Tag Archives: Legal Recruiter

Remote Biglaw Positions: Separating Fact from Myth

Besides the pandemic itself, perhaps no topic has dominated recent conversation among white-collar professionals like working from home. The upsides. The downsides. How long it will last. Whether the nature of work has changed forever. Everyone has an opinion and a preference.

For most of 2020 and early 2021, the remote work debate didn’t have much immediate practical implication. Like it or not, Biglaw attorneys were mainly working from home. But now that offices are reopening, lawyers face a choice: either accept whatever new policy their firm is adopting or look to move to a firm that better aligns with their preferences.

Varied expectations for office presence

By now firms have generally re-opened their U.S. offices, with summer attendance guidelines ranging from voluntary at firms like Ropes & Gray to “strongly encouraged” at firms like Sullivan & Cromwell. As for the fall, firms have articulated varying expectations. Paul Hastings has said it expects all attorneys to work from the office as a “default” policy. Several firms have specified a minimum number of office days each week: Skadden’s expectation of at least three days per week is typical. Nixon Peabody is offering a range of configurations, including 100% remote arrangements for some lawyers.

Many firms have presented their guidelines as applying from September through the end of 2021, avoiding longer-term commitments. That makes sense in an environment where firms understand the tight market for talent will require them to offer flexibility but it remains to be seen how much.

So where does that leave the typical associate? For those who prefer to work from the office, there isn’t much to worry about. Few firms are going to discourage a lawyer who wants to spend every weekday in the office from doing so. But for those who have enjoyed working from home and are not eager to resume office life, it’s a tougher call. You can sit tight and hope that market pressures will ultimately force your firm to permit frequent, if not total, remote work. Or you can try to lateral now to a firm that is committed to offering officially remote roles.

For those considering such a move, we at Lateral Link think it’s important to separate fact from myth when it comes to remote positions in Biglaw. We’re hearing from many associates who are keen to maximize flexibility but are not well-informed about the state of the market.

Myth: Many Biglaw firms are offering remote positions

In fact, most firms are not offering fully remote roles. There is a lot of misinformation on this point, driven in part by recruiters incorrectly telling candidates that a firm is open to remote work when the reality is different. You should understand that firms offering fully remote positions are outliers, at least for now.

Myth: Openness to remote work is the same across major markets

Law firms tend to be influenced by the cultural norms of their client base, so it’s not surprising that a split on remote work is emerging between east and west. In New York, most of the banks that serve as anchor Biglaw clients are calling their staff back to the office this summer, and most New York firms want their lawyers largely back in the office in September. In contrast, the tech companies that drive the Bay Area economy are taking a more favorable view of long-term remote work, and at least some Bay Area law firms are following their clients’ lead.

Myth: You can work remotely for a law firm located in another country

Hiring employees in a given state or country has tax implications for the employer. And in the case of transnational work, there may also be work authorization restrictions to consider. Even within the United States, remote roles are often limited to particular states where the employer has made provision to operate. So no, if you are a lawyer living in the United States, you very likely cannot work remotely for a firm outside the United States. And similarly, remote roles for American firms paid through American payroll are limited to United States residents with the legal authorization to work in the United States.

Lateral Link can help lawyers navigate the evolving market

It remains to be seen what the typical Biglaw workweek will look like a year from now. Based on what most firms are saying today, it will probably involve some days in the office and some days at home. That likely means that moving far from a major city will, for many lawyers, continue to require the tradeoff of leaving Biglaw practice.

However, we expect that policies will continue to evolve as firms survey the competitive landscape and (re)position themselves accordingly. In such a fluid situation, it’s especially important to have an advisor who is in constant contact with a range of firms and can give you accurate information about how the market is trending. If you are thinking about switching to a firm that better matches your remote work preferences, Lateral Link is happy to discuss the options with you.

Biglaw Partners Should Think Like Franchise Owners

It’s a common refrain even from highly successful lawyers: “I wish I were on the business side.”

