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Bill Lyon, a friend and financial guy, sent me a link to a story in today’s online Wall Street Journal“Pay Gap Widens at Big Law Firms as Partners Chase Star Attorneys.” I thought it significant that this issue should make it to the mainstream financial press. I guess the numbers are finally big enough for the business community to notice.

Naturally, I had to weigh in with a comment, which follows below.

This article further documents the erosion of the naive illusion that the law is somehow not a business, subject to market forces and the human business factors such as greed, etc. The pay decisions cited merely reflect the “excessive executive pay” headlines appearing daily about the corporate world for the past few years.

Notable was the quote from the former Hogan Lovells partner who, with what I hope was intentional understatement, said, “The [pay] divergence hurts the firm’s partnership ethos, creating a sense among some partners that being a lawyer is ‘less of a profession and more about making the most money you possibly can.’”

“Creating a sense among some partners” that that’s the case? As in, emerging just now, among only a portion of the partnership? Where have you folks been for the past 20 years?

For years, law firms have been using pay—in the form of reporting annual PPP—for bragging rights and recruiting benefit. They did the same thing with associate pay not so long ago.

Such ledger-based arms races can go only one way. Think: The NBA and NFL, where teams continually bid up prices for scarce stars. Under their salary caps, it’s a zero-sum game, in which every additional dollar paid to the stars results in a dollar less to distribute among the rest of the players. Over the past 10 years, the percentage of allowable pay allocated to stars has gone steadily upward, to the point that many teams, having snagged a superstar at a consumptive price, don’t have enough left to put a successful team around him.

Law firms have a form of salary cap, too, in the sense that their annual earnings are finite. So it’s the same zero-sum game, with the same disparity gap of which you write.

As for Mr. Gorrell’s claim that “We haven’t been reducing the bottom level of compensation of our partners,” unless his firm has somehow escaped the downturn entirely and is experiencing revenue growth rates that at least match the growth in stars’ pay, he must have discovered a new form of math.

The practical question is, what will non-star partners do to protect their interests?

One short-term solution is to move to a firm where one’s transferrable book of business constitutes stardom. More than a few MegaLaw partners have done that over the past year or so, usually under the cover of delivering relief to their beleaguered clients in the form of lower rates.

The only sustainable solution, however, is to increase one’s leverage and relative star power. Build a book of business that makes you mobile and raises you above the “don’t want to lose her” threshold.

Lawyers who aspire to this solution will first have to abandon the mentality that billable hours are king. Hours are what my researcher friend calls “necessary but not sufficient.”

As long as you allow billable hours to be the ultimate excuse for not generating business, it guarantees that you’ll see business development as “extra,” i.e., something to do when you’ve gotten everything else done. News flash: You’ll never get everything else done to a degree that 200 hours per year will magically become available to you.

My late parents, products of The Great Depression, adhered to the “pay yourself first” policy. That meant that, even when they felt overwhelmed by medical bills or other obligations, they always put money into savings first, then they paid what they could to their creditors. (As their circumstances improved, every creditor got paid every dime owed.)

Accept that, under the star system, revenue from your billable hours goes first to paying and retaining the irreplaceable stars, because that’s the firm’s highest priority. Then, whatever’s left will be meted out to the lawyers considered lower priority, i.e., replaceable.

Make yourself irreplaceable.

Pay yourself first, i.e., become the most important client you have, the one that gets first call on your time, attention and resources. Allocate a minimum of 200 prime-time hours, roughly four per week, to building a book of business. Read books; buy online courses; hire a coach; do, and invest, whatever you have to. Make it happen.

Or, accept that your sweat will finance the stars’ wealth for the rest of your career.

Mike O'Horo

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