Change my mind: Layoffs and no-offers should happen in biglaw Forum

[ughbugchugplug]

This is a fight for resources. Find another profession if you want to lick boots. We should take the high salary and expect no layoffs. Let them take that from our cold dead hands

[Anonymous User]

What's your actual thesis here, bootlicker? Do you think you're the first person to suggest that Biglaw could treat its employees worse and still have a waiting list? I'm guessing the same is true of your job. No-offers wreck someone's chance of ever getting back into Biglaw. Layoffs are not quite as deleterious but, when they happen at a junior level, indebted associates often can't afford them. Why are you arguing for them? Partners feeling a little inadequate at the yacht auction this year?

Firms can conduct business how they want, but people who aren't sociopaths think millionaires should bear financial burdens before people who make 10-50x less than they do, and this board (and the rest of the Internet) takes, and should take, every opportunity to call out the ones treating employees like shit and tell other people not to go there and be treated like shit.

I've heard an onslaught of in-house bitching in my time, and yet you dickcheeses keep paying these ridiculous rates. Why don't you convince your bosses to stop using Biglaw and instead hiring Shingle and Yokel LLP for your needs? Most of my colleagues have been drowning in work their entire careers and would love to have one of their pain-in-the-ass clients off their plate. So why don't you come on here and tell us when you've given your "biglaw firm hiring/firing recommendations to investment leaders," and I'll come here and tell you to get fucked with a rake every time you do?

I actually agree with most of your points, I just don't think biglaw associates are in the place compensation wise to class yourself in with the rest of the people who make these arguments. Most biglaw associates, unless you went to school late are in the top 1-2% of their age bracket for income. How much more do you make than the janitorial staff at your office 6x, 7x? The legal assistants 3x?

Biglaw comp is high enough now, where it is the type of job that shouldn't have pure job security. Layoffs really suck, and really shouldn't happen to first years since they haven't had a chance to prove themselves, but beyond that inherent risk is part of the compensation biglaw associates earn. Earning 200k or whatever the comp number for first year isn't a right, its something that is earned.

I actually think alot of the associates I work with alot are underpaid, they make sacrifices on a personal level, where its likely they hit 2500 billables in a year, but full lockstep just fucks them. Maybe their comp that year was 220, it should be closer to 300.

Theres a reason why I noted that if you are laying off support staff first, thats shit. They are in the compensaiton position where they should have a secure job.

You're just all over the place, dude.

I don't get to complain because I make more than the support staff? FWIW, I think good support staff should make more anyway. I certainly wouldn't advocate they get fired more often. But when it comes to the partners making 20x what I make, or the multibillion dollar client, suddenly the right to complain is back on the table?

You're positing a bunch of questions that have obvious management answers. Why doesn't Cravath pay more than Dechert? Because it doesn't have to in order to differentiate itself among good talent (DRIPPING with preftige). Why don't good associates make more, and why aren't bad associates shitcanned at a higher rate? Because associates in a given class year bill out at the same rate and your company doesn't demand to differentiate when it pays the bills or refuse to pay for the shitty lawyers. Why don't associates who bill 2200+ make more? Because they're not decamping for places with lower hours expectations at particularly unique rates. Why isn't the 20% associate turnover a year--which, by the way, would be considered outrageously high in almost any other industry--even higher? Because, as you danced around but never bullseyed, it's really expensive to recruit, provide for, and train associates for several years until they're good, and clients aren't willing to pay more than they do to make it happen.

It's a bit ironic that you spend all this breath on how the Biglaw model is broken and then talking about how your company hires Latham and Kirkland and all of the people who would have the power to change all of these things if they really gave a shit. The strong do what they will and the weak suffer what they must. The in-house criticism is always so pointless because it almost always comes from the same people who constantly fail to hire laterals due to giant pay cut demands, and who for the same work year after year with consistent 6% rate increases. Why would I listen to an exhortation for change from the people who are largely responsible for keeping this industry the same year after exhausting year?

I mean we don't pay for shit work and overbilling that is how this got started. Also I'd advise against playing the ad-hominem comp insult game, its not one you will win - I'm also not in-house counsel. My job and all of my colleagues job is at risk for lay-offs, its part of the exchange, in boom times we do exceedingly well, in not so great times, we don't do as well. Its likely I am laid off or things don't work out in the next 5-10 years and it is what it is. We all know it, and its all business.