There can be more than one motivation underlying that sentiment. The chance to earn more money tends to be part of the appeal, particularly if the lawyer is treating an especially successful client as the reference point. But beyond money, attorneys who yearn for a business role are often drawn to the notion of managing a P&L. In other words, they like the idea of being in charge of a business and controlling their destiny.

The thing is, if you are a Biglaw partner, you’re already running a business: your practice. It might not feel that way. Maybe you view your firm’s managing partner as the person who is running the business, and relative to that leader, you feel like you don’t have much management autonomy. If that is your view, it may be worth considering that most of the clients on the “business side” are constrained by decisions made higher up the pyramid. Not all of them are CEOs. Many are leaders of divisions within a broader corporate structure, managing a P&L that is just one component of a larger whole.

But the best analogy for law firm partners isn’t to a corporate division. It’s to a franchise. A law firm partner is effectively a franchise owner. At first glance, running a capital markets practice looks vastly different from running a fast food restaurant. But if you set aside the surface differences, there are some fundamental similarities.

In a franchise model, the franchisor determines many details of the franchisee’s operation. The franchisor defines the brand in the public imagination through marketing campaigns. It controls the menu of products sold at the franchises. It supervises the design and construction of stores to maintain a common look and feel across the brand’s outlets. And it provides instructions and training to ensure a consistent customer experience.

But although the broad strategic and design choices are primarily the domain of the franchisor, the franchisee controls the actual operation of the business and ultimately determines whether it succeeds. The franchisee’s responsibilities include hiring employees and supervising their work, building the reputation of the franchise in the community it serves, and carefully tracking the performance of the franchise relative to industry benchmarks to identify opportunities for improvement.

A law firm’s management, like a franchisor, is the primary steward of the brand under which the firm’s partners offer their services. The managing partner or management committee determines which practice areas the firm will compete in, selects the partners who will lead service delivery in those practice areas, and sets the broad policies and cultural norms by which the firm operates.

To be sure, those are all important decisions. But the success of the firm’s business is ultimately contingent on client satisfaction, and that depends on the management skills of the individual partners. As a partner, your job is to bring in matters and execute on them such that the client’s expectations are met or exceeded.

Like a franchise owner, you are responsible for your practice, and it will grow primarily through your direct efforts. It’s on you to get out there and interact with influential members of the community, and it’s on you to ensure that the team of associates working under your direction is motivated and equipped to deliver on your promises to clients. Like a diligent franchise owner, you should be monitoring the performance of your practice relative to others, taking stock of its relative strengths and weaknesses, and gleaning insights that can be leveraged to drive continuous improvement. You don’t need to shift to the “business side.” You’re already on it.


Why Leave Biglaw To Form A Boutique?

If law practice were a normal business, this would make little sense. In theory, larger firms should be more profitable per partner than smaller firms because a large firm can spread its fixed costs of operation over a larger pool of lawyers, lowering per-lawyer cost. The move to form boutiques seems to violate the basic principle of economies of scale.

But law is not a normal business. As we have previously explored, the legal profession is remarkably fragmented relative to other professional services fields. It is clear that standard economies of scale logic does not explain law firm industry structure.

We see four central factors driving the boutique boom: founder autonomy to chart strategy, avoidance of client conflicts, the opportunity to limit overhead investment, and freedom from ongoing obligations to retired partners.

Strategic autonomy

Boutique founders value the ability to chart their own strategy and run the show. A rainmaker in a typical Biglaw firm can be expected to have a more influential voice than the average partner, but the fact remains that major decisions require some degree of consensus, and the status quo tends to prevail.

Take alternative fee arrangements, for example. Boutiques generally have embraced flat-fee or other alternative structures much more readily than their Biglaw peers. That shift is a lot easier to execute when a firm is controlled by a small group of partners who work in the same practice area and are operating on a relatively long time horizon.

Boutiques can also more easily limit themselves to competing only for higher-margin work. When you make no pretense of being a full-service firm, and you have no legacy low-margin practices encumbering you, there is little reason to bring on equity partners whose revenue contribution would reduce the average.

