Partners' Gain Is Associates' Pain as Hours Move Upstream

Law.Com

13 August 2020

Client demand, and a promise of billable hour-related compensation mean that law firm partners are taking a larger share of available work during the pandemic, with associates losing out.

Client demand, and a promise of billable hour-related compensation mean that law firm partners are taking a larger share of available work during the pandemic, with associates losing out.

Law firm partners are taking a larger share of available work during the pandemic, driven by client demand and anxiety about billable hours, and associates are paying the price.

A recent peer monitor index by Reuters highlighted the downturn in overall work for law firms in Q2 of 2020 (-5.9%), while the average billed rate increased (+5.2%), showing how higher-rate partners are taking work formerly done by associates and paralegals. Experts agree that, while this has happened before, the industrywide trend has consequences both short- and long-term.
“We are seeing this in all segments,” Bill Josten, manager of enterprise content for Thomson Reuters, said in an interview. “We have a 2.7 percentage point difference between hours worked for partners and associates. There has consistently been a gap, but it got really wide, really quickly in conjunction with the pandemic.”

According to sources at ALM Legal Intelligence, the typical breakdown of hours worked on legal matters is broken down into a 20/50/30 slash: Partners handle about 20% of the hours, associates pick up 50%, and the remaining 30% of billable hours fall to paralegals and other legal staff who can be monetized.
While hours are down across the board, Josten said the hourly dip for associates in Q2 of 2020 was significantly higher than that of partners. During Q2 of 2018, associates worked an average of 139 hours per month; in Q2 2019, it was 138 hours; and in Q2 2020, that number dropped to 126, a 10% drop from 2018.

Partners also saw a drop in hours, according to Josten. Q2 of 2018 saw partners work 124 hours per month; Q2 of 2019 was at 123; and Q2 of 2020 was 118, a 5% drop from 2018.

In order to shift the overall worked rate by over 5%, this sort of change in workflow would need to be industrywide and not just the work of a few larger firms shoring up their partner’s hours. It has happened before, and it does have consequences down the road for associates.
“It did happen during the Great Recession,” Josten said. “We are seeing a reversion back to prior behaviors. If you go back five or six years as firms recovered from the Great Recession, there was a lot of discussion of a lost generation of associates. Partners stopped pushing work down to them. They didn’t hire as many, and they didn’t get trained in the same way. That is why the lateral market is so competitive for young partners now.”

Client Demands


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While some of this behavior can be attributed to partners looking to hit billable hour marks and make sure their own books are healthy, it isn’t all driven by that.

“Some partners want to hold onto work in tough times,” said Kent Zimmermann, a longtime legal consultant and partner at Zeughauser Group. “But clients want more senior partners in tough times as well.”

Zimmermann said that the kind of matters that take center stage during times of crisis tend to skew toward a more practiced hand, such as a once-in-a-lifetime bankruptcy or a front page internal investigation.

“These are the kinds of matters that are powering firms during the downturn, and if you think about what is involved, you start to see why the clients want a lot of time from the most experienced people,” he said.

Hoarding

But that doesn’t account for all of the shift. Some of that shift is, in fact, due to partners wanting to hold onto work, and in a zero sum game of billable hours that has consequences for those missing out on said work.

“In the short term, it is anxiety-producing for associates as their hours are reduced,” Scott Westfahl, director of Harvard Law School’s executive education program, said. “And most associates are smart enough to notice.”

Westfahl said that, longer term, there is what he called “associate lag,” where they are not given sufficiently challenging work in order to develop and grow professionally, which means that, although their total years in the profession indicate one thing, their actual experience level is that of someone more junior.

“One of two things will happen: Either they get stuck as their rates rise each year and they don’t have the experience to handle it and their performance rating goes down, or they get bored out of their minds,” he said.

The end result is lack of knowledge for certain classes of associates and an increase in the associate’s desire to seek employment elsewhere once economic conditions are ripe for a move to another firm.

Concerns

“I have been in contact with a lot of associates who are concerned about their workflow being slow,” said Michelle Fivel, a partner at legal recruiting firm Major, Lindsey & Africa who specializes in associate recruiting. “They are concerned about getting the appropriate training and want to make sure they are honing their skills.”

It isn’t just the skills development, though. Fivel said that some associates whose firms tie compensation like bonuses and promotions to billed hours are concerned that they won’t be able to hit those marks and feel somewhat powerless to do much about it.

“They don’t really have the power to go and get work, to bring it in,” Fivel said. “They rely on partners to do that for the most part.”

Zimmermann said the prevalence of partner “hoarding,” while likely present in most firms to some degree, can be a smaller or larger factor depending on the culture of the firm.

“Some firms are more permissive than others of that behavior,” he said regarding partners keeping more work in times of crisis. “But in the end it is in the best interests of the firm to address this, as you don’t want your best associates blocked from ascending.”

It’s Not the Great Recession

While the pandemic has parallels to the Great Recession with partners taking on additional work similar to the way they did in 2008-2009, firms learned some valuable lessons from the most recent crisis that has informed their decisions on how to handle associates during the pandemic.

“You haven’t seen the mass cancellation of summer programs like you did during the Great Recession,” Josten of Reuters said. “Firms are doing more furloughs than layoffs. You see reductions, but not like in 2009.”

Firms learned that while layoffs are certainly a way to cut spending during crisis, the long-term effects can hamper firms when they try to staff back up again once business increases, making it all the more important to keep the associates busy and productive during the down times.

“This time we are seeing a greater effort to re-tool associates,” Fivel said. “The firms learned lessons and don’t want to repeat those same mistakes.”

Fivel said that while a lot is uncertain, the lateral market for associates in the coming 12 to 18 months could be quite interesting.

“A firm’s reputation, based on how they handle difficult times is remembered for a long time.”

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