Law People : Law Practice Management, Law Firm Coaching : Ronda Muir of Robin Rolfe Resources : Law People Blog

Results from two surveys show growth at the country’s largest law firms to be down significantly in 2008 although employment is generally still on the rise. The National Law Journal’s 31^st annual survey of the NLJ 250 reports that those firms added 4.3% more attorneys in 2008, consistent with increases in 2006 and 2005 but at a lower rate than 2007’s 5.6%.  Partner growth in 2008 averaged 3.5%, which was down from 4.6% in 2007 and 5.1% in 2006. Non-equity partners increased 9.2% compared to 2007, when their ranks increased 8.2% compared with 2006. The average number of women partners stayed stable.

The West Peer Monitor Index, a measure of legal market conditions, reported in late November that large law firms had the lowest productivity during the third quarter of 2008 since keeping records, on average down 4.5%. Productivity at the largest firms, the AMLaw 100, was down even more--6.5%, largely as a result of continued increases in hiring at a time when there is less (particularly transactional) work for those associates to do. Often it takes two years for large firms to respond to market conditions in their hiring practices.

According to the Index, average associate hiring at all firms declined 6% in the 3rd quarter of 2008 compared to 2007, with firms offering equity partnerships to half as many attorneys as they did last year (including mega-firm Mayer Brown, which recently announced making 27 partners worldwide compared to 43 last year). Average lateral growth remains comparable to 2007.

Billable hours for all firms dropped 2.5% in the 3^rd quarter after declining 2% in the second quarter. Overhead expenses grew 6% compared to 8.3% in the 3rd quarter 2007 and direct expenses grew 8% compared to 9% last year. 

The short-term tact many firms are taking now is to lay off lawyers. According to the U.S. Bureau of Labor Statistics, 7,300 lawyer jobs were lost nationally between June and October, with an expectation of far more shrinkage when November and December numbers are tallied.       

Big firms, and particularly the big New York-based firms who draw much of their work from transactions for or financed by Wall Street financial institutions, have been particularly hard hit, and are responding accordingly.  The tally of recent attorney layoffs from New York offices includes 96 lawyers dropped from Cadwalader, Wickersham & Taft, 20 from Clifford Chance, 40 from Orrick, Herrington & Sutcliffe, 35 from Proskauer Rose, and 70 from White & Case.  Clifford Chance attorneys have been quoted questioning whether it's worth having a New York office at all. The fact that major transactional firms--Heller, Thelen, and now Thatcher, Profitt--have already folded this early in the recession may well presage more big firms collapsing in 2009.

Freezing salaries, as Latham & Watlkins has announced, and cutting bonuses in half and eliminating special bonuses, following the lead of Simpson Thacher, Davis Polk, Skadden Arps, Cravath and others in the US and Allen & Overy and Clifford Chance in the UK, are among the other responses to all this bad news, as well as cutting staff, reevaluating off-shore back office services, and trying to offer more flexible fee arrangements.  The recent explosion of non-equity partners is also being scrutinized for its impact on firm finances during these difficult times.  

Hard-pressed law departments are taking another look at the pros and cons of outsourcing, as well as insisting on more accommodation from their firms on staffing and pricing. 

There are a few benefiting from the downturn. The work of outplacement firms has expanded exponentially and attorney recruitment firms have had an influx of talent.  In recognition of this growing pool of lawyers, LegalOnRamp, among others, has added a legal positions component to its site. So those firms looking for talent are at an advantage now.   

Is there any silver lining?  Firms can take this time to experiment with different fee arrangements and also to shore up organizational fundamentals--enhancing performance evaluations, professional, leadership and business development training, and succession plans--so as to be better able to weather the continuing storm, and to be poised to take advantage of the economic improvements that will eventually come.  

Although some pundits are claiming that the economic impact on the law business hasn't been as disastrous as first expected (which we may have to wait a while longer to fully evaluate), there is no denying even at this stage a sea change of sorts---if only that the current fear and trembling in the legal community, historically one of the most economically stable professions, will cast a long shadow over firms as they embark on 2009 and the years to come.

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In a December 13, 2006 Legal Times article extolling the energy and talents of Pamela Rothenberg, the managing partner of Womble Carlyle Sandridge & Rice’s Washington D.C. office, Rothenberg stressed how much she relies on The Gallup Organization strengths, an assessment that is described in the book First, Break All the Rules: What the World's Greatest Managers Do Differently, in managing the firm. 

Martin Seligman, the Fox Leadership Professor of Positive Psychology at the University of Pennsylvania, has worked with The Gallup Organization to expand and refine their strengths assessment to make it particularly relevant to lawyers. Seligman is so certain of the usefulness of the Gallup strengths assessment in raising productivity, that he has issued a challenge to assess free of charge the members of any firm willing to participate, on the condition that he be paid 10% of their increased profits. 

