The Tragic Irony of Hiring Fewer Associates in Large Law Firm
Law firms' profit model operates very differently from that of public corporations. In the latter, reducing employee headcount can boost profits. And the stock price. That's not how things go in law firms. The leverage model , which had been forumulated by Paul Cravath, is based on maximizing financial results for the firm based on the number of associates used on an assignment. Here's the game. The more hours billed out for associate tasks, in addition to the hours billed out for the partner's strategic direction, the higher the leverage. That's exactly why law firms developed what seems to be an inefficient structure: the pyramid. Simply put, a partner billing out solo can only generate so much reveue for the firm. When they add on the hours of worker-bee associates the increase produces the powerhouse earnings of firms such as Kirkland & Ellis. Last year that K&E revenue was a record $10.56 billioin. Overall, throughout large law firms, revenue ...