"Clients Won’t Pay For What Law Schools Churn Out"

[cellardweller]

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So why do they keep getting paid so well?

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<p>Throughout this discussion we have essentially taken for granted that $160K/year is actually a lot. But is it really?</p>

<p>To answer that question one needs to understand the business model of the modern law firm which is based on the paradigm of the “billable hour”. For those interested here is some background on its history. </p>

<p>[Legal</a> Affairs](<a href=“http://www.legalaffairs.org/issues/September-October-2002/review_kuckes_sepoct2002.msp]Legal”>Legal Affairs)</p>

<p>First, the billable hour did not become truly dominant until the mid-70s, when it replaced the more common retainer type agreements. </p>

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The product that these law corporations make—and the source of the notion that attorneys are as interchangeable as widgets—is the “billable hour.” Both partners and associates are routinely required to bill clients a high number of hours; the current range at most large firms is between 1,800 and 2,000 a year. The benefits of seniority rarely include the opportunity to work less—only the most successful rainmakers are exempt from the pressure to bill time. As one associate puts it, “It’s like a pie-eating contest where first prize is all the pie you can eat.”

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<p>2,000 hours does not seem like a lot, it is only about 8 hours/day, 5 days week with 4 weeks vacation. But these are not all billable hours. </p>

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To do all of this and make the 2,000-hours target, a lawyer must spend the equivalent of 12 hours in the office for each working day. Since the day hasn’t gotten longer since 1958, the honest lawyer who commits to working “full-time”—to a schedule of 2,000 billable and thus 3,000 total hours—is giving his life to the firm.

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<p>the 2,000 billable hour quota is just the low end. Bonuses typically start at 2,000 hours and go up from there. If you really want to make partner you may have to put in more like 2,400 billable hours representing 3,600 office hours. </p>

<p>That’s not all. If the associate wants any chance to make partner he also has to spend time on client and professional development.

The commission also recommends making plain to associates that they should generally expect to put in 100 hours of firm service, 100 hours of pro bono work, 75 hours of client development, 75 hours of training and professional development, and 50 hours of service to the profession.

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<p>That’s another 400 hours minimum.</p>

<p>In the end, an associate may have to work at least 4,000 hours/year or 80 hrs/week to be in position to make partner. At $160k/year that is barely $40/hr. Even if he gets a bonus we are still talking less than $50/hr, hardly a windfall. </p>

<p>One could argue that medical residents also put in a minimum of 80 hrs/week during their residency and get paid less than half of what associates at big law firm make. That is true but residents typically get other benefits such as subsidized housing, free meals, insurance and so on. Also, it could be argued that an associate position is inherently more risky than that of a medical resident. The hard part is getting the residency, but once you have it, very few don’t succeed at getting certified in their specialty and getting good permanent position at the end. Associates have much lower odds of making partner and therefore the higher risk is translated into a higher salary. </p>

<p>There is a lot of debate as to whether the billable hour business model needs a serious rework, and there is clearly a trend in that direction with fixed fee arrangements and retainers for certain areas such as tax law, Intellectual property and even M&A work.</p>