Figuring out leverage ratio? Forum

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hellojd

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Figuring out leverage ratio?

Post by hellojd » Mon Jun 23, 2014 11:40 am

I recognize that leverage matters in choosing a firm, and that the lower the ratio of associates to partners, the greater the chance you have of getting higher quality work and also the greater the chances of you eventually making partner, as minuscule as that chance is everywhere (although you risk getting worked harder).

Do we typically figure this out through the NALP practice area heading for each firm? So, just to use a random example, NALP says DPW has 101 partners and 474 associates in corporate. Does that mean a leverage ratio of almost 5:1, or am I missing something? If I were to compare that with Skadden M&A which is 30 to 54, would I come to the conclusion that Skadden M&A would offer more meaningful opportunity for work / advancement?

Just trying to figure out how to go about researching this. Thanks!

AllTheLawz

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Re: Figuring out leverage ratio?

Post by AllTheLawz » Mon Jun 23, 2014 11:45 am

hellojd wrote:I recognize that leverage matters in choosing a firm, and that the lower the ratio of associates to partners, the greater the chance you have of getting higher quality work and also the greater the chances of you eventually making partner, as minuscule as that chance is everywhere (although you risk getting worked harder).

Do we typically figure this out through the NALP practice area heading for each firm? So, just to use a random example, NALP says DPW has 101 partners and 474 associates in corporate. Does that mean a leverage ratio of almost 5:1, or am I missing something? If I were to compare that with Skadden M&A which is 30 to 54, would I come to the conclusion that Skadden M&A would offer more meaningful opportunity for work / advancement?

Just trying to figure out how to go about researching this. Thanks!
All of this is speculative.. I've never seen or been told anything that even comes close to backing it up at the level you are talking about. I just can't see how leverage ratio can be a deciding factor for an income corporate attorney at any V100.

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hellojd

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Re: Figuring out leverage ratio?

Post by hellojd » Mon Jun 23, 2014 2:33 pm

AllTheLawz wrote:
hellojd wrote:I recognize that leverage matters in choosing a firm, and that the lower the ratio of associates to partners, the greater the chance you have of getting higher quality work and also the greater the chances of you eventually making partner, as minuscule as that chance is everywhere (although you risk getting worked harder).

Do we typically figure this out through the NALP practice area heading for each firm? So, just to use a random example, NALP says DPW has 101 partners and 474 associates in corporate. Does that mean a leverage ratio of almost 5:1, or am I missing something? If I were to compare that with Skadden M&A which is 30 to 54, would I come to the conclusion that Skadden M&A would offer more meaningful opportunity for work / advancement?

Just trying to figure out how to go about researching this. Thanks!
All of this is speculative.. I've never seen or been told anything that even comes close to backing it up at the level you are talking about. I just can't see how leverage ratio can be a deciding factor for an income corporate attorney at any V100.
Is there a better metric that you'd suggest instead? It seems intuitive to me that the "leaner" the model, the *slightly* less expendable each associate is, but then again I haven't worked in NYC biglaw yet so I'm all ears to better ways to go about this research.

AllTheLawz

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Re: Figuring out leverage ratio?

Post by AllTheLawz » Mon Jun 23, 2014 2:53 pm

hellojd wrote:
AllTheLawz wrote:
hellojd wrote:I recognize that leverage matters in choosing a firm, and that the lower the ratio of associates to partners, the greater the chance you have of getting higher quality work and also the greater the chances of you eventually making partner, as minuscule as that chance is everywhere (although you risk getting worked harder).

Do we typically figure this out through the NALP practice area heading for each firm? So, just to use a random example, NALP says DPW has 101 partners and 474 associates in corporate. Does that mean a leverage ratio of almost 5:1, or am I missing something? If I were to compare that with Skadden M&A which is 30 to 54, would I come to the conclusion that Skadden M&A would offer more meaningful opportunity for work / advancement?

