Specifically is the Cravath model of law firm hiring and management flawed? Bill Henderson addresses this question in an excellent ELS blog post. To greatly simplify his post, he points out the present bimodal distribution of salaries for newly minted lawyers (here) and demonstrates that this distribution is different than that found in 1991 (here) when it was more of a central distribution. According to the post, the Cravath model (developed in the early 20th century) essentially focused on recruiting entry level attorneys with prestigious pedigrees and academic credentials (top of the class rank) so as to provide the firm with a distinctive brand of legal services that would set the firm apart from Wall Street competitors — and so followed the rest of the profession. I’m not sure if the rest of the profession actually followed Cravath or just came up with similar lines of reasoning at about the same time, but the end result was this style of management – get the people with the best law school credentials (i.e. anyone from a top 10 to 15 school and the top 10% to 15% of other schools) and pay them a premium salary that does not necessarily correspond with the actual “bang” that they bring to the firm (as compared against their less credentialed fellow law school graduates).
Bill makes some further points that bear consideration regarding practice areas and law partner employment fluidity, but this first point strikes me as the most intriguing. Some questions and points to ponder after the jump.
1. Notwithstanding the tendency toward a more central salary distribution in 1991, I recall a curious lack of linearity to relative credentials and the market at that time. It seemed that while top 10% to 15% students had great opportunities, the correlation between class rank and opportunities tailed off considerably with the remaining students. In other words, there wasn’t a huge difference between being in the top third and the bottom third. This is certainly an unscientific observation and limited to one person’s experience.
2. It seems that large law firms would be better served by simply waiting around a couple of years to see how new lawyers developed and then cherry picking the best ones from firms that can’t compete with the salaries they could offer. Compare this with the ridiculous amounts of money, time, and resources devoted to summer associate programs that are arguably not even used for evaluation anymore since nearly everyone gets an offer. Perhaps this odd situation is driven by a difficulty in systematically measuring lawyering ability beyond grades or prestige of degree granting institution.
3. Bill seems to imply that the Craveth model (and its accompanying salary distribution) is not sustainable. I agree that it seems a bit nonsensical, but how is it not sustainable? A lot of inefficient, unfair, and silly systems persist for very long periods of time. What is the mechanism by which it will fail? Will clients run away from these firms to small or medium firms with specialized practices? Will the “high end” practices such as securities and white collar criminal defense splinter off into boutique firms and leave the remaining practice areas partners high and dry? What about lawyer supply systems – will undergrads quit choosing to go to law school?
4. Jim Chen has a nice follow up post on Moneylaw here, naming Bill’s post as the “post of the year.”
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