If you look at your comparison set of true employees who make similar amounts of money to you its largely consulting, banking, and high finance. All have bonus heavy structures, and you don't see people blackballing Evercore because they conducted layoffs this year, or Mckinsey because they no-offered pat of the summer class.

I'm advocating for stronger performance incentives and cutting people/not offering summers that aren't performing. If you are worried about your job at that point, or your comp at that point that is on you. I agree you should be paid more, if you are performing.

Also on support staff versus yourself, support staff are often in a position where they can't be furloughed/laid off for a few months because they don't have the ability to meaningfully save. I would hope that you aren't in that position if you are more senior than a first year.

Anon because I don’t want my old posts connected with this.

I happen to know a partner at Quinn Emanuel pretty well. Quinn, as you may or may not know, decided to axe it’s summer program and just do 3L hiring on the theory that summers are just a big waste of money. Instead, they would pay ~30k signing bonuses (I don’t remember the exact number) which is, figure, roughly half the cost of a summer associate. The firm wins because it saves 30k/head in recruiting costs and the incoming associate wins because he gets a summer somewhere else and a pretty sizable signing bonus.

Within two years, the summer program was back. Why? Because, my source told me, it was a recruiting disaster. They couldn’t get any of the people they wanted because anyone who had a good 2L summer wouldn’t want to trade firms for $30k: too great a risk on an unknown. So they went back to the standard model.

You are right that McKinsey and Evercore can get away with no offering summers and still attract top talent but lawyers as a group are generally more risk averse. Any attempts to try and shake up the recruiting or compensation model (like Quinn’s) on a large scale just cause trouble for the firms since there is a huge first mover disadvantage. Maybe if law firms already were in the practice of operating the way you describe it would work but for historical reasons, the industry developed into what we have today and it’s not really possible for the big players to shake it up without hurting themselves in the process.

[PMan99]

I think that there should be a system where some machine who bills 2700 hours, produces good work,and likely makes personal sacrifices on my deal, gets paid significantly more than the 1600 hours associate. The incentive component is too small, and the high guaranteed salary fucks incentives around, especially when firms aren't pulling in 3b in revenue or whatever ungodly number Kirkland and Latham are this past year.

There is incentive, it's called partnership. Someone who is annually putting in 2700 hours of good work is going to be in very good shape to make it it to the next level. And the fact that people stick around biglaw billing absurd amounts in the hope that they can make partner is proof that it works as an incentive.

[Anonymous User]

even elite associates wouldn't prefer this, at least from the start of their careers imo

why? because risk aversion. why would you risk getting paid way less? no one knows how well they will do in biglaw until they've actually spent a few years in biglaw. your personal life could change in unexpected ways. the mental/physical toll of the job could end up being too much and you need to leave to protect yourself. you might end up working for awful people. you might end up just being mediocre or bad at your job, despite your best efforts.

even at places like Kirkland where people go in knowing it's free market/only the strongest flourish, why would you risk being one of those associates that just realizes biglaw isn't going to work out 2-3 years in under your structure? they would risk leaving hundreds of thousands of dollars on the table under your proposed payment scheme, OP. for what? the mere possibility of higher pay if you work yourself to death? just doesn't seem like a good trade off.

[Monochromatic Oeuvre]

I mean we don't pay for shit work and overbilling that is how this got started. Also I'd advise against playing the ad-hominem comp insult game, its not one you will win - I'm also not in-house counsel. My job and all of my colleagues job is at risk for lay-offs, its part of the exchange, in boom times we do exceedingly well, in not so great times, we don't do as well. Its likely I am laid off or things don't work out in the next 5-10 years and it is what it is. We all know it, and its all business.

If you look at your comparison set of true employees who make similar amounts of money to you its largely consulting, banking, and high finance. All have bonus heavy structures, and you don't see people blackballing Evercore because they conducted layoffs this year, or Mckinsey because they no-offered pat of the summer class.

I'm advocating for stronger performance incentives and cutting people/not offering summers that aren't performing. If you are worried about your job at that point, or your comp at that point that is on you. I agree you should be paid more, if you are performing.

Also on support staff versus yourself, support staff are often in a position where they can't be furloughed/laid off for a few months because they don't have the ability to meaningfully save. I would hope that you aren't in that position if you are more senior than a first year.

I think you have much more faith than me, and most other mildly tenured associates, in trying to redesign a system with a sensible premise--paying good people more than bad people--and have it not turn into "partners take everything for themselves."

