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									      Vol. 1, Issue 1                                                                          48

                         Joshua Johnson*


  Empirical studies and anecdotal evidence suggest that associate
  attrition is a significant and increasing problem for large law
  firms. My Article examines how incentive structures at law firms
  affect associate retention rates. My central thesis is that partners’
  use of associate labor resembles a classic “tragedy of the
  commons” in which associates are overworked and undervalued.
  The overexploitation of associate labor dampens morale among
  associates and leads to inefficiently high levels of associate
  attrition. Law firms can resolve this problem by forcing partners
  to “internalize” the attrition costs that their exploitative activities
  impose on the firm.

  INTRODUCTION ...................................................................................50
  I. A Problem: Associate Attrition.................................................... 57
          A. Recent Data on Associate Attrition................................... 57
          B. The Costs of Associate Attrition........................................63
                    i. Is Associate Attrition Really a “Problem”? ...........63
                   ii. Calculating the Costs of Attrition ..........................68
                  iii. How High Is Too High When It Comes
                        to Attrition Rates? ..................................................69
          C. Why Are So Many Associates Leaving?............................72
II. A Cause: The Tragedy of the Commons.......................................76
          A. What is the “Tragedy of the Commons”? .........................76
          B. Law Firms and the Tragedy of the Commons..................78
                    i. The Pure Expense-Sharing Firm.......................... 80
                   ii. Refining the Model.................................................83
                  iii. Explaining the Sick Cycle.......................................84

  *     Joshua Johnson is a second-year student at Yale Law School.
    49                                                                              Spring 2008

           C. Why Have Firms Not Taken More Aggressive
                Action To Solve the Tragedy?............................................85
           D. Evaluating My Analysis and Understanding Its
                Limitations ........................................................................ 88
III. Potential Solutions ........................................................................89
           A. Moving to a Lockstep or “Income Sharing”
                Model ..................................................................................89
           B. Making Associate Retention a Factor in
                Partner Compensation Decisions .................................... 90
    CONCLUSION .......................................................................................94
Vol. 1, Issue 1                                                             50

        A young associate was invited to a party at the
        home of an august senior partner at his firm. The
        associate wandered awestruck through the house,
        especially amazed at the original artworks by
        Picasso, Matisse, and others adorning the walls. As
        the associate stood gazing at one Picasso, the senior
        partner approached, and put his arm around the
        associate’s shoulder. “Yes,” he said, “if you work
        long and hard, day in and day out, six, seven days a
        week, ten, 12 hours a day, I could buy another


       In every joke lies a seed of truth. The humorous tale
recounted by Marc Galanter in the pages of American Lawyer
trades on feelings of exploitation experienced by young associates
working in “large” law firms.2 As Galanter explains, the partner in
the joke “seems headed in the direction of inviting the young
associate to emulate his own climb to eminence,” but then the
partner reveals that he views the young associate “only as a source
of profit.” 3 The partner “unhesitatingly quashes the dreams” of
the young associate and conceptualizes his relationship with the
associate in “entirely instrumental terms.”4         According to
Galanter, the theme of associate exploitation “has found
expression in lawyer jokes only in the last ten years or so, as

1   Marc Galanter, Not the Aristocrats, AM. LAW., Nov. 2005, at 71.
2   There is no consensus on what constitutes a “large” law firm. In a study of
    associate attrition, the NALP Foundation divides law firms into three
    groups: those with 250 or fewer attorneys, those with 251 to 500 attorneys,
    and those with 501 or more attorneys. See PAULA A. PATTON, NALP
    NALP, KEEPING THE KEEPERS II]. Generally, when I refer to “large” law
    firms, I have in mind firms with more than 500 attorneys. As Patrick J.
    Schiltz explains, however, many “smaller” law firms model themselves after
    the leading “large” law firms. Therefore, there are many law firms that
    “act” like large law firms in terms of their organizational and business
    strategies even though they have far fewer than 500 lawyers. See Patrick J.
    Schiltz, On Being a Happy, Healthy, and Ethical Member of an Unhappy,
    Unhealthy, and Unethical Profession, 52 VAND. L. REV. 871, 924 (1999).
3   Galanter, supra note 1, at 71.
4   Id.
    51                                                                Spring 2008

associate retention and satisfaction have become issues at large
       Job satisfaction is currently a hot topic in the legal
profession. Although job satisfaction is notoriously difficult to
measure, the popular consensus suggests that attorneys are an
unhappy lot, and the most miserable lawyers are those working in
large law firms.6 Even if the problem of attorney dissatisfaction
has been exaggerated,7 it is indisputable that young law-firm
associates are an extremely mobile group. In its annual survey of
midlevel associates, American Lawyer found that only 44.9% of
respondents predicted that they would still be at their current
firms in five years, and only 11.7% expected to become equity
partners at their current firms.8 After the JD, a longitudinal study
tracking the careers of more than 5000 attorneys during their first
ten years after law school,9 found even greater levels of wanderlust
among young associates. Forty-five percent of respondents in
offices with 101 to 250 lawyers reported that they intended to
change jobs within two years, and among respondents in offices of
251 or more lawyers, 55% expected to be at a different job in two
       These intentions to move are largely borne out in practice.
In a detailed study of associate attrition, the NALP Foundation
found that 53.4% of entry-level associates leave their law firms
within fifty-five months of their start dates.11 Recent empirical
evidence suggests that associate attrition rates are on the rise, 12

