The Elastic Tournament: A Second Transformation of the Big Law Firm

I have been on a blogging hiatus due to a series of projects that have demanded a lot of my time.  This includes work on The Elastic Tournament, which is a paper co-authored with Marc Galanter (Wisconsin Law / LSE).  We presented it last week at a terrific symposium hosted by Stanford Law Review, the Stanford Center on Ethics, and John & Terry Levin Center for Public Service and Public Interest Law.

The paper is largely an update of Marc's famous 1991 book (with Thomas Palay), The Tournament of Lawyer:  The Transformation of the Big Law Firm.   We hope it is the most descriptively accurate account of  modern large law firm, which is, for a variety of reasons, a sector of practice that is of growing importance to law students and law schools.  There is a lot of interested data compiled in this study, which I will be discussing over the next several weeks.  In the meantime, here is the abstract of the article.

In 1991, Galanter and Palay published Tournament of Lawyers: The Transformation of the Big Law Firm, which documented the regular and relentless growth of large U.S. law firms. The book advanced several structural and historical factors to explain these patterns, centering on the adoption of the promotion-to-partnership tournament. Systemic changes in the marketplace for corporate legal services in the intervening years suggest the need for an updated account of the modern large law firm.

Using Tournament of Lawyers as a starting point, we propose to fill this void in the literature. Marching through a wide array of empirical evidence covering the last twenty to thirty years, our findings corroborate some of the core theoretical insights of Tournament of Lawyers. For example, the continuous upward growth of the partnership based on the tournament is clearly evidenced by a “smooth” upward trajectory in the partnership ranks while associate hiring hews more closely to the underlying business cycle. On the other hand, the widening ranks of permanent “off track” attorneys and non-equity partners, including the prevalence of de-equitizations, suggest the emergence of a more complex and elongated tournament structure that applies to both partners and associates.

Under a new model, which we dub the “elastic tournament,” the equity core is primarily reserved for partners who control access to key clients. This structure reduces cross-subsidies between lawyers with differential value to the firm, thus reducing the potential for large-scale lateral defections. Yet, this reduced sharing of risks and benefits simultaneously creates an environment in which it becomes more costly—at the individual lawyer level—to faithfully adhere to professional and ethics principles that are in tension with client objectives.  The diminution in sharing also reduces the time horizons of individual lawyers and decreases their willingness to invest in firmwide initiatives that do not simultaneously optimize their own practice. Amidst this widening collective action problem, the “firm” itself has remarkably little autonomy to pursue non-economic objectives, such as racial and gender diversity or the training and mentoring of the next generation of lawyers. Further, except in some exceptional cases, the influence of firm culture, which may have moderated lawyer self-interest in an earlier era, is weakened by the sheer size and geographic dispersion of the modern big law firm.

Although this model is fundamentally “stable” in the economic sense, it raises several philosophical and practical issues regarding lawyer independence and the long-term viability of professional self-regulation.

Comments

[John Flood]

Diversity according to Wilkins and Gulati's reinterpretation of G&P, is relegated to the permanent off-track lawyers you refer to. Thus the firm can appear to be doing something in this area while actually doing very little. Carolyn Elefant's blog carried recently something about minorities claiming to be sidelined into these categories.

[William Henderson]

Carolyn,

You raise a excellent point. I know a former large firm lawyer who started his own firm after his imploded. Because of his excellent reputation, he got a huge volume of referrals because of conflicts at big firms. He loves the autonomy of being in a small firm, has greater fee flexibility, and claims to have a much higher income, in part because of the lower overhead.

That said, large firms are growing MUCH faster than any other sector. See Baker & Parkin (NC L Rev. 2006). Perhaps both small and large sectors are benefiting from the growth in corporate demand for legal services. But there is no good evidence that big firms are going to be done in by nimble, tech savvy small firm lawyers. Indeed, many small firm lawyers trade on their former connections to big firms and benefited from exposure to the deal flow. There is a symbiotic relationship between large and small corporate law firms. Moreover, there is some benefit to having expertise in foreign locations--granted that expertise adds a huge amount to overhead.

IMO, Small firms are benefiting from a fragmentation of the market. But I don't see a wholesale paradigm shift. I could be wrong, however.

Thanks for you comment. bh.

[Carolyn Elefant]

I just downloaded your paper and I am looking forward to reading it. However, based on your abstract, I think that you have overlooked a significant factor in the changing nature of the large law firm: the ease with which technology enables lawyers to leave law firms and start their own. Twenty years ago when I graduated, starting a solo practice typically meant pounding the pavement for consumer oriented cases. But with technology, many lawyers can handle many of the litigation, contract and regulatory matters traditionally handled by large law firms. Moreover, as Mike Dillon, Sun GC pointed out in his blog post, Way of the Mastodon, corporate counsel no longer need the one stop shopping that firms offer and can instead find the best people on the Internet. As fees skyrocket and firms merge, clients are conflicted out of cases or simply can't afford firm rates and are looking for alternatives that new solo and small firms are ready to provide. I have written about these changes more here in this blog post from my new book, Solo by Choice: How to Be the Lawyer You Always Wanted to Be.

http://www.myshingle.com/2008/02/articles/book/authors-cut-solo-practice-looking-back-looking-forward/#more