First comes an FT story on clients demanding more "diversity" in City firms, then a followup letter attributing high female turnover to late night hours, next a WSJ Law Blog piece on how to keep female talent on the partnership track (featuring insights from WilmerHale and Cleary), a Working Mother story called "Young, Gifted, and Leaving" about law firm associates, and finally a lead editorial by the President of the California State Bar on "Escaping the billable hours trap."
Journalists like to say that three anecdotes constitute a trend, but here we have not three but five noteworthy articles telling us that what we’re doing is essentially unsustainable. Are you paying attention?
The facts are pretty straightforward. For about the past three decades, women have constituted 50% or slightly more of law school graduates, yet they’re still only about 17% of BigLaw partners. It can no longer be argued that they only need time to get through the pipeline; that argument exhausted itself about 20 years ago, and essentially nothing meaningful in the female partnership statistics has changed. Whatever we are doing and have been doing is not working if greater representation of women as partners is the goal. As the well-known joke sometimes attributed to Einstein has it, a working definition of insanity is to keep doing the same thing the same way and expect a different result. We need different results.
How big is the problem? Or is it even a problem? After all, law firms are hardly suffering, and PPP numbers continue (at least through the last reporting period….) to keep growing at double-digit rates.
But the question is not whether firms are profitable on the current model; the question is whether they could do better by deciding to seriously address the problem of sacrificing such an enormous proportion of their talent pool for no evident business reason. The question, in other words, is one of opportunity costs. By doing nothing to address staggering female attrition rates, what are firms losing? Some statistics.
"The number of young female associates leaving law firms hit a record high over the past five years—with an average annual attrition rate of 19 percent, according to the National Association for Law Placement (NALP) Foundation. Not surprisingly, the higher a law firm’s required number of billable hours, the higher its associate attrition rate, according to a 2006 survey by the Bar Association of San Francisco. And many of these departing associates leave for good—some 31 percent, a recent survey by MIT Workplace Center reveals. Beyond bleeding firms of top talent, this loss can affect the bottom line: Each associate who walks takes along about $300,000 in lost training and recruitment costs. A 15 percent departure rate may siphon off an average of $12 million each year from a large firm, estimates Paula Patton, CEO and president of the NALP Foundation."
Taking this beyond "diversity"
Are there plausible ways to address the female attrition rate—and the overall associate attrition rate? Are there things we’re doing wrong which are kneecapping our performance as consummately professional organizations delivering superb client service, as economic engines of profit generation, and as profoundly rewarding places to work?
Yes.
But only so long as you’re willing to tilt at windmills, and the windfall (pun intended) du jour is the billable hour. No matter how many stakes have been aimed at its heart, none have been driven home true.
I can’t say I’m surprised. For law firms, it’s cost-plus pricing: A great deal! You literally cannot lose money on that economic model. Indeed, you can produce super-normal profit margins. And for clients, it’s also weirdly bulletproof. "For services rendered…." followed by a six-figure number, unitemized, is tough for the green eyeshade crowd to digest.
You may know and I may know that figure is (a) entirely appropriate; (b) thoroughly earned; (c) probably understated vs what the law firm could have charged and gotten away with, but how do you "defend" it? Billable hours are defensible in the same way parking tickets are defensible. We know what the rules are: Never mind that the rules may be fundamentally nonsensical, you can’t argue with City Hall.
And what is wrong with the billable hour?
Don’t take my word for it, take a page from Jeff Bleich, president of the State Bar of California:
"This mission — ensuring access and justice by all means possible — is what attracted me to the bar. It is also what makes me think we need to re-examine a practice that is threatening the capacity of lawyers to serve the public effectively: billable hours. We all know about the lifestyle burden that billable hours places on lawyers. But on a deeper level, a billable hours system is corrupting to our profession in both obvious and more subtle ways. One of the important challenges of the next generation of lawyers and bar leaders will be to find a way out of the billable hour trap."
And permit me to go on by excerpting what he says in relatively full part. These are important words.
"The destruction brought by billable hours can be subtler in that it affects not merely the cost and efficiency of our work, but the quality of our profession as a whole. Firms now have only three ways to make more money — work longer hours, increase the number of lawyers or raise rates. Predictably, in a profit-maximizing system, firms have been doing all three. Instead of working 1,700 hours a year as lawyers did in the 1970s, today, new lawyers typically bill around 2,100 hours. Those additional hours come out of two places — evenings and weekends. That means less sleep, fewer outside interests, less commitment to loved ones and the crumbling of a decent life.
"Lawyers feel guilty about doing the very things that we should do to achieve access and justice — such as pro bono work for those in need or service to the community. Instead new lawyers come to view themselves as people who merely rent out their brains for a certain price per hour. And they and their work are degraded by the experience.
"The trend towards putting lots of lawyers on cases just compounds this. Young lawyers have fewer client contacts, less ownership of a case and fewer opportunities to actually solve a problem. As they advance, they aren’t asking the questions that will allow them to one day lead their firms and the profession: what experience am I getting, what sorts of colleagues are we developing, what is our culture and philosophy? Instead they think more and more about profit targets, hours targets and what their exit strategy is.
"An entire generation of lawyers has come to believe that their worth as a lawyer is measured not in how they solve problems but in how many hours they need to work. Not surprisingly, this has not made them better problem solvers.
"I realize that strong economic forces will continue to favor billable hours, and if a better and equally lucrative alternative existed, it would have been adopted by now. So this will not be an easy problem to solve. But we will eventually reach the outer limits of human endurance and the upper reaches of client tolerance, and if we do not begin addressing the issues now, it will be too late when we do. There are alternatives to billable hours, such as fixed fee arrangements with negotiated bonuses based on performance.
"The point though is not any one solution. The point is that as a profession, we need to start finding billing methods that will reduce distrust and damage to our client relationships, that will refocus young lawyers on being problem-solvers again, and that will remind us of — rather than distract us from — why we are lawyers in the first place."
Finally, there may be some good news.
WilmerHale’s Bill Perlstein (and potentially some other firm leaders) have some innovative ideas about how to keep female, and male, associates on the partnership track through different approaches than the century-old Cravath system’s 7-9 year up or out model. There do, indeed, have to be other ways.
This is a profound long-term challenge to our profession, and no one has all the answers.
What are your thoughts?
Update: Monday 28 April. A reader writes:
I enjoyed your piece very much because it hits home for me quite directly from both the female perspective as well as the billable hour one. In the last two weeks, I left my partner position at a large law firm in Chicago where I had been for more than 14 years to join some like-minded billable hour dissidents in the new litigation venture Valorem Law Group (www.valoremlaw.com). Having co-founded and co-chaired the women’s initiative at my previous firm (incidentally, named one of the 100 Best Companies for Working Mothers in 2007) and co-founded a recent organization in Chicago called the “Coalition of Women’s Initiatives in Law Firms,” I am quite aware of the negative impact that the billable hour model has, not only on clients who want their work done quickly, efficiently and with good results, but also on attorneys who are creative, efficient and thrive on collaboration — all things that the billable hour model hinders.
Without over simplifying it, as a working mother of 3
who was determined to work more productively in order to enjoy a balanced home life, I would venture to say that the billable hour model disproportionately (but not exclusively) impacts women, as any value measured by the commodity of already-stretched-too-thin time is going to favor those who have more of it — and that is not typically women.Our experience at Valorem and the widespread feedback we’ve received so far from clients and other attorneys tells us we are on the right track, both for clients and for the industry as a whole. As you would say, we are “tilting windmills.” Stay tuned to see how the wind continues to blow.
