
How Our Professional Elites Are Hired - tortilla
http://andrewsullivan.theatlantic.com/the_daily_dish/2010/08/how-our-professional-elites-are-hired.html
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grellas
The Big Law model (in which I worked for four years some time back and with
which I have dealt repeatedly over the years from one angle or another)
depends heavily on highly leveraged relationships within the firm, typically
with something like a 1 to 3 ratio between the equity partners and the young
associates who do the bulk of the actual hourly billing.

It also depends on the firm's having the capacity to do highly sophisticated
legal work while consistently adhering to standards of excellence.

Finally, it depends upon the firm's ability to induce the associates to adhere
to wildly oppressive work hours as part of their normal schedule, such that,
for example, when FB broadened its disclosure of user information there came
popping out a whole series of attorneys who had (in the former cover of
darkness) described themselves as "Slaves of xxx," or some variation thereof
(which FB automatically designated as company names).

These firms will pay the associates anywhere from $165K/yr to start up to the
high $200s, often with large bonuses tacked on to the base salary.

Why? Because it is basically a vast money-making machine for the partners who
lead and manage those firms and who pull in multi-million dollar annual
incomes. And the key to it is to have lots of talented bodies consistently
pulling all-nighters on major pieces of litigation and major deals that such
firms handle. Thus, whenever you read about a headline deal ("Skype to offer
shares in IPO at $1B valuation"), you can assume that there is a small legal
army at work in the background doing an orgy of billing.

For their part, the associates toil and slave in such systems for as much as 8
to 10 years in hopes of making partner so that they can one day be on the
receiving end of this money-making machine.

This system works well only if highly talented young attorneys can
consistently be recruited to handle the vast bulk of the billable hours
involved in such work. Thus, the most precious asset belonging to such firms
is precisely this pool of young talent, and they will pay dearly to get it.
What is more, such associates are paid in lockstep, meaning that if one of
these large firms "adjusts," the others will be quick to follow. For a nearly
unbroken period over the past 25 years, those adjustments have consistently
been upward. The craziness peaked in the bubble years of the late 1990s,
during which the associates themselves set up "greedy associates" websites and
compared notes on every dollar paid and every perk provided by their
respective firms. Of course, if any firm began to be seen as out of step with
what these young lawyers came to see as their entirely legitimate demands,
this would be suicide for the firm involved because the top talent would no
longer go there. Thus, one saw the spectacle of the most elite law partners in
the nation cravenly bowing and scraping to green new grads, all for the
purpose of continuing to curry favor with them for recruiting purposes.

It goes without saying, then, that the firms would easily shell out for the
sorts of things described in this piece - for expensive and luxurious flights,
hotel stays, cab fares, dinners out, etc. It was all part of the game, and not
a particularly costly part given what the firms would ultimately derive from
this labor-pool asset within their business models. During their summer
internships, they would be wined and dined as law students and would be
repeatedly told what a great place to work the firm was. Once recruited as
associates after graduation, they were introduced to the "slave system" in
spades, and the naive perceptions they had as students would often be deflated
in light of a sometimes harsh reality of endless, long hours and of often
harsh taskmasters who drove them with an unkind hand.

A significant part of this has to do with grabbing the students from the elite
schools but the real goal was to grab the talented attorneys from each
graduating class (this meant those from top schools and those from the top 10%
or so of second-tier schools). The practice of law in such environments is
truly demanding, and the goal was to find attorneys who worked hard, who knew
how to think, and who comported themselves with the highest standards of
discipline and excellence. Very few young attorneys can do all this
consistently, and they are in great demand.

In one sense, however, this piece reads like it must have been written a
couple of years ago. In reality, Big Law is still reeling from the latest
economic collapse and the latest crop of 3Ls is still largely unemployed, with
no serious prospects for improvement in sight for this particular labor
market. Even the Harvard 3Ls have largely had to settle for the types of
positions that, until recently, they would not even have begun to consider.

This truly is an artificial world and there is some doubt today whether it can
continue to operate in its accustomed manner. Time will tell on this. I
personally doubt it.

~~~
sbaqai
grellas, insightful post as always. Do you mind elaborating further on your
last sentence/point?

There was an article earlier on HN about the growth of legal outsourcing in
places like India, as well as the prevalence of four tiers of law schools
overcrowding the marketplace. In your opinion, is the current state of the law
labor market a reflection of recent economic shock, or do you think there is a
paradigm shift occurring to some degree?