I *would like* to see more serious bonuses for people who bill 2200+ or are otherwise rated exceptionally, because at almost every firm it gets you either nothing or a lower per-hour rate than the standard bonus (even though the extra hours are the ones that suck the most). Cravath *should* pay more than Dechert for the standard it demands of its associates. The problem is, the experience of the legal industry over the past 20 years is partners grabbing every dollar that doesn't come back later to bite them in the ass. The "bonus" for high-performing associates used to be partnership, and Boomers largely pulled that ladder up behind them.

So when you say "layoffs and no-offers should become standard," my reflex is not to think that the money for low-performing is somehow going to be gifted to high performers; it's that it would head straight back to PPP. Security at the junior level is the last real benefit we can protect by publicizing firms who don't offer it and attempting to direct incoming hires elsewhere, and even then, firms are mostly just avoiding the massive expenses that come with high turnover. I would recommend, based on my experience, that firms do *less* firing of juniors/midlevels. Comparatively few are (a) totally lazy or (b) hopelessly stupid, and some real investment in training and targeted feedback more often than once a year would go a long way. A lot of firms seem to just fire whoever fucks up and churn through the next crop without really figuring out whether their investment can be salvaged. (And by the way, underperforming associates often don't get bonuses based on hours thresholds or other performance metrics, and subpar 3+ years are regularly forced out across the board.)

As it stands now, I'm not sure what problem you think are identifying. You say you started this because your company doesn't pay for "shit work and overbilling." But law firm realization rates have remained steady in the high 80s and a decent chunk of that is just discounts that are negotiated as a matter of course--it's a very small percentage of hours actually getting flagged for writeoff due to client dissatisfaction. So if clients are so upset with shitty performers in Biglaw, they sure as shit aren't doing anything about it, and they're not decamping for cheaper firms. Matter of fact, there's more money flowing through top firms than ever. So who are you really looking for? Top performers to get a bigger slice of the pie? Because everything firms have done this century implies their interest lies in not sharing any more of that pie than absolutely necessary and making associates as interchangeable as possible.

[Winter is Coming]

What's your actual thesis here, bootlicker? Do you think you're the first person to suggest that Biglaw could treat its employees worse and still have a waiting list? I'm guessing the same is true of your job. No-offers wreck someone's chance of ever getting back into Biglaw. Layoffs are not quite as deleterious but, when they happen at a junior level, indebted associates often can't afford them. Why are you arguing for them? Partners feeling a little inadequate at the yacht auction this year?

Firms can conduct business how they want, but people who aren't sociopaths think millionaires should bear financial burdens before people who make 10-50x less than they do, and this board (and the rest of the Internet) takes, and should take, every opportunity to call out the ones treating employees like shit and tell other people not to go there and be treated like shit.

I've heard an onslaught of in-house bitching in my time, and yet you dickcheeses keep paying these ridiculous rates. Why don't you convince your bosses to stop using Biglaw and instead hiring Shingle and Yokel LLP for your needs? Most of my colleagues have been drowning in work their entire careers and would love to have one of their pain-in-the-ass clients off their plate. So why don't you come on here and tell us when you've given your "biglaw firm hiring/firing recommendations to investment leaders," and I'll come here and tell you to get fucked with a rake every time you do?

I actually agree with most of your points, I just don't think biglaw associates are in the place compensation wise to class yourself in with the rest of the people who make these arguments. Most biglaw associates, unless you went to school late are in the top 1-2% of their age bracket for income. How much more do you make than the janitorial staff at your office 6x, 7x? The legal assistants 3x?

Biglaw comp is high enough now, where it is the type of job that shouldn't have pure job security. Layoffs really suck, and really shouldn't happen to first years since they haven't had a chance to prove themselves, but beyond that inherent risk is part of the compensation biglaw associates earn. Earning 200k or whatever the comp number for first year isn't a right, its something that is earned.

I actually think alot of the associates I work with alot are underpaid, they make sacrifices on a personal level, where its likely they hit 2500 billables in a year, but full lockstep just fucks them. Maybe their comp that year was 220, it should be closer to 300.

Theres a reason why I noted that if you are laying off support staff first, thats shit. They are in the compensaiton position where they should have a secure job.

You're just all over the place, dude.

I don't get to complain because I make more than the support staff? FWIW, I think good support staff should make more anyway. I certainly wouldn't advocate they get fired more often. But when it comes to the partners making 20x what I make, or the multibillion dollar client, suddenly the right to complain is back on the table?

