Meet the new boss
Same as the old boss
The Who, Won’t Get Fooled Again. June 1971
Lots of speculation these days about what the new normal for law firms, especially larger ones, will look like. Will law firms continue to allow remote work? Or will they mandate a return to the office? Will they, as one firm has done ” strongly encourage” return (wink, wink, nod, nod)? Will they tell associates they can work at home…but if you want to be on the partner track….
Add to the mix law firm reluctance to change, the desire of younger lawyers for the flexibility remote work provides, and an apparent shortage of associate talent that has set off some bidding wars. On the face of it, it looks like there is the possibility of a culture clash, the result of which could have far reaching repercussions.
So law firms would seemingly want or perhaps need to offer flexibility to attract and, of course, retain the best talent
Law firms would certainly appear to have a strong incentive to provide flexibility particularly given the strong demand for associates. Many sought after associates embrace the freedom and flexibility that remote work offers. And some talented associates may want to live in places other than where the law firm offices are. So law firms would seemingly want or perhaps need to offer flexibility to attract and, of course, retain the best talent. (The cost and disruption of a 3rd or 4th year associate leaving a firm is well known. It’s at the 3rd or 4th year level many firms begin to see the return on investment for associate training)
And it’s a fact that real estate is the second highest cost for law firms. (I have talked before about the impact of this fact). Gregory Shill, a University of Iowa College of Law professor Gregory Shill recently published a new research paper on just this subject. As he put it in an interview by Dan Packell of law.com, “Law firms are notoriously space inefficient.” So now that the viability of remote work is established, you would think law firms would have an incentive to embrace the cost savings from less space.
Sounds like a win-win, right? Less real estate costs, better ability to attract talent. As Niki Black, legal evangelist at MyCase recently put it, “running a law firm with a business mindset” would suggest that firms be flexible, embrace remote work and even work to improve overall working conditions
But that seems less and less likely, at least in the long run. As Shill puts it, “When I spoke to partners at different firms about the possibility that they could split offices, share offices and economize on their real estate expenditure, not one of them was interested in doing it, neither for themselves nor their firm or associates. And definitely not other partners. ”
I’ll stand in a bucket of shit for as long as you want if you pay me enough money.
Instead, the law firm solution seems to be the tried and true “let’s throw money at the associates, and they will unquestionably do what we tell them to do.” The idea seems to be, as one of my former partners somewhat inelegantly put it, “I’ll stand in a bucket of shit for as long as you want if you pay me enough money.”
And the money being offered is pretty eye popping. As his been widely reported, Vinson & Elkins, Gunderson Dettmer, and Boies Schiller Flexner recently announced they planned to bump starting associates’ salaries above $200,000. Davis Polk & Wardwell announced it would raise its starting pay for associates to $202,500. Milbank also recently stated it planned to bump pay for its first-year associates to $200,000.
The unknown, of course, is whether younger lawyers, having been given the taste of freedom remote work provides, will accept a return to the old ways. The long commutes, the lack of flexibility of working hours. Being at the beck and call of partners. My guess is some will, although not as many as once did. But if the labor pool is reduced and the strategy is to simply pay more money, the law of supply and demand would suggest continued escalating salaries.
And by throwing money to attract associates, the law firms up their expenses yet again. As Shill correctly notes, “At just about every law firm, the biggest expense is personnel, and the second biggest is real estate. And those expenses are related because you have to pay a premium to get the talent that you want, but also the talent that can afford to live proximate to that high-cost real estate.”
And many firms will try to simply pass these increased costs along to clients in the form of higher rates
It’s a vicious cycle. Higher salaries to attract a workforce that perhaps has less interest in what you are offering. Continued excess office space. And many firms will try to simply pass these increased costs along to clients in the form of higher rates.
Simple business logic would suggest that this can’t continue. That at some point, clients will stop the music and some firms will find themselves without a chair to sit in. You would think that running a law firm with a business mindset would lead firms to do things differently as a matter of long term success or even survival.
But then don’t count out law firms and the status quo. Afterall, firms have gotten away with simply covering costs with higher and higher rates forever. As long as clients stand for continued cost escalation, law firms will keep on keeping on. To be blunt, non business management has made law firms millions.
So, yes some firms will be innovative and flexible. Some associates will balk at a return to normal and seek other alternatives. But at the end of the day, money talks. And without clients balking at continued higher rates, it will be more or less a return to the old normal.