~~~
grellas
The recent economic collapse has caused a general revulsion against the
billable fee structure that has been routinely used in large firms.

At their peak in 2008 before the collapse, fee structures had gotten to the
point where first year associates were being billed at about $500 per hour,
with senior associate rates reaching into $600/hr plus and partners ranging
anywhere from $700 to $1,000/hr (even paralegals would be billed at as much as
$350/hr plus, not to mention the summer clerks, who also would be billed at
such rates).

Even more, the standard practice in such firms is to travel in packs. Several
lawyers and a team of paralegals would be assigned to a typical project that
comes to the firm and every one of them bills time on the matter whenever they
talk to each other about it. Thus, a "team meeting" may wind up costing the
client thousands of dollars per hour, as the lawyers and paralegals ruminate
over the strategy of a case or the details of a discovery strategy, etc. Now
it is not the norm to have everyone globally assembled even for a large
matter, but even the routine, day-to-day handling of a matter winds up being
double- or even triple-billed, e.g., a court hearing at which a partner shows
up to do the argument with two associates in tow carrying the bags.

All in all, not a very efficient system. But, as noted in the article, there
is an incestuous network in place between the big firms and the general
counsel and other senior in-house counsel who effectively determine to which
outside law firms they will farm out the company's most complex matters. Not
only do the lawyers on the client have relationships with the big-firm lawyers
but they also operate under the "I can't be fired for using IBM" principle -
and this has led over the years to strong ties within this network that have
assured a steady and growing stream of work for the big firms from the most
prominent companies with the most complex legal needs, all in spite of any
inefficiency in billing or even overt billing abuses.

For a while, when all was still well, these same in-house counsel, under
pressure from management, began to assert themselves by questioning the
overbillings, etc. and this led to a pattern by which initial billings in a
matter became, in effect, akin to opening offers. Such billings would be
scrutinized and returned with complaints about this or that, would be cut
back, and would then be paid in what was generally regarded as still-inflated
form.

The downturn did change all this, with companies having had enough of this
billing model. In today's environment, the large firms have had to adapt and
have been forced to temper the old abuses with reduced hourly rates, fixed-fee
arrangement, caps, etc. It is still the same old machine but much humbled when
it comes to routine billing matters involving the in-house network. Very large
and very complex matters still command the old rates and the old multiple-
billing mechanisms, and that is why large firms salivate over the prospect,
e.g., of getting a prominent role in the Lehman bankruptcy or in defending a
prominent class action, etc. The problem is that there are only so many
matters of this type, and certainly not enough to support the range of large
firms in the manner to which they had historically been accustomed.

Thus, today, the field is much more varied even for the larger legal matters
that have traditionally gone to large firms. For discrete issues, such as
complex discovery, much of the work is being outsourced, e.g., to the Indian
companies you mention. Instead of having a team of U.S. lawyers and paralegals
poring over millions of documents at rates of $500 and up, you have a much
less expensive labor pool overseas doing this sort of mind-numbing work. You
also have a proliferation of smaller, boutique firms throughout the country
doing the same work as the larger firms generally do, by comparably qualified
lawyers, at half the billing rates. Some are set up "virtually" to enable
themselves to compete on price even more effectively. And, in response, as
noted above, the big firms themselves are adapting and discounting rates, etc.

All this represents a major change from historical patterns. I would go so far
as to say that it has left the large firms "reeling," if that term is not too
strong.

Will it result in a paradigm shift? In some ways, no. The network upon which
the large firms feed is firmly intact and it does not appear that anything
will change the basic ways in which the work is generated for such firms,
i.e., they will continue to get the prestige big-company work and this will
continue to support the existing structures. To that extent, the downturn has
basically caused a short-term shift in the relative bargaining power between
the company clients and the large firms. I expect this will shift back over
time because law more and more affects large companies, with ever-expanding
government regulatory frameworks, etc. in place, not to mention ever-expanding
theories of legal liability. In this sense, Big Law will continue to be a
"growth" business, albeit one that is temporarily in a slump.

In other ways, yes, however. Modern technology has indeed transformed the way
law works and it is far easier today for clients to find good law firms of
varying types to compete for their projects. Thus, at this level (which
certainly includes the bulk of the startup world), clients have a far broader
range of choices and this means more competition among the lawyers and better
billing arrangements for the clients. Clients in such cases do not need to put
up with things such a double-billing, or paying extensively for the learning
time of all those young attorneys who are part of the 3-to-1 ratio on which
the Big Law model depends. In these respects, I think the change is permanent.
Clients are more knowledgeable and the information is now out there to give
them good choices. This will not change going forward and is a good thing from
the client side.