Just trying to figure out how to go about researching this. Thanks!
All of this is speculative.. I've never seen or been told anything that even comes close to backing it up at the level you are talking about. I just can't see how leverage ratio can be a deciding factor for an income corporate attorney at any V100.
Is there a better metric that you'd suggest instead? It seems intuitive to me that the "leaner" the model, the *slightly* less expendable each associate is, but then again I haven't worked in NYC biglaw yet so I'm all ears to better ways to go about this research.
Easy.. there is no decisive metric. There are a bunch of rationales for "leanness" that don't show up on a NALP sheet and won't be apparent to someone without deep understanding of a given firm, its clients, the types of deals it typically works on, the structure of its partnership, etc. Pretty much every single biglaw firm uses some kind of utilization metric to measure the effectiveness of its staffing and each departments hiring needs. Utilization is whats important, not "leanness" of staffing. If a firm is both successful and has high leverage over a long period it suggests that their business model/practice mix requires high leverage for effectiveness. Even worse, you are comparing a broad category to a specific practice area. Look at Skadden's NALP and you will see that Corporate Finance (a part of general corporate) has a 9:36 ratio and a disproportionately high number of counsel.

When choosing a firm, you just have to mainly go on feel and comfort with the people you met and/or interviewed with and some kind of generalized idea of their reputation in the overall market you are focused on. If its DPW v. Skadden in the NYC market then you should pretty much exclusively be focused on feel and comfort. If its between Skadden Boston v. Ropes Boston then their may be some significant market reputation differences that might be worth accounting for. Everything else, besides obvious stuff like pay and benefits differences, is pretty much irrelevant at the entry-level corporate associate level.

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hellojd

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Re: Figuring out leverage ratio?

Post by hellojd » Mon Jun 23, 2014 3:02 pm

AllTheLawz wrote:
hellojd wrote:
AllTheLawz wrote:
hellojd wrote:I recognize that leverage matters in choosing a firm, and that the lower the ratio of associates to partners, the greater the chance you have of getting higher quality work and also the greater the chances of you eventually making partner, as minuscule as that chance is everywhere (although you risk getting worked harder).

Do we typically figure this out through the NALP practice area heading for each firm? So, just to use a random example, NALP says DPW has 101 partners and 474 associates in corporate. Does that mean a leverage ratio of almost 5:1, or am I missing something? If I were to compare that with Skadden M&A which is 30 to 54, would I come to the conclusion that Skadden M&A would offer more meaningful opportunity for work / advancement?

Just trying to figure out how to go about researching this. Thanks!
All of this is speculative.. I've never seen or been told anything that even comes close to backing it up at the level you are talking about. I just can't see how leverage ratio can be a deciding factor for an income corporate attorney at any V100.
Is there a better metric that you'd suggest instead? It seems intuitive to me that the "leaner" the model, the *slightly* less expendable each associate is, but then again I haven't worked in NYC biglaw yet so I'm all ears to better ways to go about this research.
Easy.. there is no decisive metric. There are a bunch of rationales for "leanness" that don't show up on a NALP sheet and won't be apparent to someone without deep understanding of a given firm, its clients, the types of deals it typically works on, the structure of its partnership, etc. Pretty much every single biglaw firm uses some kind of utilization metric to measure the effectiveness of its staffing and each departments hiring needs. Utilization is whats important, not "leanness" of staffing. If a firm is both successful and has high leverage over a long period it suggests that their business model/practice mix requires high leverage for effectiveness. Even worse, you are comparing a broad category to a specific practice area. Look at Skadden's NALP and you will see that Corporate Finance (a part of general corporate) has a 9:36 ratio and a disproportionately high number of counsel.

When choosing a firm, you just have to mainly go on feel and comfort with the people you met and/or interviewed with and some kind of generalized idea of their reputation in the overall market you are focused on. If its DPW v. Skadden in the NYC market then you should pretty much exclusively be focused on feel and comfort. If its between Skadden Boston v. Ropes Boston then their may be some significant market reputation differences that might be worth accounting for. Everything else, besides obvious stuff like pay and benefits differences, is pretty much irrelevant at the entry-level corporate associate level.
Ok that makes sense I guess, thanks for the post. I suppose I was just trying to figure out if there was a more data-driven way to figure out which firms most quickly "up or out" their associates either forcibly or through terrible partnership prospects. So by what you're saying most of the v10ish firms (except maybe WLRK) probably have similar utilization / work distribution / partnership prospects?

Thanks.

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