We have used the Gallup strengths assessment in a number of client projects for law firms and law departments. If you are interested in participating in Seligman’s challenge, or simply want to know more about these strengths and how they could be useful to improving productivity in your firm, contact us.

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BTI Consulting Group recently announced the results of its sixth annual client service survey, with the conclusion that corporate America is not very happy with their law firms.  Of the more than 250 corporate counsel and top executives interviewed over the past year, only 32% said that they would recommend a firm that worked for them.

Of those firms who were in the top 30 for client service, Sidley Austin topped the list.  In a separate list of the most arrogant law firms, Skadden, Arps, Slate, Meagher & Flom took top honors.  It was notable that California and other West Coast firms were well-represented on the former list and New York and other East Coast  firms seemed to dominate the latter.  Several firms are clearly working their way up the service list, including Morrison & Foerster and Reed Smith.

While the survey provides useful data for most firms for understanding their public persona and marketing themselves to prospective clients, those who didn't do well or who figured prominently in the arrogant and other undesirable lists should do their own risk management review and come up with strategies to address their shortfalls.  Understanding the firm's values and how the culture reflects them, possibly reevaluating and redirecting either or both, educating both associates and partners in client service, raising the firm's emotional intelligence, and setting a timeline to confirm by marketplace and client surveys the effectiveness of the firm's new policies are possible strategies.  In a competitive marketplace where clients are king, doing nothing is not a reasonable course.

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Two recent books highlight some of the challenges in building strong practices:  retaining and promoting women and balancing life and work.

Ending the Gauntlet: Removing Barriers to Women's Success in the Law (Thomson/Legalworks, 2006) by Lauren Stiller Rikleen, a partner at the Massachusetts law firm Bowditch & Dewey, reviews the lack of professional fulfillment and the unsustainable personal sacrifice that the current law firm structure engenders in its lawyers, and identifies how these struggles are even more acute for women trying to succeed. While Ms. Rikleen suggests that leaving behind the billable hour fee structure, improved mentoring and other changes within firms can start a transition, it is her opinion that clients and law schools are the ones who have the power to make radical changes in the legal profession and its treatment of lawyers, particularly women.

The ABA's "The Lawyer's Guide to Balancing Life & Work: Taking the Stress Out of Success" by George W. Kaufman (2006) explores the ways that legal practice supports or undermines all lawyers' quest for success, advocating a personal self-assessment to gauge expectations, values and goals and the use of an individual action plan to realize a future more attuned to those issues.

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Women have suddenly become scarce among the Supreme Court Justices’ clerks, the New York Times reported August 30, 2006. While 50% of law school graduates in 2005 were women, only 7 of the 37 Supreme Court law clerkships are women, the first time since 1994 that the number has been in the single digits. Justices Breyer, Ginsburg, O’Connor and Stevens have cumulatively had the most women clerks from 2000 to 2006, with each averaging 44% women or more.

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The National Law Journal has carried stories on several firms or regions where diversity has taken a front seat. On July 2, 2006, it reported that several Chicago firms had announced their intention to build their diversity numbers, responding to the Chicago Bar Association’s initiative, the “Alliance for Women.” So far, the firms involved are outperforming both their old diversity percentages and the national averages, climbing to as many as 27% female partners. The key, they report, is not in their hiring, which has long been attentive to females, but in creating better environments for female advancement. 

Similarly, the NLJ reported on July 10, 2006 that firms in Texas are making a concerted push to raise diversity levels, hiring internal diversity directors, moving women into leadership roles, and creating scholarship and other support programs. Their efforts have resulted in increased women and minority percentages.

California’s new law that requires managers in businesses with 50 or more employees to undergo two hours of training on sexually harassment each year has been applied to law firms, possibly both partners and associates. Connecticut and Maine also require mandatory harassment training. 

The California State Bar is also working to improve diversity by trying to set up a support network that would help guide poor kids of all races into a legal career, as well as crack down on not only harassment, but simply rude, uncivilized behavior from attorneys.

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The last few months have seen five new studies relating to diversity and the practice of law:

1.  A new study by the ABA’s Commission on Women in the Professions entitled “Visible Invisibility: Women of Color in Law Firms” found that few women of color are offered equal opportunity and most choose to leave their firms rather than stay and fight for equality.   One of the study’s promoters decried how similar the results are to the results in the studies her committee conducted on the same issues in the 1990s. While, largely in response to client demands, more law firms are attempting to hire for more racial diversity, few pay attention to what happens once these women actually start working at the firm. The attrition rate for these lawyers, according to NALP, reaches nearly 100 % within eight years. At least one reason for their lack of success is laid to the lack of like-situated mentors. While there is a tendency to believe we are past the overt discrimination, 49% of women and 34% of men of color reported harassment or discrimination, compared to 47% of white women and 2.5% of white men. However, the primary reason women of colored reported for leaving legal practice was to obtain greater work-life balance, which is also the most frequently reported reason for all other groups surveyed to leave.