The ultimate institutional constraint, though, that will continue to support
the current system is the guild system under which lawyers operate. Owing to
the force of the law regulating the field, one can only practice law in a
jurisdiction in which one is licensed and one who is not licensed can't offer
any form of legal services to the public. This system, though intended to be
protective of clients, acts much as the old guilds of the middle ages did in
making sure that only the licensed artisans get the work. This in turn creates
artificial scarcity, leaves it impossible for enterprising people to solve
legal problems through creative means, and generally leaves the client with
fewer choices and little ability to bargain over price. As long as this system
generally prevails, there will be no fundamental changes in the field.

Sorry to go on and on, but I do hope this helps give you an insight into the
broader patterns in the field.

~~~
abalashov
Very informative and interesting comment - thank you for "go[ing] on and on!"

It seems to me that the pattern you are describing also applies to Big 4
professional services firms like PriceWaterhouseCoopers, KPMG, etc, in areas
anchored around accounting and auditing but characterised by an ever-expanding
array of allied services. Would you care to comment on any nuances or
differences particular to them as opposed to Big Law?

~~~
grellas
Both are attempting to take what were traditionally fairly sleepy service
professions (this would be 50+ years ago) and transform them into worldwide
mega-businesses for their respective niches. This means that the old
partnership model has effectively died in both professions. Partners tend not
to sign on for life with such a firm any longer but rather tend to align
themselves more opportunistically with any given firm, ready to jump to
another as opportunity and the dollars warrant. For this reason, too, the
firms tend not to support partners over the long term and the loyalty factor
is much diminished from what it used to be. In short, both are now major
businesses, with all the upside and downside that comes with taking the risks
of major entrepreneurial ventures.

Thus, as firms trying to expand aggressively into new fields, with worldwide
operations, such firms are now subject to all the vagaries of major
businesses. In the past, a major law firm or a major accounting firm would not
have wild fluctuations in its firm operations - ups and downs, yes, but not
wild swings that could threaten its survival. Today, both large law firms and
major accounting firms have done the unthinkable: (1) systematically purging
their partner ranks to weed out less productive partners, (2) mass layoffs of
younger professionals to survive severe downturns, (3) firm explosions that
have caused some of the premier firms to go out of business altogether (in
accounting, Arthur Andersen, of course; in law, firms such as Heller Ehrman
(which was a 150-year-old firm, Brobeck, etc.). These are all symptoms of the
shift from staid profession to major business venture. Of course, the rewards
of successful expansion have far exceeded the risks over the years, and have
enabled such professionals to make returns on average per partner that easily
dwarf what such partners used to make under the old ways and hence they have
made this shift.

I don't think I am competent to comment on refined nuances between the large
firms within the accounting profession versus the legal and so will leave that
to others.

------
tomsaffell
I worked at one such firm for five years, and did a lot of recruiting of
undergraduates in that time. This is a mostly fair summary, but I take
exception to the following:

 _Even getting an interview often requires attending an Ivy League
professional school or a very few top tier equivalents_

Anyone _could_ apply. All applications were taken seriously, and I worked with
several excellent people from non-Ivy-League schools. It would be much more
accurate to say:

 _Even _knowing_ about such business consulting firms often requires attending
an Ivy League professional school or a very few top tier equivalents_

I always found this regrettable. It boils down to the fact that most
undergraduates have never heard of most business consulting firms (or the
industry at all), so a lot of work (consultants' time) and money go in to on-
campus awareness marketing. That doesn't scale well at all. So we ended up
doing it where we had the biggest bang for the buck (in the UK, this was just
Cambridge and Hull... err, I mean Oxford). We would sometimes send one new
hire to the careers fair at a few other universities.

Bottom line: anyone could apply; every application was taken seriously; 99% of
students outside Oxbridge had never heard of us, and that was too expensive
for us to fix.

~~~
silverlake
This is true. I went to a state school and had never heard of management
consulting until everyone I met from MIT went into it. I remember a dinner in
Boston where I kept asking them, why would a company pay a 24 yr old with no
experience for advice on anything? I still haven't heard a good explanation.