You're positing a bunch of questions that have obvious management answers. Why doesn't Cravath pay more than Dechert? Because it doesn't have to in order to differentiate itself among good talent (DRIPPING with preftige). Why don't good associates make more, and why aren't bad associates shitcanned at a higher rate? Because associates in a given class year bill out at the same rate and your company doesn't demand to differentiate when it pays the bills or refuse to pay for the shitty lawyers. Why don't associates who bill 2200+ make more? Because they're not decamping for places with lower hours expectations at particularly unique rates. Why isn't the 20% associate turnover a year--which, by the way, would be considered outrageously high in almost any other industry--even higher? Because, as you danced around but never bullseyed, it's really expensive to recruit, provide for, and train associates for several years until they're good, and clients aren't willing to pay more than they do to make it happen.

It's a bit ironic that you spend all this breath on how the Biglaw model is broken and then talking about how your company hires Latham and Kirkland and all of the people who would have the power to change all of these things if they really gave a shit. The strong do what they will and the weak suffer what they must. The in-house criticism is always so pointless because it almost always comes from the same people who constantly fail to hire laterals due to giant pay cut demands, and who for the same work year after year with consistent 6% rate increases. Why would I listen to an exhortation for change from the people who are largely responsible for keeping this industry the same year after exhausting year?

This is all very much correct. One of the worst parts about the TLS buyout is that it is impossible to tell the difference between delusional idiots, bootlickers, paid shills and straight conmen. I have a feeling that OP is a mixture of all four.

[JusticeJackson]

One of the worst parts about the TLS buyout is that it is impossible to tell the difference between delusional idiots, bootlickers, paid shills and straight conmen. I have a feeling that OP is a mixture of all four.

Bob Dell strikes again.

[Winter is Coming]

One of the worst parts about the TLS buyout is that it is impossible to tell the difference between delusional idiots, bootlickers, paid shills and straight conmen. I have a feeling that OP is a mixture of all four.

Bob Dell strikes again.

"While this brief email announcement is not an ideal form for communicating this type of decision, it is the only realistic way for a firm of our size to inform everybody directly and at the same time. For now, we ask everyone to respect our process so that our friends and colleagues affected by this decision can be notified personally, and to give them the support and understanding they deserve."

[cavalier1138]

I'm not sure what I expected from a thread named after a dumbass meme...

[nealric]

I’m not sure why in-house folks should care one bit how Biglaw compensation works. Do you take such a deep interest in the compensation model at Kimberly Clark when you buy toilet paper?

Law firms pay how they do because that’s how they attract the associates they need. Keep in mind that associates are assets - they are a product that the firm invests in and can be resold for a profit. Purging assets in the downturn only to buy new ones as soon as demand picks up isn’t a great business model.

I’d also posit that associates aren’t as differentiated in quality as people like to think. The truly bad ones don’t make it to mid level status. There’s a big variation in hours billed, but that generally has more to do with the practice group or partners they work for.

As far as comparing to public company compensation- makes little sense. The demands and environment are very different. I took a small pay cut to go in house, but my hourly wage went up over 50%. If anything, I was underpaid in biglaw by comparison.

[kovdak02]

I actually want to work this out and see where it goes. OP says a firm that offers $120k to first years, with $120k bonuses to a meaningfully-sized band of top performers, will eventually outperform the “market” $190k + $10k firms in terms of associate talent acquisition.

Who would do this? Cravath and the rest of the V10 are already attracting top associate talent. It would need to be a firm that pays market but doesn’t truly compete with the top firms at T14 OCIs. I’m not sure where on the Vault scale that hitch would come in. But AlmostElite LLP makes the move to try to climb.

This is conjecture, but very few to no law students are turning down $200k guaranteed at a guaranteed prestigious firm for a non-guaranteed shot at $240k, and perhaps less than $200k, at a firm that is not as prestigious. This profession is so focused on prestige. You can disagree with me on this, but you won’t convince me I’m wrong, because neither of us have good evidence. My best evidence are the P-side firms that pay below market salaries and often way above market bonuses, such that associates could earn more than biglaw market. Top 2Ls do not go there over Cravath or Kirkland or Latham.