2.  The Inside Counsel/Dickstein Shapiro Diversity Survey, published October, 2006, focused on the diversity progress in corporate law departments based on 377 in-house counsel responses, including 19% participation from general counsel, with respondents being 70% white,14% black; 7% Hispanic and 7% Asian. 

The primary findings of that study are consistent with the ABA report above that looked at law firms, including: 

§         Legal departments lack racial diversity.  "The average legal department that responded had 46 attorneys of which 3.5% are non-Caucasian;  the median department employs 11 attorneys of which 1 is non-white."

§         Less than 9% of legal departments are headed by non-Caucasian general counsel

§         Senior leadership fails to set goals--only 32% of companies surveyed had formal diversity polices.

§         Commitment from the GC and CEO is essential, although often leadership compensation is not tied to meeting diversity goals.

3.  “Presumed Equal: What America’s Top Women Lawyers Really Think About Their Firms” surveyed 16,000 lawyers to report on what women attorneys experience in law firms, updating a 1993 report and its 1998 followup. The report found that many women believe their firms don’t provide opportunities to make partner or foster an environment that values diversity and family.  The survey looks to general trends in disparate treatment that women experience at various law firms and highlights specific weaknesses of 105 individual firms ("most prestigious law firms in the US"). It scores the firms based on responses and ranks them nationally and by geographic location.

Since it was initially created to assist law students in their consideration of job opportunities, this survey attempts to provide a discourse about what it is like to be a woman at a top law US law firm and evaluates environment for women to achieve personal goals such as (i) making partner, (ii) finding a mentor, and (iii) life balance.

The report concludes, "Objective indicators still show a disparity between the relative power held by men and women in the legal field and indicate that gender is still relevant to women's success." 

The report also finds "that long-term professional satisfaction for women is not based on the quality of a woman's work. At present, the reluctance of male dominated partnerships to mentor female attorneys, the persistance of gender biases regarding women's roles, and the tacit penalties that women endure for taking advantage of maternity leave, to name only a few dynamics at play, still profoundly shape women's experience within the legal profession."

4.  "Creating Pathways to Success: Advancing and Retaining Women in Today's Law Firms, " issued by the Women's Bar of DC in May 2006, examined better ways to stem the departure of women from law practice.  While the report includes many specific actions, the findings generally are that there are more stumbling blocks to the success of women in law practice than are currently being addressed by the commonly used methods of supporting and promoting women.  The most common current practices focus on specific programs in specific business areas in a silo-like approach.  The stumbling blocks, however, cross broad issues and fields but unite on the key issues of  how women can achieve the level of business success they expect of themselves consistent with societal demands and personal creativity.  

5.  In October 2006, the National Association of Women Lawyers (NAWL) reported on its survey of the American Lawyer Media's 200 largest firms, measuring the comparative role of female lawyers at different levels of seniority, types of partnership opportunities, where women stand in relation to men in firm governance and comparative compensation at the same levels of seniority.  According to NAWL, the survey findings reflect the situation at law deparatments as well.

With responses from 103 of the 200 firms (and against the background that women have been 50% of law school graduates for each of the past 15 years), women constitute:

§         16% percent of equity partners

§         26% of non-equity partners

§         28% of "of counsel" or other special counsel positions

§         45% of associates

Looking at the 16% representation among equity partners, in an era when partnerships are made within 7-10 years, many of us would have expected greater gender parity at all but the most senior levels of law firm partnership. 

The statistics also reveal that of the 16% percent of all equity partners, women are more heavily represented among the more junior classes of equity partners, constituting 21% of equity partners who graduated law school between 1990 and 1995, and 24% of those who graduated in 1996 or later.

But NAWL warned that the trend emerging from such figures is unclear, noting that women who have recently become equity partners could yet leave the profession, and that even at 24 percent of equity partners, women are substantially under-represented relative to their 45 percent of the total number of associates.  

In terms of leadership positions:

§         16% of the members of law firm governance committees are women. 

§         15% of the firms reported that up to 25% of the members of the highest governing committee were women

§         10% of responding firms reported that there were no women on the highest governing committee

§         5% of managing partners are women.

As to compensation, of 62 firms responding, 92% said that the highest paid lawyer was male.  Of the 35 firms that provided compensation breakdowns, male equity partners were paid an average of $510,000 whereas female equity partners averaged compensation was $429,000.  The survey recognized that the higher number of men at senior partnership levels could account for the significant difference in compensation.

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Sexual harassment came to the legal profession in 1994, when a secretary at Baker & McKenzie filed a discrimination case against the firm and a partner. In 1998, a California Superior Court jury awarded her $7 million and the landscape of law firm conduct was trumpeted as being in the midst of a major change.  Last spring the news broke that a male partner at Holland & Knight’s Tampa office had been given the job of chief operating partner, prompting a number of complaints about his history of sexual harassment, which had, interestingly enough, not been brought to the attention of the firm’s administrators earlier. After extensive local and national news coverage, he resigned from his management position. 

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