~~~
astrofinch
[http://www.overcomingbias.com/2010/04/consulting-isnt-
about-...](http://www.overcomingbias.com/2010/04/consulting-isnt-about-
advice.html)

How about having someone to blame?

~~~
_delirium
It might be one of those apocryphal engineering war stories, but one I've
heard a few times: a consulting company is brought in by management with a
pretty obvious goal of ratifying something management already wanted to do.
The in-house engineers know what's going on, and what management wants
ratified, but they're supposed to work with this consulting firm. The
engineers at the consulting firm know that they're probably being asked to
ratify some already-made decision, and their job is basically to find out what
it is and recommend that. Early on, the in-house engineers just spill to the
beans to the consulting firm's engineers, and both groups more or less take it
easy for three months, short-circuiting the usual charade while management on
both sides thinks that some sort of consulting dance is going on.

------
ctkrohn
I've been on the other side of this as a Wall Street trading intern. As a
college senior in 2007, my future employer hosted a party in NYC for all those
who had accepted their job offers. Keep in mind, this is for people who had
already agreed to take the job -- not for potential candidates. Still, they
flew us to NYC from our respective colleges, put us up in a really nice
boutique hotel, reserved a very nice restaurant for the night, paid for our
drinks, drove us around in limos, served us brunch, and flew us back to NYC
the next day. It was totally outlandish.

Potential employers wine and dine their candidates because, well, that's how
THEY would want to be treated if they were applying. Wall Streeters are quite
status conscious, so of course they'll try to appeal to candidates'
materialism and sense of status. Law firms are no different, though they're
probably a bit more modest than your average investment bank.

It's the same thing as Google bragging about their massages and catered sushi.
Google is just showing that they have what their candidates care about. Your
average tech employee probably wouldn't care, and would maybe even be a little
put off if their employer took them to an exclusive club. Wall Street banks
are big on expensive dinners and bottle service, but many of them don't even
have gyms or subsidized cafeterias, much less free food. My firm didn't even
have napkins in the pantry!

~~~
enjo
I published a technical book at the age of 21. While I didn't make much money,
the publisher (who has since been bought and sold 3 times I think) certainly
wined and dined me at every conference and event that I went to. Great meals
and all the free booze I could drink. Not to mention the chance to flirt with
the always really attractive editors they sent out to work these things.

It sure made an impression on 21 year old me. There didn't seem to be a lot in
it for the publisher (other than keeping their writers happy I suppose). It
wasn't like my book was very successful. Hell it wasn't very good at all. At
21 I had the knowledge, but lacked the work-ethic to really put the time into
it.

I always wonder if that's all this really is. Folks who have the money looking
for an excuse to spend it (and make some kids year). I'm not sure it's a big
plot to make them dependent on the job. I really think that people, generally,
like to throw money around.

------
learningtobuild
A few random thoughts from long time lurker, first time commenter (I finally
have some value / expertise to add): The biggest thing that these interviews
are testing is structured assimilation. Banks look for someone who can
convincingly discuss their unremitting passion to enter finance as a lifelong
career without seeming either passionate or betraying an interest in the
money. Consulting firms structure 'case interviews' designed to test 'problem
solving' when they are really laying out a regimented structure which can be
most easily mastered through having a successful network of already-hired
junior consultants. Again, it's not that there isn't a desire to hire
creative, talented people, but the profile has to fit along certain metrics.

~~~
gruseom
What experiences led you to this assessment?

------
rdtsc
I think it basically comes down to a status signaling mechanism. They are
selling a dream to these candidates, so later they can sell these candidates
to their clients. And selling is just that -- appearances. I doubt other
schools don't have the candidates with the appropriate knowledge. However, I
am sure, they do not have candidates that are in $200K+ student dept, and who
expect to drive a Porsche bought with the signing bonus from their first job
after college, who know the tastes of various types of caviar, and spend their
vacations on private islands. One needs exactly these kind of people for your
customers to interact with. They exude class, luxury, superiority, and
confidence.

So it is about signaling a certain status position and it is about giving your
client the best ass cover they can imagine. Anyone hiring these consultants
can always point to them and say "Look, we had all the best people. If they
can't solve the problem, nobody can". These firms tap into that market -- the
market for golden scapegoats.

And the funny thing is, if the golden scapegoats fuck up, it is not a problem
-- on the contrary, bonuses still roll in. The firm doesn't lose reputation.
Because, after all, if these guys and gals can't do it, nobody can. The fuck-
up is just a demonstration of impossibility of solving the particular problem.

------
known
Management strategy while hiring a Consultant is _Heads I Win. Tails You Lose_

