Presentation to be given at Harvard Law School on the evolution of the elite law firm model, what brought about recent changes, and alternatives that have been rising up since 2008.
Presentation at Harvard Law School: Evolution of Elite Law Firm model and Rise of Alternatives
1. Convergence: Growing dissatisfaction with
Biglaw and the Rise of the Alternatives
Presented at Harvard Law School
by Michael B. Moradzadeh and Yaacov Silberman
3. HOW DID WE GET HERE?
Ongoing changes in technology and society
Economic Crash of 2008
Rise of Megafirms in late 1990s in
reaction to globalization and limited liability
American lawyer rankings start in July 1987
Billing by hour starts to take over in 1960s
Specialization leads to assembly by 1950s
Cravath System of early 1900s
4. CRAVATH SYSTEM
In early 1900s, Paul Cravath turned the affiliation of partners with
apprenticeships model into an up-or-out salaried model with strong
management, specialization, and hierarchy. Associates who survived
became partners. This created a pyramid structure.
Senior Partner
Junior Partner
Senior Associate
Mid-Level Associate
Junior Associate
Senior Associate
Mid-Level Associate
Junior Associate
Mid-Level Associate
Junior Associate
Junior Associate
5. ASSEMBLY LINE
Changes in society and business models from the 1920s,
and hyper-specialization resulting from Cravath System,
eventually brought the assembly line to law firms.
6. BILLABLE HOUR
Before 1960s, elite law firms would send a bill for “services rendered”.
Clients began to demand clearer metrics, so law firms start billing by the hour.
In 1960s attorneys at elite firms were expected to bill about 1300 hours a year.
7. AMERICAN LAWYER RANKINGS
In July 1987, American
Lawyer Magazine starts
ranking law firms by
profits and revenue.
Result: obsession with profits per partner and revenue. Leads to larger firm, more
leveraging, longer partner-track, higher billable rates, de-equitized partners, more lateral
movements, more mergers, higher pay for rain makers, and higher billing requirements.
Often to overall detriment of firm.
8. LIMITED LIABILITY PARTNERSHIPS
2
1992
40
1996
In 1992, only two states allowed LLPs, by 1996 over
forty states had adopted LLP statutes by the time LLPs
were added to the Uniform Partnership Act in 1996
Limited Liability Partnerships allowed for greater
risk when bringing in lateral partners. This led to
more movement of lateral partners.
Partnership structure is often short-term focused.
9. MEGAFIRMS
In response to globalization, Limited Liability Partnerships (1992)
and AmLaw revenue rankings, law firms compete for size, starting
in late 1990s. Desire to be everywhere their clients were.
Result: higher conflicts, more bureaucracy, increased leverage.
10. ECONOMIC CRASH
Overleveraged firms with large employee and real estate
Overhead, and high salaries promised to rainmakers, show vulnerability to
economic downturns, especially in 2001 and 2008.
11. RISE OF ALTERNATIVE MODELS
(2000)
(2008)
(2001)
(2008)
(2008)
(2004)
(2008)
(2008)
Clerky
(2010)
(2010)
(2011)
(2013)
12. WHAT PROBLEMS
ARE WE TRYING TO SOLVE?
COST
QUALITY
Too high
Unpredictable/O
paque
Poor Incentives
High leverage
Associates
learning on the job
LIFESTYLE
Growing dissatisfaction
of attorneys in Big Firm
practice
Is there an alternative to
"Soul Crushing" work?
14. THE ECONOMY HAS PLAYED A HUGE ROLE
Corporate legal departments are under
tremendous pressure to manage costs and justify
expenditures
Old model was squarely CYA
With increased focus on costs, alternatives to
Big Law (including in-house, solos, etc.) are
seen as increasingly legitimate options
15. CHANGES IN TECHNOLOGY
Disruptive Technology lowers the barrier to entry
enabling startups to compete with Big Law.
OLD REQUIREMENTS
NEW MODEL
Real Estate
Cloud computing
Technology
Infrastructure
Subscription model
Human capital
(admin)
Self Administration
Expensive
Research Tools
Increased
competition from
resource providers
19. DISTRIBUTED MODEL/
ONLINE DELIVERY OF SERVICES
Palo Alto
San Francisco
Tyson’s Corner
New York
New Orleans
Washington D.C.
Los Angeles
Seattle
Orange County
San Diego
Chicago
Tel Aviv
20. SEGMENTATION OF MARKET AND ASSIGNMENT
OF WORK BASED ON RELATIVE IMPORTANCE
1
2
3
Bet the
Company
Important
Routine
Would you have an aerospace engineer
repair your Vespa?
21. EXPERIENCE
Recognized by Best Lawyers of America and
All of Rimon’s
SuperLawyers
partners have at least
10 YEARS
OF LEGAL
EXPERIENCE
Hold JDs, PhDs, LLMs, and MBAs from the best
universities in the United States and abroad
All attorneys working on every matter are highly
specialized in their respective field
from some of the top law firms
in their respective fields.
Former partners at global law firms,
executives at global corporations, and
professors in business, law and science