I admit there likely is a number at which AlmostElite LLP could pull in some of the folks otherwise going to SullCrom. Maybe not 120+120, but how about 150+150? 170+100? The number exists. So let’s say they do it and start actually pulling in better associates. I strongly doubt that better first-year associate quality will have any effect on their business generation or the rates they can command. So their revenue is flat. But now we are talking about, say, 60k in average additional comp for first-year associates. There’s only one place that money comes from and it’s the partnership. The partners are now taking a pay cut for the long term goal of strengthening the associate talent pool (and, a decade or more from now, the partnership). The partners start to jump to AlmostElite’s Vault rankings neighbors, who will protect their comp. Congrats! You now have more HLS law review feeder clerks doing signature pages and cite checks, but fewer partners obtaining clients and generating business.

I don’t think that’s a win.

[Anonymous User]

Is this really a problem? OP says he likes working with Kirkland, Latham, Ropes, and Wachtell. Of those firms, only one pays lockstep.

Kirkland: black box bonuses
Latham: lockstep but willing to fire people they don't like
Ropes: black box bonuses after year 2
Wachtell: pays above market, and they don't let any idiots through their doors anyway

[ChickenSalad]

I’m not sure why in-house folks should care one bit how Biglaw compensation works. Do you take such a deep interest in the compensation model at Kimberly Clark when you buy toilet paper?

Law firms pay how they do because that’s how they attract the associates they need. Keep in mind that associates are assets - they are a product that the firm invests in and can be resold for a profit. Purging assets in the downturn only to buy new ones as soon as demand picks up isn’t a great business model.

I’d also posit that associates aren’t as differentiated in quality as people like to think. The truly bad ones don’t make it to mid level status. There’s a big variation in hours billed, but that generally has more to do with the practice group or partners they work for.

As far as comparing to public company compensation- makes little sense. The demands and environment are very different. I took a small pay cut to go in house, but my hourly wage went up over 50%. If anything, I was underpaid in biglaw by comparison.

Agreed. The point here just seems to be a generalized grievance about how highly associates are paid and how they shouldn’t complain.

If you get bad work product take it to the firm and tell them. Or, if you don’t like the work you get, change firms. An industry wide shift on big law pay doesn’t really address that.

And I don’t understand the reason for layoffs. Just for the sake of having fewer associates? If a specific firm isn’t doing well financially because of staffing issues, then that firm can address it as they see appropriate. Industry wide change isn’t the issue...

[LBJ's Hair]

OP, I'm curious. Have you personally participated in a rank-and-yank summer program? Or worked at a professional services firm with mostly performance-based compensation?

It's not pleasant.

I would happily give up $20-$30K a year to keep my firm from turning into Lord of the Flies-Meets-Suits.

[veers]

The point here is that in-house clients feel that their law firms overcharge them for the value of services they produce. And this is true broadly across all major biglaw firms.

The biglaw firms often defend themselves by pointing to the high cost of attracting legal talent, and therefore the cost structure of biglaw is extremely relevant for in-house clients. If biglaw firms could produce the same product at half the price, by paying their associates left, that would would be a boon to in-house budgets.

And, unlike toilet paper, high end legal services are quite expensive, and a significant part of in-house budgets, and therefore it is very reasonable for clients to push their law firms to push through greater efficiency in their cost structure.

I’m not sure why in-house folks should care one bit how Biglaw compensation works. Do you take such a deep interest in the compensation model at Kimberly Clark when you buy toilet paper?

Law firms pay how they do because that’s how they attract the associates they need. Keep in mind that associates are assets - they are a product that the firm invests in and can be resold for a profit. Purging assets in the downturn only to buy new ones as soon as demand picks up isn’t a great business model.

I’d also posit that associates aren’t as differentiated in quality as people like to think. The truly bad ones don’t make it to mid level status. There’s a big variation in hours billed, but that generally has more to do with the practice group or partners they work for.

As far as comparing to public company compensation- makes little sense. The demands and environment are very different. I took a small pay cut to go in house, but my hourly wage went up over 50%. If anything, I was underpaid in biglaw by comparison.

Agreed. The point here just seems to be a generalized grievance about how highly associates are paid and how they shouldn’t complain.

If you get bad work product take it to the firm and tell them. Or, if you don’t like the work you get, change firms. An industry wide shift on big law pay doesn’t really address that.

And I don’t understand the reason for layoffs. Just for the sake of having fewer associates? If a specific firm isn’t doing well financially because of staffing issues, then that firm can address it as they see appropriate. Industry wide change isn’t the issue...

