<p>Sorry NYU, but I guess we’ll have to disagree. You’ve ignored a salient point-getting into the top law schools in the first place-and then doing well at the top school. That winnowing process is brutal. It’s like the old joke “how to make a million bucks and not pay a penney in taxes…first, get the million bucks”.</p>
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<p>That is irrelevant for this discussion, which is about the economic/ social rationale for the current Biglaw salary.</p>
<p>As mentioned, top law firms pay top dollars to associates, in return for their intellectual capital. Law firm is a prestige-driven business; a large chunk of law firms’ marketing/ sales pitch to large, institutional clients (such as banks) is that they claim to attain an army of the ‘brightest’ minds in law, who all hail from top of the class at very top law schools. </p>
<p>Biglaw, I-banking, and Strategy Consulting are few industries where, the employers care more about your raw intellectual horsepower and potential, more so than amont of the ‘experience’ or ‘training’ you have.</p>
<p>To put this in context: consider the management consulting industry. McKinsey or Bain hire top undergrads from the very top colleges in the nation, with the starting comp of over 80-90k a year (ignoring bonuses and overtime), for analyst positions. Do you think that the clients of these consulting firms - namely F500 companies, would willingly pay a dime for the hours billed by these analysts fresh out of school, with no work experience, for their “corporate strategic insight”? I don’t think so. Yet, Management Consulting firms pay these analysts top dollars, to lure top talent. (away from I-banking, trading, academia, Biglaw, medicine, etc) The only reason why the clients of consulting firms tolerate having non-experienced analysts on their projects, paying a boatload of money for their hours, is due to the credibility and expertise of the more senior, and very well-respected consultants or partners on the project from that firm, and the fact that these analysts are needed to do the grunt work for that team to function as a whole.</p>
<p>The same is true of Biglaw. Clients pay 1st year associates’ billing hours despite being aware of their lack of experience - based on the credibility of that law firms’ senior leadership, skilled senior staffs, law firm’s reputation, and the fact that 1st year associates are still needed to process large, complex transactional deals under the supervision of more senior attorneys on the deal team.</p>
<p>At the end of the day, whether the client is WILLING to pay for 1st years’ work product is irrelevant. Whether it be I-banking, consulting, or Biglaw, there still needs to be warm bodies doing grunt work, for the whole team to function. The rather high starting salaries of Biglaw, consulting, or I-banking have nothing to do with what the clients think regarding the issue.</p>
<p><a href=“Incidentally,%20in%20this%20overcrowded%20field,%20there’s%20no%20shortage%20of%20top%20talent,%20unless%20you%20mean%20those%20who%20have%20done%20federal%20appellate%20clerkships,%20including%20the%20Supreme%20Court,%20or%20have%20been%20with%20the%20DOJ.”>quote</a>
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<p>Although there are thousands and thousands of college grads and students in U.S., even if we are just talking about top ten colleges, top employers wouldn’t agree with your viewpoint at all.</p>
<p>The BCG interview recruiter, when I talked to her at the info session at my undergrad, expressed her concern that finding the top talent is a very challenging and difficult task for the top firms, and as a result, these firms spend a huge amount of time and resources to find and recruit the top talent. She also mentioned that the top consulting and I-banking firms are rather fierce against each other in order to recruit the same pool of candidates.</p>
<p>Usually, the way it works is that most of top consulting and I-banking firms would all want same pool of candidates, and not really interested in candidates outside of that pool. It is not uncommon, at all, to find people at top colleges/ top MBA programs who end up with multiple I-banking and consulting job offers, while many others are left out with no offer from any employers at all, even within the same program/ school. </p>
<p>The same goes for law. At my law school, there are people who ended up with more than 10 offers from Biglaw, while some others struggled for just one offer. The amount of investment and effort that top employers put in order to recruit the finite amount of very desirable candidates are enormous, and deserve more of our attention.</p>
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<p>Then your definition of “market” is much different than mine. :)</p>
