NY GOES TO 180k! IT HAPPENED!!!! (CovingTTTon does a 180! Holder wept.) Forum

[TLSModBot]

Oh I finally downloaded the AmLaw 200 that just came out - I'm gonna look at financials for this year, compare them to the past two years, and see how many firms can actually afford this. I'm so excited to play with the numbers for this - though I need to figure out how to quickly find out breakdowns of associates at various offices/regions, which will be difficult.

All of the 100 most profitable firms could afford this. It's just a matter of attempting to quantify which ones are greedy and which ones are spectacularly greedy. The lights are not gonna go out tomorrow if Haynes and Boones starts paying $180k.

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

[Actus Reus]

Tomorrow is essentially Match Day, but for lawyers.

[smaug]

Oh I finally downloaded the AmLaw 200 that just came out - I'm gonna look at financials for this year, compare them to the past two years, and see how many firms can actually afford this. I'm so excited to play with the numbers for this - though I need to figure out how to quickly find out breakdowns of associates at various offices/regions, which will be difficult.

All of the 100 most profitable firms could afford this. It's just a matter of attempting to quantify which ones are greedy and which ones are spectacularly greedy. The lights are not gonna go out tomorrow if Haynes and Boones starts paying $180k.

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

If Irell doesn't and other IP lit heavy firms do, it'll give up the ghost.

[Anonymous User]

Quinn will match per WSJ

[TLSModBot]

Oh I finally downloaded the AmLaw 200 that just came out - I'm gonna look at financials for this year, compare them to the past two years, and see how many firms can actually afford this. I'm so excited to play with the numbers for this - though I need to figure out how to quickly find out breakdowns of associates at various offices/regions, which will be difficult.

All of the 100 most profitable firms could afford this. It's just a matter of attempting to quantify which ones are greedy and which ones are spectacularly greedy. The lights are not gonna go out tomorrow if Haynes and Boones starts paying $180k.

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

If Irell doesn't and other IP lit heavy firms do, it'll give up the ghost.

After the cockslap to the face that is Hueston Hennigan's immediate move, I think they'd have to

[jbagelboy]

With HH moving already, and QE LA at 180, Irell/munger have no choice but to match. Squeezed from large firms and small.

[bruinfan10]

http://www.wsj.com/articles/law-firm-cr ... 1465241318

[5ky]

people are just going to need to post WSJ articles and not links behind payrolls

[bruinfan10]

With HH moving already, and QE LA at 180, Irell/munger have no choice but to match. Squeezed from large firms and small.

[jbagelboy]

people are just going to need to post WSJ articles and not links behind payrolls

[Anonymous User]

Relevant part:

Already, a few law firm partners indicated on Monday that they would match. “No doubt we will be raising as will other firms,” John Quinn, co-founder of litigation powerhouse Quinn Emanuel Urquhart & Sullivan LLP, said in an email. “This market is very efficient in that way.”

[kcdc1]

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

This was confusingly presented. What is the difference between a firm and a unique firm?

Also, you're using a weird metric to determine whether a firm can "afford" to raise associate salaries. According to your numbers, raising salaries wouldn't put these firms in the red -- it would just reduce or offset the rate at which profitability grows for 2016. PPP staying flat at 2M during the one year in ten where associate comp is increased is hardly a catastrophe.

[TLSModBot]

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

This was confusingly presented. What is the difference between a firm and a unique firm?

Unique relative to the previous data point (so of the 42 firms in the second set, only 7 weren't already represented in the first set of 65 - just meant to avoid double-counting firms)

[lowdmouse]

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

This was confusingly presented. What is the difference between a firm and a unique firm?

Also, profits per partner and revenue per lawyer are statistics people talk about. I've never heard anyone talk about profits for lawyer, and I can't see why it would be a relevant number.

[Monochromatic Oeuvre]

Oh I finally downloaded the AmLaw 200 that just came out - I'm gonna look at financials for this year, compare them to the past two years, and see how many firms can actually afford this. I'm so excited to play with the numbers for this - though I need to figure out how to quickly find out breakdowns of associates at various offices/regions, which will be difficult.

All of the 100 most profitable firms could afford this. It's just a matter of attempting to quantify which ones are greedy and which ones are spectacularly greedy. The lights are not gonna go out tomorrow if Haynes and Boones starts paying $180k.

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

Not matching the market base in a primary market is TTT as fuck in a way that even failure to match bonuses isn't. I would be surprised if anyone above like $1.5M PPP didn't match within a month or so.