[veers]

I guess it depends on how you see yourself fitting into the pecking order. If you are at the bottom, obviously you prefer the slow-to-fire/let incompetent associates linger model. If you are in the middle, then you are probably indifferent. If you are at the top then the model kinda sucks, in that you will be putting in 8 years of way above average hours, for the same comp, just to get a shot at making partner. Contrast this to working at GS or a hedge fund, where being a top performer is a quick road to 7 figure paydays, with a fundamentally better job.

OP, I'm curious. Have you personally participated in a rank-and-yank summer program? Or worked at a professional services firm with mostly performance-based compensation?

It's not pleasant.

I would happily give up $20-$30K a year to keep my firm from turning into Lord of the Flies-Meets-Suits.

[LBJ's Hair]

I guess it depends on how you see yourself fitting into the pecking order. If you are at the bottom, obviously you prefer the slow-to-fire/let incompetent associates linger model. If you are in the middle, then you are probably indifferent. If you are at the top then the model kinda sucks, in that you will be putting in 8 years of way above average hours, for the same comp, just to get a shot at making partner. Contrast this to working at GS or a hedge fund, where being a top performer is a quick road to 7 figure paydays, with a fundamentally better job.

[/quote]

OK, let's be clear here. The question isn't "Do you want hedge fund money?" No one is getting hedge fund money.

The question is, "Do you want a system where...?"
- 1/4 of the associates get below (what was previously) market compensation and are like, apoplectic
- 1/2 of the associates get roughly market compensation and are pissed because they think they deserve more
- 1/4 of the associates get above market and are happy

[nealric]

The point here is that in-house clients feel that their law firms overcharge them for the value of services they produce. And this is true broadly across all major biglaw firms.

The biglaw firms often defend themselves by pointing to the high cost of attracting legal talent, and therefore the cost structure of biglaw is extremely relevant for in-house clients. If biglaw firms could produce the same product at half the price, by paying their associates left, that would would be a boon to in-house budgets.

And, unlike toilet paper, high end legal services are quite expensive, and a significant part of in-house budgets, and therefore it is very reasonable for clients to push their law firms to push through greater efficiency in their cost structure.

I’m not sure why in-house folks should care one bit how Biglaw compensation works. Do you take such a deep interest in the compensation model at Kimberly Clark when you buy toilet paper?

Law firms pay how they do because that’s how they attract the associates they need. Keep in mind that associates are assets - they are a product that the firm invests in and can be resold for a profit. Purging assets in the downturn only to buy new ones as soon as demand picks up isn’t a great business model.

I’d also posit that associates aren’t as differentiated in quality as people like to think. The truly bad ones don’t make it to mid level status. There’s a big variation in hours billed, but that generally has more to do with the practice group or partners they work for.

As far as comparing to public company compensation- makes little sense. The demands and environment are very different. I took a small pay cut to go in house, but my hourly wage went up over 50%. If anything, I was underpaid in biglaw by comparison.

Agreed. The point here just seems to be a generalized grievance about how highly associates are paid and how they shouldn’t complain.

If you get bad work product take it to the firm and tell them. Or, if you don’t like the work you get, change firms. An industry wide shift on big law pay doesn’t really address that.

And I don’t understand the reason for layoffs. Just for the sake of having fewer associates? If a specific firm isn’t doing well financially because of staffing issues, then that firm can address it as they see appropriate. Industry wide change isn’t the issue...

As an in-house client, I disagree that law firms always overcharge. Some do and some don’t. In general, I find law firm fees to be much more reasonable than investment bank fees and often have less fluff than BIg4.

If you don’t like the fee structure at biglaw, there are legions of mid size and smaller firms that would love to get your business and would charge less. Those firms generally pay their associates a lot less. The issue is, are you going to get the same quality of legal work from them?

The bottom line is you won’t get a Rolls Royce at Hyundai prices. Admonishing Rolls Royce to improve their cost structure won’t change that. If they find an efficiency, it will go to their profits and not to you. To be sure, sometimes you don’t need a Rolls, and paying for one is a senseless waste of money. Are you driving around the Queen or delivering pizzas?

[kovdak02]

The point here is that in-house clients feel that their law firms overcharge them for the value of services they produce. And this is true broadly across all major biglaw firms.

The biglaw firms often defend themselves by pointing to the high cost of attracting legal talent, and therefore the cost structure of biglaw is extremely relevant for in-house clients. If biglaw firms could produce the same product at half the price, by paying their associates left, that would would be a boon to in-house budgets.

And, unlike toilet paper, high end legal services are quite expensive, and a significant part of in-house budgets, and therefore it is very reasonable for clients to push their law firms to push through greater efficiency in their cost structure.