<p>In my opinion, biglaw salaries are so large because if not, no one would bother working for those large firms. Who wants to spend $200+k on law school, get a job at a big firm, work 70-100 hrs/wk just for an average salary? No one. The work isn’t that difficult (from what I hear, so maybe I am wrong) but tedious, repetitive, and boring. The money is what draws the law students to those jobs. Many eventually burn out and leave for other, more suitable work.</p>
<p>Cranky - Loved your post. I don’t think I’ve heard that before, but it’s so true!</p>
<p>NYU Lawyer: I also disagree with a lot of your assumptions about how BigLaw works, from my perspective in-house with a Fort. 500. We don’t pay for associates with no experience. Period. When I was working on a major project not long ago, our BigLaw partner asked if some associates could sit in to take notes, order meal deliveries and run copies…(for the experience, no charge). Somebody is paying for their time. Do you really think that the law firm doesn’t care what the clients think about the build-up of rates?</p>
<p>We don’t care where the firm’a associates went to law school. We only research the partner’s experience in the matter at hand. BigLaw firms compete for our business, and we manage their bills closely. We certainly have enough good mid-sized firms, regional firms and boutique firms competing for our business, and BigLaw only gets a small piece of it.</p>
<p>The last time we hired, our company got more applications for the openings than for any other postion in the office’s history. I hired someone from a T100 law school with practical experience in our industry from his undergrad internships. I’m sure the starting salary would have shocked and dismayed you. </p>
<p>Of course, this is only my experience. Over my approximately 35 years of experience (including a few years with a NYC boutique law firm), I’ve certainly met lawyers in an elitist bubble. However, the majority of lawyers in this country are not from T14 law schools. It’s naive to think that clients are happy to pay premium prices just to get services of “top minds,” and it’s dangerous to believe that BigLaw always offers the best legal work. </p>
<p>I’m obviously biased though, since I didn’t go to a T14 school and my kid (graduated this past year and gainfully employed as a lawyer) went to a good state law school. I noted your description of state law schools in an earlier post. Wow. Just remember …I’m the client now, and my kid could be your client in the future.</p>
<p>“Biglaw, I-banking, and Strategy Consulting are few industries where, the employers care more about your raw intellectual horsepower and potential, more so than amont of the ‘experience’ or ‘training’ you have.”</p>
<p>From what I’ve seen, BigLaw and strategy consulting do care about raw intellectual horsepower; BigLaw more so than strategy consulting. Investment banking cares more about if you have the right type of attitude and whether you are capable of working 100+ hours/week consistently more than anything else.</p>
<p>Just a brief coda to one of the points that Neonzeus made:</p>
<p>About a year ago, I got to talking on a plane with the managing partner in what might be described as a semi-Big Law firm (150 lawyers in a mid-size Midwestern town). He said what they look for when hiring was something they could sell to a client, who in his inexperience do not care about the average LSAT or gradepoint average of the lawyers at the firm. So, for example, if they were trying to get a mining company as a client, it would be helpful for an applicant at the firm to have a background in mining engineering.</p>
<p>Disagree with nyulawyer as well. What he misses from the recruiting perspective is how hard it is to get in the door. Resumes are circulated by committee and they all have similar credentials, but ninety five percent don’t get an interview slot. A couple of years ago two committee members at my firm were from the same undergrad. They went out of their way to give preference to fellow alums. They created for themselves a little gang that perpetuated itself in our firm and in several others as members moved on. In that year, that school is over represented in at least a handful of firms.</p>
<p>As far as working through major events, it should always be noted that associates do have some control over their schedules. If you have a brief to be drafted the week of your kid’s birthday, you have the option to get work done early or to hold the party after the brief is filed. Most kids won’t be in therapy because their party was a week later. Also, in litigation, dates are often set as much as a year in advance and things that come up unexpectedly are often legitimately urgent. And frankly, if you work in a field like municipal bonds, you either adjust to working like a dog from Thanksgiving till New Years or you find another job. Just like accountants know what their schedules will be at tax time. Partners are very rarely monsters. Usually they are good, smart people who work hard and take pride in their work.</p>
