The big news last week was that Bob Savitt, co-chair and veteran litigator with Wachtell, left that firm for Gibson Dunn and took six others with him. (It was supposed to be seven, but that’s a whole other story.) Lots of speculation why, and most of it centered on money.
It is, indeed, a remarkable departure for a couple of reasons. Savitt was not just any partner. He was co-chair of the firm. If anyone could impact conditions at the firm and things like compensation, it was him. And the fact that he left Wachtell is also telling. Wachtell has long prided itself on being a genteel firm where you came in as an associate, became a partner, and never left. Indeed, it only recently shifted from a pure lockstep compensation system to a modified lockstep.
There’s something afoot here besides more money, not just with this move but with many others. The truth is, in the age of AI and tech, it’s just too damn easy to pick up and leave. To go someplace else where the grass and money look greener.
But It’s Not the Principle, It’s The Money.
Before we get to why it’s easier, it is important to think about money, because, like it or not, we live in the age of Moneyball. It used to be that firms, even larger ones, were different. It was about a lifelong partnership. Many firms, like Wachtell and another New York firm, Cravath, engaged in lockstep compensation for partners. Every partner in each class got paid the same regardless of how many hours they billed or how much work they originated. The old all for one and one for all concept.
The system was driven by the idea that the clients the lawyers worked for were clients of the firm, not individual lawyers. Therefore, it was assumed that everyone somehow contributed, even in some fashion, to getting and maintaining those clients. So, a lockstep system seemed fair and made some sense.
But truth be known, those days are long gone and have been for a while. Clients today are more loyal than ever to the lawyer or lawyers that get results instead of to a firm. Clients like, trust, and rely upon the lawyer doing or managing their work presumably because of that lawyer’s individual talents.
Certainly, there were longstanding client relationships with firms that created loyalty to that firm. Often, the general counsel for the client may have come from that firm. But at the end of the day, results matter, and the whole notion of clients of the firm has eroded.
As it did, so did the rationale for lockstep compensation. A person with a $10 million book of business, twice that of most of the rest of the closest books of business, needed to be fed if they were going to stay on. Wachtell was indeed one of the last holdouts to lockstep. But unlike most firms, Wachtell didn’t completely junk it. It went to a modified lockstep. In doing so, it reportedly went to a 3-to-1 compensation spread. That’s more or less a lockstep since any way you look at it, it places a ceiling on a rainmaking partner’s compensation.
It’s also rumored that the firm valued its merger and acquisitions work more than litigation. Someone like Savitt could have viewed this value as limiting his future compensation.
The truth is we probably won’t know the exact reasons for them leaving. What we do know is that lateral moves are happening all over the place and that loyalty to a firm is more or less dead.
Loyalty. What Loyalty?
But part of the whole concept of firm loyalty may not have traditionally been loyalty at all. It was instead based upon need. Things heavy hitters like Savitt had to have to bring in and serve all their work. Things that only a large firm could provide. Things like institutional knowledge, internal subject matter experts, significant internal support, firm stature and clout, proprietary forms and processes, stability, associates and other partners to do work, the investment of the time and money for associate training and development, and even location. All these things were provided by a large firm. And in Savitt’s case, as co-chair, he more than most had the ability to make things happen to get what he needed when he needed it.
Moving Was a Big Headache
All of these could not be easily replicated by switching to another firm. Packing up and moving for more money or greener pastures involved a lot of dysfunction and disruption to get your work and workflow back to where it was. And many times, a partner would conclude it was just not worth the effort and the logistical headaches to pull up stakes. Not to mention the fact that you had to worry if your clients would follow you out the door.
Indeed, I remember proposing to my mentor one time, due to frustrations with the firm, our practice group should just go form our own firm. I thought it was a good idea until he looked at me and said, “Great, how are we going to make the first month’s payroll?” It was just those kinds of considerations that would keep lawyers and partners at firms. (We never formed our own firm, by the way.)
But Now…
But today, many of those headaches can now be alleviated with artificial intelligence and technology. AI can draft a brief. It can search thousands of documents. It can tap into expertise from anywhere and everywhere. It can reduce associate learning curves. It makes it easy to standardize work across offices. Indeed, technology reduces the need for location to play a key role at all.
And the clients? Most trust their lawyers, not the lawyer’s firm. And why not? Just like their lawyers, their needs can be satisfied by virtually any firm as long as they still have their lawyer. Clients see how technology and AI frees up lawyers from their firms, so they don’t care as much what the name on the front door of the firm is.
So, a partner can leave and head to another firm or even start their own with barely a hitch. If you aren’t happy with your compensation or your partners, no sweat, just leave and go someplace else. No fuss, no muss.
Management Implications
This, of course, has enormous implications for firm management. Whatever control management had based on client loyalty to the firm, and the cost to the lawyer to change firms, is gone. Given most law firms’ consensus decision-making model, firm management never had the clout management other businesses had. It never had much ability to control or corral big rainmakers. And now with the ease of making a lateral move, management is even more constrained. Firm management is in a tough spot. You either risk losing a heavy hitter or give them everything they want.
Any notion of a culture built over years of partners practicing is also gone. Lawyers in firms, especially those with big books of business, are now free agents who can take their talents wherever they want and whenever they want. We are now truly in the age of free agency with no salary caps or ceilings.
Firms are truly a bunch of individuals just sharing office space.
Just ask Wachtell.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
The post Lawyer Laterals: Free Agents With No Comp Caps appeared first on Above the Law.
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