% of respondents were White (non-Hispanic), 5% Hispanic or Latino, 4% Asian, 3% Black, and 3% Other/Multiracial.

Broadly experienced negative mental health impact

The proportion of respondents who agree that mental health problems and substance abuse are at a “crisis level” in the legal industry has grown each year since 2019, reaching 44% in the most recent survey. On the question of whether mental health problems and substance abuse are worse in the legal industry than in other industries, 55% of respondents said yes, 36% don’t know, and only 9% said no.

35% of respondents said they personally feel depressed, and two-thirds reported having anxiety. Three-quarters reported that the profession has had a negative effect on their mental health over time. 64% reported that their personal relationships have suffered as a result of being a member of the legal profession. 19% answered yes to the question: “In your professional legal career, have you contemplated suicide?”

When asked to select factors that negatively impact their mental well-being, 72% of respondents selected “always on call/can’t disconnect,” 59% selected “billable hour pressures,” 57% pointed to “client demands,” and 55% selected “lack of sleep.”

Rising awareness of the problem

Even though the overall data are undeniably bleak, the survey does include some indications of progress. The proportion of respondents who agreed that their “workplace is a safe environment to raise concerns about mental health and substance abuse” has risen from 40% in 2019 to 45% in 2022. Still far too low, but at least moving in the right direction. The survey also indicates that more firms are taking tangible action to provide more comprehensive mental health support: in 2022, 61% of attorney respondents reported that their firm offered an Employee Assistance Program including assistance for mental health or substance abuse, up from 54% in 2019.

In addition, the survey suggests that COVID-related mental health pressures are starting to improve. 61% of respondents reported that the COVID pandemic had made their mental health worse, but this was down from 70% in 2021.

Mental health and return to office

Although some aspects of the survey might seem like “more of the same,” the section on Remote Work Environment is particularly timely, given that the profession remains in a tug of war over a return to the office. In a set of questions introduced for the first time in this survey, ALM asked respondents about the effect of “hybrid or remote work environments” on various elements of their professional and personal lives. The results are less than conclusive.

There was something approaching consensus on a few points. For example, 76% of respondents reported that remote work had decreased the quality of interpersonal relationships with colleagues and 62% said it had increased the quality of home-based personal relationships. 59% reported that remote work had increased their quality of life.

But the reported mental health effects were much less clear. 38% of respondents stated that remote work increased mental health, whereas 35% said it decreased mental health, and 27% reported no impact. On the question of whether hybrid or remote working environments increase or decrease the likelihood of professional burnout, 25% said increase, 33% said decrease, 25% answered “stay the same,” and 17% didn’t know.

Unfortunately, the published survey includes no breakdown of how these responses intersect with demographics, which is perhaps a missed opportunity.

For those who found that remote work flexibility relieved stress levels, the prospect of being forced to return to old ways of working inspires real anxiety. It will be interesting to observe over the coming months and years how the widespread desire of firm leadership to encourage (or enforce) return to office will interact with increased awareness of a responsibility to address mental health challenges.

Featured, Tips

How To Work Effectively With A Legal Recruiter

Let’s be honest: lawyers like to complain about legal recruiters. And hey, I get it! Sometimes lateral candidates have bad recruiter experiences, through no fault of their own. But without excusing the unprofessional behavior that some recruiters engage in, it’s important to recognize that the candidate/recruiter relationship is a two-way street. It’s highly advisable to treat your recruiter considerately and professionally — not only is this the right thing to do, but it also maximizes your recruiter’s ability to effectively advocate for you.

To some extent, this is basic common sense (or should be)!  But to be fair, the lateral market can be stressful, and sometimes candidates may not be fully cognizant of the effects of their actions. So it’s worth laying out a few best practices that you should follow if you decide to work with a recruiter.

Be open and honest. This is the foundation for a productive, trust-based relationship with your recruiter. Some of the conversation will cover very standard terrain. How would you describe your experience and skill set? What are your short- and long-term career goals? What are your compensation expectations? Other aspects may be more awkward to discuss. Have you ever been fired? Have you recently worked with another recruiter? Have you applied to certain firms in the past? This is all important context for your recruiter to have. Remember: you and your recruiter are on the same team. The more you tell us, the more effectively we can frame your candidacy.

Communicate often. Part of being open and honest is being communicative when circumstances change. Have you adjusted your goals? Did your current work or compensation situation change recently? That’s fine, but you need to tell us. It isn’t helpful to have a recruiter pitching you to firms based on outdated information.