There are dozens of law firms capable of doing the vast majority of work that in-house counsel would seek one for. If a firm is greedily overcharging like you allege these counsel believe, the market should happily provide them with an alternative.

It speaks volumes that a counsel will bitch about how much they are spending on some 28 year old with $200,000 in debt who’s missing their anniversary dinner while clearing 250 hours that month, only for the counsel to keep hiring that firm over and over. The market speaks - for both of those participants. Those transactions, counsel-firm and associate-firm, are both worth it (in that moment).

[Lurk2020]

The point here is that in-house clients feel that their law firms overcharge them for the value of services they produce. And this is true broadly across all major biglaw firms.

The biglaw firms often defend themselves by pointing to the high cost of attracting legal talent, and therefore the cost structure of biglaw is extremely relevant for in-house clients. If biglaw firms could produce the same product at half the price, by paying their associates left, that would would be a boon to in-house budgets.

And, unlike toilet paper, high end legal services are quite expensive, and a significant part of in-house budgets, and therefore it is very reasonable for clients to push their law firms to push through greater efficiency in their cost structure.

If they think they aren’t getting value for what a Kirkland or DPW is charging, there are plenty of firms that do charge less. There isn’t anything that requires them to hire a V10 or even a V100 firm. The costs you’re talking about are the costs of acquiring the legal talent that they are seeking and being able to ask that legal talent on Friday at 5pm to have something turned back to them by Monday at 9am. They get the prices that reflect the demands they are making.

Edit- nealric beat me to it

[Monochromatic Oeuvre]

The point here is that in-house clients feel that their law firms overcharge them for the value of services they produce. And this is true broadly across all major biglaw firms.

The biglaw firms often defend themselves by pointing to the high cost of attracting legal talent, and therefore the cost structure of biglaw is extremely relevant for in-house clients. If biglaw firms could produce the same product at half the price, by paying their associates left, that would would be a boon to in-house budgets.

And, unlike toilet paper, high end legal services are quite expensive, and a significant part of in-house budgets, and therefore it is very reasonable for clients to push their law firms to push through greater efficiency in their cost structure.

I’m not sure why in-house folks should care one bit how Biglaw compensation works. Do you take such a deep interest in the compensation model at Kimberly Clark when you buy toilet paper?

Law firms pay how they do because that’s how they attract the associates they need. Keep in mind that associates are assets - they are a product that the firm invests in and can be resold for a profit. Purging assets in the downturn only to buy new ones as soon as demand picks up isn’t a great business model.

I’d also posit that associates aren’t as differentiated in quality as people like to think. The truly bad ones don’t make it to mid level status. There’s a big variation in hours billed, but that generally has more to do with the practice group or partners they work for.

As far as comparing to public company compensation- makes little sense. The demands and environment are very different. I took a small pay cut to go in house, but my hourly wage went up over 50%. If anything, I was underpaid in biglaw by comparison.

Agreed. The point here just seems to be a generalized grievance about how highly associates are paid and how they shouldn’t complain.

If you get bad work product take it to the firm and tell them. Or, if you don’t like the work you get, change firms. An industry wide shift on big law pay doesn’t really address that.

And I don’t understand the reason for layoffs. Just for the sake of having fewer associates? If a specific firm isn’t doing well financially because of staffing issues, then that firm can address it as they see appropriate. Industry wide change isn’t the issue...

"You see, the associates cost so much, that's why we have to have these ridiculous fees!" said the Rolex-wearing partner at his Miami vacation home.

If there's one group I care about less than the partners, it's the in-house budgets of megacorps. Let them piss and moan all they want; at the end of the day they still pay these ridiculous fees without fail. But yeah, sure, if clients want "greater cost efficiency" they don't want to actually find a new firm or tell partners to take home 1% less, associates are an easy punching bag. Come on here and in the Wall Street Journal and wherever telling us we're the problem; I'll be here calling you a bunch of dipshits for as long as you do.

[kovdak02]

Also it's striking that the very first sentence of this thread references an email from Andy Calder, a Kirkland partner in Houston, who was brought over to K&E from STB at the age of 35 with a $5 million annual guarantee. But there are no complaints about partner compensation as a factor in "firms over-charging." Personally, I don't think that's how markets work - firms charge what businesses will pay, partners get compensated as much as a firm will pay them - but if one prefers instead to complain about lazy associates being paid too much and fired too seldom, some consistency on the point would be nice.