Conflict avoidance

In their public statements, boutique founders tend to highlight the appeal of escaping the conflicts entanglements of Biglaw. It sounds more noble than “I’m expecting to make way more money.” But in all seriousness, freedom from conflicts can be important. It is a frustrating experience to be in line to represent a client in a significant matter, only to find out that your firm has a conflict that seems entirely tangential but nevertheless requires you to decline the work.

No bloated overhead

If law firms were managed to maximize profits, overhead considerations would counsel against forming a boutique. All law firms must incur some level of fixed cost in order to operate. Consider IT costs. Properly managed, the amount spent on IT per lawyer should be materially smaller at a 1000-lawyer Biglaw firm than at a 10-lawyer boutique. Similar economies of scale should exist for real estate expenses.

And yet, boutique founders routinely cite reduced overhead as an advantage of the boutique model. This is an indictment of large firms’ spending decisions. Historically, there has been a cultural assumption among the Biglaw elite that fancy offices on the highest floors of the most prestigious towers are a necessary expense, both as a status symbol for clients and as a recruiting tool for attorney talent. Boutiques have illustrated that there is reason to doubt this assumption. Even before the pandemic made every law firm question its real estate needs, boutique founders realized that they could operate successfully with a considerably smaller office footprint.

Here we again see the value of the autonomy discussed above. It is easier for a small group of founding partners to agree to dispense with some of the traditional trappings of Biglaw office space than to drive consensus among a large partnership to make substantial cost cuts.

No retirement payments

The final factor is likely the least intuitive, especially for lawyers who are not yet partners: the burden of payments to a firm’s retired partnership. Biglaw firms vary in the generosity of annuities offered to retirees, but it is common for a retired partner to be paid in perpetuity something like one-third of the partner’s average compensation in the final five years of service.

As life expectancy has increased, these generous payouts have become an ever-growing drag on Biglaw profits. Imagine you are a relatively young and successful partner. You could spend the next two decades dutifully contributing to the pockets of your retired forebears and hoping that you will receive a similar deal in your old age. Or you could leave now, found your own boutique, and keep that portion of your billings for yourself. In a world in which even partners who stay in Biglaw are likely to make multiple lateral moves over the course of their careers, it is increasingly difficult to convince current partners that bearing the costs of retirement payments is a worthy investment.

Conclusion: Biglaw must reform its cost structure

Unless Biglaw firms take seriously the signals that the boutique boom is sending, they can expect escalating losses of their most productive partner talent. There is of course a limit to the reforms that Biglaw firms can undertake: the autonomy and conflicts factors are particularly hard to counter. But on cost control, the ball is in Biglaw’s court. And in the wake of the pandemic, the largest firms have a golden opportunity to reimagine their business models in fundamental ways.

Biglaw firms need to take a hard look at all elements of their cost structure, with real estate and retired partner compensation at the top of the list. To that end, now would be a great time to shift to more professional administration by trained management professionals, rather than untrained lawyers engaging in administration as a part-time, supplemental duty.

Biglaw firms have advantages that boutiques cannot easily match, including strong brands and the ability to cross-sell work among multiple practices. But without significant reform on the cost side, Biglaw will continue to lose ground to boutiques.

Who Is Better Compensated: Elite Biglaw Partners Or Top General Counsel?

If you’ve paid any attention to the ballooning compensation figures of Biglaw partners in recent years, you already know that it pays to be an equity partner at a large firm. Meanwhile, as average partner compensation escalates, top in-house lawyers are being left behind.   

In 2020, a Major Lindsey & Africa survey of partners in “Am Law 200 size firms” found average compensation of above $1 million. The ALM Intelligence 2020 Law Department Compensation Benchmarking Survey found general counsel and chief legal officers earned average total compensation of $573,000. So, as a general rule, it’s more lucrative to be a Biglaw partner than a general counsel.

But what about at the very top end of the profession? In this article, we take a look at the pay packages of the top 100 highest-paid general counsels, in comparison to partners of top Biglaw firms (as measured by profits per equity partner). We find that on a cash compensation basis, equity partnership is more lucrative than being a general counsel. But the story is more complicated when taking stock options into account.