Be loyal. If you are targeting law firm roles, only work with one recruiter at a time. At the outset, it’s advisable to speak to a few recruiters to get a sense of which one feels like the best fit. But once you find a recruiter you feel you can trust, stick with that person. Law firms very rarely offer recruiters exclusive roles, so working with multiple recruiters is of no practical benefit (and in fact, can complicate your job search). Note that in-house roles are a different story. These are often filled through exclusive recruiter arrangements, so if you are going in-house it’s fine to work with more than one recruiter to gain access to a wider range of roles.

Be considerate and respectful. Be aware that recruiters only get paid if we place you with a new employer. When we invest time to help you with resume revisions or provide extensive interview coaching and career counseling, we do so with the expectation that you’re serious about working with us. If you aren’t certain you want to work with a particular recruiter, it’s extremely inconsiderate to mislead that person and take advantage of their services. Most especially, please understand that it’s highly unethical to learn about an opportunity from a recruiter and then go behind our back by submitting an application directly or through a friend who works at the firm. Don’t be that person.

Be responsive and committed. We get it, you are busy and working long hours. Many of us are. But you need to help us help you. Respond to our emails and phone calls, even if it’s just to let us know you’re tied up and will follow up with a response at a later time. If you agree to an interview, follow through on that commitment by showing up on time. If you promise to send a recruiter your resume by a certain date, either keep your promise or give a heads up that you’ll need a few more days. Don’t ghost a recruiter after you’ve agreed to work with us or after we’ve helped you. If you change your mind, that’s okay, it happens. But do your recruiter the courtesy of letting us know. It only takes a second to respond to an email.  

Be professional. This last one is a bit of a catch-all, and the importance of it cannot be overstated enough. It applies not just to your dealings with recruiters, but to everyone you interact with in the lateral hiring process. Keep in mind that the legal industry is relatively small, and your reputation will follow you. The bridges you build (or burn) while in the recruiting process may affect your career years from now in unexpected ways. Make sure you leave a positive and professional impression. At some point in the future, you’ll be happy you did.

Associate Tips, Attorney Laterals, Featured, In-House Tips, Lateral Moves, Partner Tips, Tips

Strategies for Working Effectively With Your Recruiter

Recruiters can offer invaluable information and guidance during your job search and throughout your legal career long before or after a move. Here are a few tips for working most effectively with your recruiter and leveraging their knowledge and experience to benefit your job search:

Establish a relationship with a recruiter you trust early on. Take advantage of us. We have information on the market to share and we can offer you the benefit of our experience working with hundreds of other lawyers over the years who may have faced similar circumstances and decisions. It doesn’t cost you anything to have a conversation once in a while. Then if and when you are ready to make a move, you’ll know which recruiter has the best relationships with employers, which recruiter is most knowledgeable about the market you’re exploring (and the market you’re coming from, if different) and which recruiter you trust to best advocate for you and guide you through the process.

Work with one trusted and knowledgeable recruiter. While it may be beneficial to touch base with multiple recruiters if you’re looking for in-house positions, when exploring law firm options, working with multiple recruiters often leads to problems—at worst, duplicate submissions and at best, an imperfect management of your timing and leveraging of offers.

Allow your recruiter to adequately prepare. If you’re ready to make a move, send your resume and deal sheet if you have one ready in advance of an introductory call. This will make for a more efficient conversation if you’re pressed for time. Of course, if you’re not actively looking to move, no need to send a resume just to open the dialogue.

Give us all the logistical details. Then let us decide what may be important to share with the prospective employer and at what stage. For example, if you would need a delayed start date due to notice periods, school calendars, leases, etc., or if you do not yet have work authorization in the U.S., please let us know upfront.

Give us all the substantive information to work with. I recently spoke with a partner candidate who told me, “Don’t be offended. I value your knowledge and input but no one can sell me better than I can sell myself.” And he’s largely right. Recruiters can be instrumental in determining how to best present you to prospective employers, but without your substantive input, our abilities are limited. So don’t be the candidate who tells your recruiter simply, “Submit me!” Empower us with as much information as you can. For example, give us bullet points/sound bites covering why you’re looking to make the move and why in your own words you believe you’d be a good asset to the new team. See my post on cover letters for more details.

If you are working with other recruiters or applied anywhere on your own, let us know where and when right from the start. And keep us posted on the progress so we can best manage the timing and leverage your other interviews/offers.

Keep us posted on your thinking. We’re here as a source of information—in terms of the substance of opportunities and the logistics of the job search process—but we’re also here to be a sounding board. Let us know what concerns you may have so we can dispel any rumors or flag issues that may indeed be real concerns. Let us know your thinking on why you’re leaning towards accepting one offer over another.