Out of curiosity, since I don't know off the top of my head--what's the largest PPP of a firm that wasn't paying $160k in a primary market (BOS/NY/DC/CHI/LA/SF)?

[Desert Fox]

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

I don't think it's all that significant to look at 1 years growth or 1 years ppp growth. This is a raise almost 10 years in the making. They basically got 5-7 years of frozen wages for free. Now they'll have to pay for it all at once.

I'd look at how much PPP it would actually cost them.

[Anonymous User]

OP could we get a list going of the firms matching CSM?

[TLSModBot]

Some initial findings (I went conservative and said $20K for associates at all levels). I'll leave the conclusions up to y'all:
For 65 firms, the cost of raising salaries would be greater than the firm's entire 1 year revenue growth
For 42 firms, the cost of raising salaries would be greater than the firm's entire 2 year revenue growth (7 unique firms)
For 138 firms, the cost of raising salaries exceeds the profit per lawyer growth in the past year (roughly meaning the raise would offset or overwhelm net profit growth for the firm) (75 unique firms here)

That's 147 firms out of the AmLaw 200 (granted, the lower AmLaw 200 weren't entirely in major markets paying the going rate anyway). Even if we assumed all 100 of the lower AmLaw 200 were in that set (they're not), that's still about half of the largest firms that would see a financial hit from making this jump.

Obviously this would be ameliorated if the raises were limited just to NY or select major markets, or if bonuses were reduced to offset the raises.

ETA: for example, Irell has had a rough year and lost $30K in profits per lawyer - do you think they want to add another $20K on top of that?

This was confusingly presented. What is the difference between a firm and a unique firm?

Also, profits per partner and revenue per lawyer are statistics people talk about. I've never heard anyone talk about profits for lawyer, and I can't see why it would be a relevant number.

Profits per lawyer was introduced in the 2014 AmLaw as a new metric - it hasn't been talked about because it wasn't tracked.

The problem with profits per partner is that it is extremely easy to manipulate - it isn't based off of sound accounting principles. Firms can change who qualifies as an equity partner (or even as a partner at all), and can mess with operating income to artificially inflate it. There are a lot of good articles about the problems with PPP as a proxy for profitability or firm health - I'll try to dig some up at some point.

Metrics that talk about revenue are problematic because revenue is only half the equation - we need to look at expenses as well. As an extreme example, the guy who makes $100 but spends $80 of it to do so is in a worse position than the guy who just makes $30 with no expenses. If we went off of revenue alone, Latham would be the most financially powerful/healthy firm and I don't think anyone's arguing that.

Profits per lawyer shows the bang for the buck that firms are getting off its workforce. Because lawyer salaries represent the largest expense for law firms (we're talking 60-70% of total expenses), firms who use a large number of associates to achieve the same PPP as a firm who uses less gets hurt in their ranking. This way, PW isn't gonna edge out Wachtell no matter how asinine PW's leverage gets.

What profits per lawyer doesn't tell us is overall affordability, however. We DO need to look at revenue to see whether firms could stomach the hit given their net operating income and other expenses, and I'm still working on that part. PPL however is a promising metric that I think will be more useful in time than RPL or PPP.

[jbagelboy]

OP could we get a list going of the firms matching CSM?

Seconded

[TLSModBot]

I don't think it's all that significant to look at 1 years growth or 1 years ppp growth. This is a raise almost 10 years in the making. They basically got 5-7 years of frozen wages for free. Now they'll have to pay for it all at once.

I'd look at how much PPP it would actually cost them.

This is a good point re: the PPP - I'll run these numbers next. I don't think partners see it as "10 years in the making" / overdue raises but I think the Altman Weil survey might prove me wrong on that front (I'll have to check).

[Anonymous User]

With HH moving already, and QE LA at 180, Irell/munger have no choice but to match. Squeezed from large firms and small.

If I had to guess Irell will match and then drop its bonuses to the Cravath scale. I would not assume that they match until it really starts snowballing, though.

[El Pollito]

i can't believe this happened still

[lhanvt13]

OP could we get a list going of the firms matching CSM?

Seconded

Can we also get a shame list of firms that SHOULD be matching but haven't yet (and we can cross them off as we go)

[arklaw13]

Crossing my fingers for DC to match

[rpupkin]

OP could we get a list going of the firms matching CSM?

Seconded

Can we also get a shame list of firms that SHOULD be matching but haven't yet (and we can cross them off as we go)

OP could just list the entire V50 in the OP, with stirkethroughs for Cravath, Boies, and W&C. Then we can cross off the rest one-by-one. (We'll likely need to resort to asterisks for the firms that only match in NYC.)