The Past 50 Years in a Nutshell

"The
Industrialization of the Law Firm" is the ambitious,
but fair, title of a piece by A. Harrison Barnes, Esq., founder of BCG
Search.  His conclusion?: 

"Today’s law firm environment is, in a sense, now being
controlled by Adam Smith’s ‘invisible hand’–for better or worse."

He leaves little doubt, I must hasten to add, that he firmly believes
it has been for the worse:  The law firm environment "has become
a very tormented place," loyalty has "deteriorated dramatically," and
the "Greedy Associates" chat boards are emblematic of the parlous state
of the profession.

First, Barnes’ argument in a nutshell; then, my take.

Barnes starts by introducing an elysian "pre-industrialized" law firm,
an "insular" and "predictable" place where associates joined out of law
school, made partner almost without exception, and stayed until retirement.  Lateral
hiring was unthinkable, lockstep compensation ruled, and bills were for
the [perceived] value of services rendered.  The first stage of
"industrialization" occurred from the 1950’s to the 1970’s, as American
corporations grew and demanded correspondingly larger scale from their
law firms of choice.  Firms in turn expanded by hiring more associates—but
then came the realization that not all associates could make partner,
lest profits per partner take a nose-dive.  From this pressure emerged
the classic "Cravath model," wherein associates are paid handsomely in
exchange for the tacit understanding that virtually all will fall short
of partnership.  With the increase in leverage provided by more
associate bodies came, as well, the billable hour as the default fee-setting
mechanism.

The second stage of "industrialization," from the 1980’s to today, saw
the introduction of two-tier (equity and non-equity) partnerships—according
to Barnes, largely instigated by consultants promising increased profits
through increased leverage.  [Preliminary results from the Law
Firm Research Project belie this promise, but that is a separate
topic.–Bruce]  The toxic result of this nefarious "stratification"
of the partnership was compounded by the death of lockstep compensation
and the introduction of performance-based compensation.  Performance-based
compensation, in turn, fueled the growth of lateral mobility, through
both a "demand" and a "supply" effect:  The
demand being firms’ need for high-performance teams, and the supply being
such teams who deemed themselves insufficiently appreciated at their
current firm.  Firm mergers, as well, took wing.

Now, as noted, Barnes points with alarm and views with despair these
developments.  You should not be shocked to learn that I have a
different view.  My recap?

I for one know in which world I prefer to live.  That said, Barnes’
lamentations about the incivilities of today’s world, including most
gravely the deterioration of loyalty to and by firms, are real.  But
to postulate that the "Greedy Associates" boards constitute the best
representation of the state of the profession today is nonsense on stilts.  Indeed,
this reminds me of the (deeply uninformed) debate over "outsourcing"
jobs—and yes, Barnes does not hesitate to get in a last jab on
this very point.  One should not make public policy based on analysis-by-anecdote,
and one should not assess the evolution of the profession during the
past 50 years based on internet chat boards.

My reaction to the "industrialization" story Barnes recounts is, in
fact, entirely different:  What took so long?  I suspect Adam
Smith himself would have a similar view.