When in doubt, run it by us first. If you don’t know how to answer a question a firm poses or you don’t know what to say when a partner is calling you with a verbal offer…if you don’t know if a detail is important enough to share, JUST ASK.

The bottom line: It’s better for everyone if there are no surprises! There’s no such thing as “too much information” when it comes to working with your recruiter. Give us all the information and let us do our best work for you! If you’d like to discuss your job search, have questions about the lateral process or just want to open a dialogue for general career guidance, please reach out to me at .

Featured, Market News, Partner Market, Partner Tips

Making the Jump from Government Practice to Law Firm Partnership

A stint in public service is attractive to many lawyers. Government practice enables attorneys to improve public policy and promote justice, contributing directly to our collective well-being. But for many attorneys, government practice will be just one phase of a longer, multifaceted career.

After their time in government, lawyers frequently transition to private practice. For some, this represents a homecoming—many attorneys simply return to the firm for which they worked prior to entering government. Others are new entrants to private practice, drawn by the challenge of applying their government knowledge in a new context and by the lure of a substantial increase in compensation.

For a government attorney seeking to make this transition, the range and quality of available private practice roles will depend on several factors. Realistically, not everyone is competitive for law firm partnership, especially at the most prestigious firms. A former equity partner who left her law firm for a stint in a high-profile government post is in a different situation from a career government attorney whose expertise is not aligned with a hot law firm practice area.

Firms value seniority, expertise, and a business development track record

Whether partnership is a realistic aspiration for a departing government lawyer typically depends on three factors: seniority, nature of expertise, and history in private practice.

High-level government leaders tend to be strong partnership candidates, even if they have no prior law firm experience. The lawyers in this category are often political appointees. Examples include:

  • General Counsel of an Agency;
  • US Attorneys and First Assistant US Attorneys;
  • Attorneys General and Deputies;
  • Directors (such as Directors of Enforcement);
  • Chiefs and Deputy Chiefs of major divisions/committees etc.

Some government lawyers who are not in top leadership posts are nevertheless competitive for partnership on the basis of specialized and valuable expertise. A Senior Counsel with deep knowledge of a hot regulatory area such as privacy, cybersecurity, or international trade has a shot at becoming a partner. On the litigation side, partnership is realistic for attorneys with a proven track record of high-profile trial advocacy. An association with an elite group such as the Mueller Special Counsel team is ideal, but even other AUSAs who have accumulated substantial first-chair trial experience can have a solid shot at partnership.

When law firms assess the suitability of a government lawyer for partnership, one critical question is how successful the candidate will be in generating revenue for the firm. Service in a high-profile government role and/or expertise in a high-demand regulatory area will assist in marketing to potential clients. But the most reliable predictor of business development ability is having done it before. A government lawyer with prior experience as a law firm partner will therefore have a considerable advantage. Candidates with partnership experience are especially desirable if they have taken care to maintain relationships with their former private practice clients, as this is a strong signal of capacity to ramp up a book of business quickly.

Although the majority of lawyers who make the transition from government to AmLaw partner fit into one of the above categories, there are occasional exceptions. For example, a former agency attorney (GS-15) became a partner at a firm thanks in part to her former supervisor, who had sufficient business and clout at the new firm to push for the title. In this instance, it was particularly critical for the attorney to work with a recruiter to craft an effective business plan and to prepare for interviews. That preparation enabled her to make the business case to each interviewer she met, regardless of their practice area and location.

Equity or non-equity?

Experience as a law firm partner will be weighed heavily in the decision to offer equity partnership versus non-equity partnership. It is rare (but not unheard of) for all but the highest-ranking government lawyers who lack a business development track record to get offers for equity at the outset. Conversely, a former equity partner can reliably expect equity partnership offers, particularly where the partner is not seeking to ascend the AmLaw ranks significantly. (A candidate who was an equity partner at a small law firm may not be competitive for equity offers at top AmLaw firms.)

For former non-equity partners, a stint in government can be the perfect springboard to equity partnership. Candidates exiting government roles sometimes mention their non-equity status at their former law firm as the main factor motivating them to seek partnership opportunities at other firms.

What about more typical government lawyers?

For government lawyers who do not fit into the rarified categories described above, but are nevertheless committing to becoming a partner, there is still hope. It may be advisable to pursue opportunities at smaller or less prestigious firms, remembering that the first destination post-government need not be the last. Sometimes, an interim move to a lower-ranked firm can enable a candidate to lay the foundation for a second move in three or so years to join a stronger firm. Flexibility and strategic planning are especially important for lawyers in this situation.

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.

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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.

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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.