A quick note on sources. For general counsel compensation data, we look at the top 100 highest-paid GCs as listed in the 2020 ALM Intelligence GC Compensation Survey. This data set is not comprehensive. For one thing, ALM compiles its data from proxy statements filed with the SEC, so only public companies are included. Our source for Biglaw partner compensation is the 2020 edition of the Am Law 200 ranking.

It’s hard to outearn a top Biglaw partner

The General Counsel Compensation Survey ranks general counsels based on total cash compensation. The top 100 highest-paid GCs earned total cash compensation of $2.42 million on average. We don’t know how much the 100 best-paid Biglaw partners earned in the comparable period, but we can say that the top firm in the Am Law ranking — Wachtell — had 85 equity partners and profits per partner of $6.33 million.

Just two general counsels took home cash compensation higher than $6.33 million: Alan Braverman of Disney ($8 million) and Eric Grossman of Morgan Stanley ($6.94 million). Meanwhile, 38 Am Law firms had profits per equity partner in excess of the $2.42 million average general counsel cash compensation.

How does this compare to the situation a decade earlier? Analyzing the 2010 editions of the same surveys, we find that not much has changed. Based on the 2010 General Counsel Compensation Survey, the top 100 general counsels took home average total cash compensation of $1.56 million. Wachtell’s profits per partner were $4.3 million, a figure exceeded by just one general counsel. 28 Am Law firms had higher profits per equity partner than the $1.56 million general counsel average.

What about compensation growth over that ten-year period? From a growth perspective, who did better: the top 100 general counsels or the partnership of the top Am Law firms? The table below shows the results, ranked by growth rate. The law firms in the table were the top 10 firms in the 2010 Am Law 200. We see that general counsels fall in the middle of the pack, outpacing some partnerships and trailing others.

Group (equity partnership or GCs)10-year compensation growth
Kirkland & Ellis108%
Simpson Thacher83%
Paul, Weiss75%
Cravath63%
Sullivan & Cromwell57%
Top 100 GCs55%
Cahill Gordon51%
Wachtell47%
Quinn Emanuel46%
Boies, Schiller17%
Irell & Manella8%

But stock options can make a big difference

The comparisons above obscure some important factors. On the in-house side, it is critical to note that the very highest-earning general counsels receive a substantial portion of their compensation in the form of equity. Taking stock options into account, some general counsel roles start to look considerably more attractive. For example, revisiting the 2020 surveys, when accounting for equity compensation, the number of general counsels topping Wachtell’s profits per partner rises from two to 41. And some of the general counsels have total compensation that would exceed that of even the highest-paid Biglaw rainmaker. For example, Chewy GC Susan Helfrick had total compensation of $30.3 million (of which less than $1 million was in cash). Apple GC Kate Adams had cash compensation of $3.56 million, but her total compensation was $25.2 million.

On the law firm side, profits per equity partner gives little indication of the rewards that flow to top rainmakers. Firms vary widely in their compensation ranges. At the most traditional end of the spectrum, a firm’s highest-paid partner might take home 4x the pay of the lowest-paid partner. In contrast, at a firm with a strong eat-what-you-kill culture, that ratio may be 10x or higher. A 2018 New York Times article about the lateral talent wars reported on eight-figure pay packages for star hires at firms like Kirkland & Ellis and Paul, Weiss. It’s impossible to know how many Biglaw attorneys have breached $10 million, but the lateral market for partners with a strong book of business remains red hot.

Conclusion

There are a lot of reasons why an attorney might prefer to be a general counsel than a law firm partner. But viewed strictly through the lens of compensation, high-performing lawyers are typically better off staying on the law firm track. Of course, that doesn’t necessarily mean they should stick with their current firm. With Biglaw partnerships increasingly diverging in their approaches to compensation, it’s a mistake to assume that a partner with a given book of business will be paid similarly at any comparably prestigious firm. Productive partners have a variety of options — and it pays to know about them.