Biglaw Learns New Math

My first question was where do I apply.  After all, I could really use a year abroad.  Really.  Going café to cabaret sounds like a dream come true.  So when I read in the New York Times about the Skadden Arps offer to associates to take a year off for a third of their salary, I felt envy of Biglaw associates for the first time ever. 

Only in a financial world turned upside down would an arrangement like this one make sense. Looking to cut costs like everyone else, but not prepared to lay off associates, Skadden has chosen instead to offer all of its associates — about 1,300 worldwide — the option of accepting a third of their base pay to not show up for work for a year. (So far, the partners have no equivalent arrangement.)

In the case of the lawyer profiled in the article, a 6th year associate, the pay for her year off would be $80,000.  Naturally, she will have to leave New York City to survive, as no one can make it here on such a pittance.  Seriously, that’s pin money for those of you in Kansas who won’t understand the prior sentence.

But once I got past my whimsical dream of a never-ending carafe in Aix-en-Provence, a realization hit home.  It’s financially better for Skadden to pay $80 grand to be rid of its associates for a year than to have them working.  After all, with layoffs aplenty around Biglaw, it’s not like Skadden couldn’t tell its youngins’ that they can work for a third of their salary for a year, or until the revenues justified otherwise, or take a hike.  Given the options, particularly that a third of a Biglaw associate’s salary is still more than they would earn doing pretty much anything else they’re qualified to do, they’ve got them by the ‘nads.  Since when is Biglaw afraid to squeeze?

What this offer reveals is an astounding lack of value associates bring to the practice of law.  The myth is busted.  They are worth more to Biglaw out of the office than they are there. 

The real joke isn’t on Biglaw, but its clients.  You remember them, the folks who pay the freight for the two partners and six associates assigned to every matter, bearing in mind that the first perk of partnership is never having to carry a bag again.  Not that there isn’t real heavy lifting to do.

Assuming that Skadden’s program doesn’t take into account the profit motive that some larger law firms consider when making decisions such as this, we are now informed that at least a third of the cost of an associate is utterly, needlessly and totally wasted.  My bet is that it costs firms at least that much to keep them in redwelds with gold-leaf monograms and Starbucks.  It’s a cost saver to toss a third of their salary down the toilet rather than have them show up.  What a smack in the face.

Still, if it will get me to the continent and keep me in lattes for a year, I could learn to suffer.  And to all my buddies at Skadden, there’s little that will bruise my ego anymore, so I can take the insult with no hard feelings.  Plus, I assure you that I will never want to return to the grind for my shot at your corner office.  It’s a win-win.  Think about it.

4 comments on “Biglaw Learns New Math

  1. Jonathan Mitchell

    The idea that a refusal to carry papers is a mark of high standing in the legal profession has a long history. This is from Maidment’s ‘Court of Session Garland’, Edinburgh, 1839 (writer to the signet= attorney; apprentice=first year associate):

    “A gentleman, afterwards well known in the profession, who subsequently settled in London, and who is still alive, had been bound apprentice to a respectable writer to the signet of the old school, who was no great admirer of modern puppyism. The youth was deemed, or rather deemed himself a very fine sort of person, and the idea of carrying papers was revolting to his feelings. One evening the master rang the bell, and the apprentice was desired to take a very small parcel of papers to a professional gentleman, whose residence was not far distant, the packet was received in silence,—not a word was said. A minute had hardly elapsed when the master saw a porter run hastily across the street, apparently to the office. This induced some suspicion of his errand,—which was verified by shortly seeing the young man issue forth from the office followed by the porter. Seizing his hat the master followed, and overtaking the latter, relieved him of his burden. He then followed in the rear of his apprentice, who, of coarse, thought it beneath his dignity to look round. At last the place of destination was reached,—the door bell was rang with violence, ” here fellow,” quoth the youth, ” give me the parcel,” slipping sixpence into his hand; but without condescending to look at him, ” here it is for you,” exclaimed the supposed porter,—the voice struck the young gentleman, and his astonishment and confusion may be imagined when he beheld his master. In place of scolding him, the old gentleman contented himself with using the very powerful weapon of ridicule, and with such effect, as the apprentice afterwards candidly avowed, that in future he resolved not to be above his business.”

  2. cbr

    The whole point behind any deferral program (Skadden may be the only firm offering it to current associates, but other firms are doing the same thing with their incoming associates) is to get some sort of natural attrition. Biglaw shops have a natural rate of attrition of around 1/3 each year. That is, 1/3 of the associates leave for greener pastures each year. So, what about this year? Firms have experience almost 0% attrition. Therefore, to get back some semblance of attrition, Skadden has offered their associates this option. The 1/3 salary and other benefits are already built into the financial plan because firms usually pay out severance when associates leave, including 3 months salary, health, etc. Therefore, in light of the financial economic meltdown, the program is not all that startling, and I’m sure any partner can explain this point to his or her clients.

  3. SHG

    Obviously, but the error of the rationale behind it is that cost of the failure rate of associates within Biglaw that is ultimately paid by the client.  But even a one third natural attrition rate (reflecting some less than brilliant hiring and retention practices, by the way) reflects a slavish adherence to misguided personnel practices.  If there’s no attrition, and your associates are so wonderfully competent, then stop hiring until you need more lawyers. 

    This is how every other industry staffs, yet Biglaw has its own venerated system of classes of associates.  And as you show, it’s so married to its historic ways that it has yet to dawn on Biglaw that it could always break free of tradition and start behaving like an intelligent employer.  I bet the clients could explain this point to the partner.

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