Of Cravath, Dewey…and the risks of playing “Follow the Leader”
What is it our parents always told us? If your friend jumped off a bridge, does that mean you should do the same? In this case, it is more like “Match Game 2012” than it is about “follow the leader.” So the question becomes, how necessary is it for a law firm to match another’s year-end bonus? And in my business, what are the marketing implications for a law firm that does or does not choose to follow suit?
As reported by Peter Lattman in The New York Times this week, “Cravath sets the tone for law firm bonuses.” Law firms don’t have NFL salary caps or MLB luxury taxes to help keep things competitive. In many ways, Cravath is like the New York Yankees of law firms–old, venerable and wealthy. They generate a lot of revenue that others can’t, and can spend accordingly. But most other teams simply don’t generate the same revenue and can’t pay out the same amounts. Spending more does not mean you always win, but you are usually in the game.
If the process holds true that Cravath sets the scale, then you could argue they could do it to squeeze others as much as it might be to reward the associates that spend the year billing the night away. If you think about it, if they force less profitable firms to profit less, are they not creating an even stronger market advantage for themselves?
And what does this say about all the surveys and reports we keep reading? Corporate counsel cutting spending. A soft economy. Revenue is down. Are those reports really not accurate barometers? (I’ve often felt that a significant amount of that data does not accurately reflect reality.) In many cases, the answer is reflected in the fact that most firms are simply not in the same boat. Those that had already chosen to match by week’s end–Paul Weiss, Proskauer, Simpson Thacher, Skadden, among them–are playing in the same pond. The reality is that those firms are in a position to match without concern. The problem is that the same conversation goes on in a hundred firms that are not.
I often cringe in having the “match” conversation with law firm management. Will we remain competitive? Will we be seen as second tier? Can we afford not to match? Will the short term pain outweigh what is perceived as long term gain? What will others think? Will we lose out in associate retention and recruiting wars? Many of those questions lead a firm to just say “yes” regardless of whether the feared impact is true. I don’t believe in almost every instance that matching is necessary. It comes down to semantics. In a working world where the bottom line dollar is less and less important to those that are living large either way, there are so many other determining factors that can make your law firm the place to be. After all, didn’t the St. Louis Cardinals and San Francisco Giants just win the last three World Series? And did Dewey & LeBoeuf match last year? I’d ask, but nobody is answering the phone.