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Preparing for OCI

Preparing for OCI. John Steele www. john steele law.com. Gender and the Legal Profession: the Michigan Law Alumni Data Set 1967-2000. Kenneth Glenn Dau-Schmidt Indiana University–Bloomington Marc S. Galanter University of Wisconsin--Madison Kaushik Mukhopadhaya

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Preparing for OCI

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  1. Preparing for OCI John Steele www.johnsteelelaw.com

  2. Gender and the Legal Profession: the Michigan Law Alumni Data Set 1967-2000 Kenneth Glenn Dau-Schmidt Indiana University–Bloomington Marc S. Galanter University of Wisconsin--Madison Kaushik Mukhopadhaya Indiana University–Bloomington Kathleen Hull University of Minnesota

  3. The Elastic Tournament:The Second Transformation of the Big Law Firm Stanford University Law School March 14, 2008 Marc Galanter Wisconsin Law / LSE William Henderson Indiana Law

  4. Topics (1) Demographics (2) History: Private Practice Firms (3) Law Firm Economics (4) Your Human Capital (5) Interviewing (6) Summer Associates & Interns

  5. 1Demographics

  6. Number of Lawyers US (1.2 million) CA (150,000)

  7. Where the Lawyers Are

  8. Private Practice Size(source: ABA Marketing Dept)

  9. AmLaw 100 EP & NEP

  10. Gender(source: ABA)

  11. e.g. Leaking Pipeline to Law School 14 Kent Lollis, LSAC Presentation

  12. US Population / Legal 15 Kent Lollis, LSAC, StreetLaw Presentation; Dr. Gambitta, Rocky Mountain Diversity Summit Presentation

  13. Attorney Demographics in the Private Sector – Statewide State Bar of California Diversity Pipeline Project

  14. 2History of Private Practice

  15. Puritans “To set up a villagewith tackle for tillage,Jack Carter he took to the saw; To plunder and pillagethis same little village,Tim Gordon he took to the law.”

  16. Founders Half of the delegates had studied law. Politics & inheritance

  17. Antebellum Tocqueville: Democracy in America (1840) “There is hardly a political question in the United States which does not sooner or later turn into a judicial one.” “The profession of the law constitutes the only aristocratic element with which the natural elements of democracy will combine”

  18. The Leadership of the Nation • Approximately … • 100% judges • 58% U.S. Senators • 38% U.S. representatives • 50% governors • 20% state legislators • 50% of our presidents • + • 11% major CEOs

  19. Antebellum People as clients Debt, wills, land conveyance, defamation Later: railroads

  20. Civil War

  21. Postbellum

  22. The Cravath System • Hire the elite • Full time employment • Rotation • Worked on firm’s clients • “Up or out” • Strategic out-placement

  23. 1880s-1930s • ABA is formed • Creates mandatory bars • Imposes bar examinations • Law as graduate degree • Close night schools, for profit school • Controls law school accreditation

  24. 10 20 30 40 Fig. 1. Inverted Funnel The Early (Classical) Tournament Firm(Galanter/Henderson) Narrowing by Death / Retirement Insulated – No lateral movement – in or out Years in Practice Partners-owners Expanding as a result of tournament-driven growth Selection / elevation to partner-owner Up or out Attrition / Outplacement Associates Number of Lawyers

  25. By 1970 • Still a solo’s profession • Lockstep compensation • Closed compensation • Restrictions on advertising • Almost no lateral movement • “Classic Tournament” (Galanter/Palay)

  26. 1970s Changes • Advertising permitted • Bates v. Arizona • Price fixing outlawed • Goldfarb v. Virginia • AMERICAN LAWYER salary surveys • Era of envy begins • Lateral movement begins

  27. Chart 1. Growth of Large Firms / Persistence of Tournament(1978 to 2007)

  28. Dotcom Boom • SV set salaries – “Gunderson Bump” • “Recruiting is war” • Hiring 3 years out! • ABA had stifled new entry • Associate pay skyrocketed • So did billable hour requirements

  29. Separation by Practice Area Practice Area Firm Left Firm Joined Difference N % of Total White Collar & Securities Enforc.* $721,837 $1,009,490 $287,653 49 1.20% M&A, Cap. Mkts., Emerging Bus* $804,980 $919,644 $114,664 253 6.20% Intellectual Property* $693,272 $781,620 $88,348 460 11.30% Antitrust $857,089 $944,114 $87,025 79 1.90% Labor & Employment $610,426 $665,019 $54,593 270 6.70% Bankruptcy $717,895 $734,386 $16,491 114 2.80% Corporate Securities $750,831 $766,159 $15,328 686 16.90% Litigation $735,033 $738,620 $3,587 598 14.70% Other $733,510 $736,464 $2,953 386 9.50% Business Law $836,592 $801,757 -$34,835 515 12.70% Regulatory* $700,583 $657,222 -$43,361 360 8.90% Real Estate, Public & Project Finance* $764,480 $708,100 -$56,380 250 6.20% Trusts & Estates* $766,806 $608,889 -$157,917 36 0.90% Group Total $742,563 $759,257 $16,694 4,056 100%

  30. 10 20 30 40 Fig. 2. “Core and Mantle” Tournament Firm(Galanter/Henderson) De-equitized Partners Laterals In/Out of Core and Mantle Years in Practice Permanent Associates Of Counsel Expanding as a result of tournament-driven growth Owner-Partner Core Promotion to Nominal / Equity Partner Up or out Non-equity Partners Expansion / Attrition / Lateral Movement Associates Number of Lawyers

  31. Post-Internet-Boom • ABA losing control over schools? • Lost control (10 new schools) • Re-asserting control? • Demand outpaces supply (at top) • Firms more flexible • “Elastic tournament” • 3rd-4th tier schools: economically viable?

  32. Law School Admissions(source: ABA)

  33. Undercutting Biglaw

  34. Demise of Cravath System?

  35. The Downturn • Associates –8% • Partners -4% • Hiring just in time • Competencies over credentials

  36. 3Economics

  37. Terms & Definitions • Profits = Revenue - Costs • Leverage = associates / partner • PPP vs. PPEP • FTE = Full time equivalent • Billable Hour

  38. Costs • Compensation • Associates / specialized staff • Real estate • Marble floors in Manhattan • Malpractice insurance • Supplies & resources

  39. PPP Formula M x R x U x L = PPP

  40. PPEP Formula • Margin = Profit / Revenue • Rate = Rev. / Billable Hours • Utilization = BH / FG FTE’s • Leverage = FG FTE / EP FTE

  41. Profit contribution (noob)

  42. Profit contribution (5th year)(salary = 225; overhead = 175; billed @ 325/hr)

  43. BillableHours 2/3rds – Yale + 2 Your life

  44. 11 mos; 21 days/month

  45. 11.5 mos; 25 days/month

  46. 4Your Human Capital

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