[veers]

The point is that large law firms, in lockstep, have been pushing through 5%+ annual rate increases for the last 10 years.

Do you every look at the bills that get sent out for M&A deals/cap market deals? Just ginormous monstrosities, with partners billing $1,500/hour, unqualified 1st years billing $450/hour, and senior associates close to the $1,000/hour mark.

That is a massive amount of money spent to basically have a bunch of liberal arts grads move commas around form documents, many times in an incredibly inefficient manner for relatively straightforward deals.

Any reasonable business is going to find these mounting legal fees increasingly painful, and naturally inquire why it costs so much darn money to do fairly straightforward work, and especially how it makes sense to pay $400+/hour for a first year associate who spent 3 years philosophizing in law school, but has little in the way of real tangible skills or an understanding of financial transactions.

The point here is that in-house clients feel that their law firms overcharge them for the value of services they produce. And this is true broadly across all major biglaw firms.

The biglaw firms often defend themselves by pointing to the high cost of attracting legal talent, and therefore the cost structure of biglaw is extremely relevant for in-house clients. If biglaw firms could produce the same product at half the price, by paying their associates left, that would would be a boon to in-house budgets.

And, unlike toilet paper, high end legal services are quite expensive, and a significant part of in-house budgets, and therefore it is very reasonable for clients to push their law firms to push through greater efficiency in their cost structure.

I’m not sure why in-house folks should care one bit how Biglaw compensation works. Do you take such a deep interest in the compensation model at Kimberly Clark when you buy toilet paper?

Law firms pay how they do because that’s how they attract the associates they need. Keep in mind that associates are assets - they are a product that the firm invests in and can be resold for a profit. Purging assets in the downturn only to buy new ones as soon as demand picks up isn’t a great business model.

I’d also posit that associates aren’t as differentiated in quality as people like to think. The truly bad ones don’t make it to mid level status. There’s a big variation in hours billed, but that generally has more to do with the practice group or partners they work for.

As far as comparing to public company compensation- makes little sense. The demands and environment are very different. I took a small pay cut to go in house, but my hourly wage went up over 50%. If anything, I was underpaid in biglaw by comparison.

Agreed. The point here just seems to be a generalized grievance about how highly associates are paid and how they shouldn’t complain.

If you get bad work product take it to the firm and tell them. Or, if you don’t like the work you get, change firms. An industry wide shift on big law pay doesn’t really address that.

And I don’t understand the reason for layoffs. Just for the sake of having fewer associates? If a specific firm isn’t doing well financially because of staffing issues, then that firm can address it as they see appropriate. Industry wide change isn’t the issue...

As an in-house client, I disagree that law firms always overcharge. Some do and some don’t. In general, I find law firm fees to be much more reasonable than investment bank fees and often have less fluff than BIg4.

If you don’t like the fee structure at biglaw, there are legions of mid size and smaller firms that would love to get your business and would charge less. Those firms generally pay their associates a lot less. The issue is, are you going to get the same quality of legal work from them?

The bottom line is you won’t get a Rolls Royce at Hyundai prices. Admonishing Rolls Royce to improve their cost structure won’t change that. If they find an efficiency, it will go to their profits and not to you. To be sure, sometimes you don’t need a Rolls, and paying for one is a senseless waste of money. Are you driving around the Queen or delivering pizzas?

[Lurk2020]

The point is that large law firms, in lockstep, have been pushing through 5%+ annual rate increases for the last 10 years.

Do you every look at the bills that get sent out for M&A deals/cap market deals? Just ginormous monstrosities, with partners billing $1,500/hour, unqualified 1st years billing $450/hour, and senior associates close to the $1,000/hour mark.

That is a massive amount of money spent to basically have a bunch of liberal arts grads move commas around form documents, many times in an incredibly inefficient manner for relatively straightforward deals.

Any reasonable business is going to find these mounting legal fees increasingly painful, and naturally inquire why it costs so much darn money to do fairly straightforward work, and especially how it makes sense to pay $400+/hour for a first year associate who spent 3 years philosophizing in law school, but has little in the way of real tangible skills or an understanding of financial transactions.

Why aren’t these businesses going to cheaper firms then?

[The Lsat Airbender]

When you're doing a $400m debt issuance you might as well drop an extra $100k on legal fees if it means getting the best representation and potentially heading off issues down the road. The MAE stuff arising from the pandemic vindicates this risk aversion because it turns out there really are some billion-dollar commas from time to time.