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<p>I think this analysis is somewhat confusing the relationships at play. At the F500 you were the client of the firm. In economic terms however, you were not the client of the young lawyers, the firm was. The firm is the one buying their services, not you. You just rent some lawyer time from the firm. And believe me, you were paying them. The money the firm brought in goes in part to paying their associates, and that money came from your company. </p>
<p>As to hiring, you may not care where someone went to law school directly, but you probably do care indirectly. Most of the F500 hiring I’ve seen favors those who came from BigLaw. You don’t really get into BigLaw without going to a top school, so filtering for one is just a proxy for filtering for the other. And even if you personally don’t filter for BigLaw, it certainly seems like most of your peers do.</p>
<p>Demosthenes: I grasp that we we were paying for them. That’s what rate build-up means. Of course, we do our own calculations as to what the legal work is worth, and pay negotiated rates even for partners. I suspect it’s a little like law schools. If schools want the top students, they give scholarships. If a firm wants to work on our really high-profile projects , they have to give us scholarships too LOL. And as I mentioned, BigLaw competes for our work.</p>
<p>I’m not sure what experience you have with F500 hiring? I’ve worked for four of them over my career and am friends with legal executives at others, but this is a drop in the proverbial bucket. There are huge differences between Fortune 500s depending on their industries and location. I do believe that the financial services sector have relied more heavily on BigLaw, so perhaps there are legal executives in those firms who practice the self-selection that you reference. I don’t know how that has worked out for them through the banking crisis and recession. I also think (again, my personal observations) that BigLaw has been expanding exponentially into international markets, and that its international customers tend to rely more on name-brands when seeking legal counsel in the U.S. </p>
<p>I stand by my reaction to the naive opinions that (1) clients will pay a premium for a BigLaw firm just for prestige, and (2) what clients think about associate salaries buried in those rates doesn’t matter. With the possible exception of international clients as noted above, I disagree with both. (Frankly, I also disagree that T14 grads are inherently better lawyers because they’re smarter than everyone else. You can discount that as my personal opinion.) </p>
<p>Law is a market-driven service business. There is a point at which U.S. clients won’t pay the rates anymore whether the firm buries the cost of those six-figure associates (along with the rest of their pricy overhead) in partner rates or not. Try explaining the prestige factor to your CFO when he’s asking about the legal expenses for the year LOL.</p>
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<p>The obvious follow-up q for me would have been, "how do you define “top talent”?</p>
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<p>They are all really smart students (since they attend a top LS), so what sets them apart? (Think about it critically, from the employer’s perspective.)</p>
<p>So many clients won’t pay for first year associate time that some firms use a different billing model for them, and clients often don’t get directly billed for their time. This is pretty new in the field.</p>
<p>“So many clients won’t pay for first year associate time that some firms use a different billing model for them, and clients often don’t get directly billed for their time. This is pretty new in the field.”</p>
<p>I first heard about that back when I was in law school (I think 2007 or so). It came within a year or two of the big-market law firms going to $160k on first year associate salaries. NYULawStudent’s statements aside, it was very much a situation of companies saying, “That’s great that you want to pay a 25-year-old with no experience that kind of money, but it’s not going to be our money.” </p>
<p>Within two years of that, Big Law firms drastically reduced their first-year associate classes. The word I’ve heard from many BigLaw partners is that first-year associate hiring will be permanently in the dumps, with firms relying on lateral hiring and outsourcing of a lot of typical new attorney duties to temp agencies, firms operating in places like West Virginia, and a sharp rise in non-partner-track hiring. </p>
<p>Somehow, this is not the market at work, as a rational person (i.e. non-lawyer) defines it.</p>
<p>It’s easy to say that firms will rely on lateral hiring (music to my ears), but laterals have to start as 1st year associates somewhere. There are practice areas in which there are not enough experienced associates. I have clients who are begging for experienced real estate associates.</p>
<p>I haven’t seen a decrease in first year or clerk hiring, but their time is often written off or skewed to pro bono.</p>
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<p>Depends on industry of employers.</p>
<p>Consulting - initial screen = top 10 college/ MBA + top GPA + strong resume/ internships. After that, it comes down to the ability of the candidate in terms of acing the case interviews.</p>
<p>I-banking - similar to consulting, except no case interviews.</p>
<p>Biglaw - School pedigree + law school grades are 80-90% of the equation. After that, it will come down to whether or not the candidate in question can carry a 30 minute long conversation without coming off as socially awkward. </p>
<p>Note - there is a common denominator in how all the employers from those three power-house industries screen and recruit candidates - academic credentials. No matter how smart and talented you are, if you come from Ohio State U, you won’t get an interview with McKinsey or BCG. Top-notch academic credentials are prerequisites to get in the door at these industries, since these industries care more about your raw intellectual potential (which strong academic pedigree signals), more so than the amount of real-life work experience or training you may have.</p>
<p>After all, each year, I-banking, consulting, and Biglaw employers hire thousands of 1st year analysts/ associates fresh out of school, who don’t have any previous full time work experiences.</p>
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<p>Grades and interviewing skills.</p>
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<p>This is spot on. First, Biglaw partners don’t actually do the grunt work - 1st and 2nd year associates do. Partners are salesmen who close out deals and bring the firms revenues - and supervise the overall scope of the project. And guess what - in law, there is a necessity for tons of grunt work to be done, ranging from legal research, drafting, proof-reading, doc review, copy & paste, you name it. So, while the client or whatever may not be willing to pay for hours billed by inexperienced associates at Biglaw, they in fact, end up doing so. </p>
<p>Second, most of desirable in-house attorney positions at large corporations hire exclusively from Biglaw associates. And, the fact that Biglaw only hires from top law schools imply that F500 or whatever in-house attorney positions would also depend on the screen Biglaw adopted initially - law school pedigree.</p>
<p>Law hiring has changed drastically over the years. At the law firm I’ll be heading, there are numerous partners who graduated from 2nd tier law schools, ranked barely in top 50-60 in the nation. One partner, while having dinner out with the team (during my call back interview) remarked how he wouldn’t stand a chance in hell of getting hired by the firm he works at today, had he been a law student today, not 30 years ago, when he graduated.</p>
<p>As a result, the perspective of very senior attorneys regarding how law firm hiring functions today may be very outdated, and no longer realistic in today’s market.</p>
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<p>Rather simple for BCG and others to determine, correct? (In other words, not a whole lotta work involved. And certainly not very “challenging” or “difficult” as your BCG recruiter seemed to suggest.)</p>
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<p>Bingo. And why do you think that aspect is so important? (Could it be that eventually, Big Consulting or Big Law is gonna put that recruit in front of a client and that client is gonna opine on whether that recruit is worth $500+ per hour to them.)</p>
<p>The response of law firms is, I think, telling. In the pit of the recession, while some firms were actually going bankrupt, BigLaw opted not to cut associate salaries but to hire fewer associates. </p>
<p>Apparently, the thinking is that a recession shrinks opportunities and therefore need for young associates, but doesn’t alter the desirability of “top talent” – defined however the firm defines it – to fill those needs, as compared to the sort of talent you’d be recruiting on $125K.</p>
<p>This is quite counterintuitive. Remember, slashing salary saves you money on salary while preserving your access to more labor. Cutting your workforce saves you money on salary but at the expense of cutting your access to labor.</p>
<p>Law firms could easily be wrong; industries are wrong about this sort of thing all the time (e.g. Moneyball). But their apparent thinking is that they’d rather save money by giving up labor than by giving up talent.</p>