5        Id.
6        See Schiltz, supra note 2, at 881-88 (discussing multiple studies showing
         high levels of dissatisfaction among attorneys, especially those working in
         large law firms, but also describing a study of Chicago lawyers
         demonstrating that 84% of respondents were either “very satisfied” or
         “satisfied” with their careers).
7        See Aric Press, The New Reality, AM. LAW., Aug. 2007, at 91 (concluding
         based on the results of the magazine’s annual midlevel associate
         satisfaction survey that “[a]ssociates aren’t miserable, except perhaps in
         certain high-pressured New York precincts”).
8        See id.
         RESULTS OF A NATIONAL STUDY OF LEGAL CAREERS 13 (2004) [hereinafter
         AFTER THE JD].
10       Id. at 54.
11       NALP, KEEPING THE KEEPERS II, supra note 2, at 24.
         STATUS REPORT ON ATTRITION 8 (2005) [hereinafter NALP, TOWARD
Vol. 1, Issue 1                                                                52

and with the estimated costs of replacing a departing associate
ranging from $250,000 to $500,000, law firms appear
increasingly worried about associate turnover.13 Periodicals
focusing on issues of law-firm management are replete with
articles bemoaning the problem of associate attrition and
suggesting ways in which firms can improve their retention of
young associates.14 The elite New York law firm Sullivan &
Cromwell even organized a crash course in etiquette for its
partners after the firm’s internal data showed that the firm lost
31% of its associates in 2004 and 30% of its associates in 2005.
The confidential slide presentation encouraged partners to
indulge in such common courtesies as saying “thank you” and
“good work” to associates and promptly returning associates’
phone calls.15 The rising popularity of commercial seminars
promising to help firm managers boost retention rates further
demonstrates the extent to which firms are concerned that
associate attrition may be negatively affecting their bottom-line.16
        Law firms’ primary response to associate attrition,
however, has been to recruit aggressively, dedicating staggering
amounts of time, money, and effort to woo fresh blood to replace
departing associates. Law firms typically begin recruiting new
associates during their second year of law school. If a student has

     EFFECTIVE MANAGEMENT] (concluding based on attrition data that associate
     turnover is a “growing” problem for legal employers).
     WASHINGTON LAW FIRMS (2d ed. 2001), available at
14   See Associate Management, PARTNER’S REP. FOR L. FIRM OWNERS, May
     2007, at 4; Associate Retention, PARTNER’S REP. FOR L. FIRM OWNERS, July
     2007, at 6; Joan Newman, Appreciate Your Associates: Make Your Firm a
     Workplace of Choice, LEGAL MGMT., Mar./Apr. 2007, at 47; Steven T.
     Taylor, To Curb Associate Attrition Rates, Firms Must Stay Tech Savvy,
     OF COUNS., Aug. 2007, at 1; Charles A. Volkert, Got Talent?: Learn How To
     Keep Good Employees, LEGAL MGMT., Oct./Nov. 2006, at 22.
15   Peter Lattman, Does “Thank You” Help Keep Associates?, WALL ST. J., Jan.
     24, 2007, at B7.
16   Project for Attorney Retention, Retention and Reduced Hours, (last
     visited Mar. 30, 2008). For example, the American Conference Institute
     regularly hosts pricey seminars that pledge to help law firms “successfully
     tackle a multitude of hurdles,” such as “controlling costs” and “[r]ecruiting
     and retaining top talent.” American Conference Institute, Legal and
     Business Conferences and Publications, Law Firm Management, (last
     visited Mar. 30, 2008).
 53                                                             Spring 2008

the requisite credentials and performs well in his or her
interviews, a law firm will offer the student a position as a
“summer associate” with the expectation that the firm will likely
extend the student a full-time offer at the end of the summer.17
Firms may “spend as much as $250,000 to recruit a single
summer associate,” and despite these costs, a survey by the
National Association of Law Placement (NALP) shows that less
than 30% of students who are offered a position by a firm with
more than 250 lawyers accept the offer.18 Increasingly, law firms
are supplementing their traditional recruitment of law-school
students by engaging in the once taboo practice of hiring so-called
“lateral attorneys” who have graduated from law school and
worked in other legal jobs.19 Data from the NALP Foundation
show that laterals today comprise more than 40% of all associate
       The competitive market for top legal talent imposes stiff
costs on law firms. Firms currently “spend up to 1.5% of their
annual revenues on associate recruitment and retention,” and
these costs show no signs of abating.21 In fact, as firms grow and
the size of the graduating classes of elite law schools stays
relatively constant, firms are likely to face increasing scarcity in
the legal labor market.22 Firms are already engaging in costly
bidding wars in an effort to attract new hires.23 In the latest round
of increases, the nation’s largest, most prestigious law firms raised
the salaries of first-year associates from $145,000 to $160,000.24
To pay for these raises, firms are increasing and strictly enforcing

17   See generally Tom Ginsburg & Jeffrey A. Wolf, The Market for Elite Law
     Firm Associates, 31 FLA. ST. U. L. REV. 909, 915-30 (2004) (describing the
     typical law-firm recruitment process).
18   Elizabeth Goldberg, Open Season, AM. LAW., Aug. 2007, at 93, 93.
19   NALP, TOWARD EFFECTIVE MANAGEMENT, supra note 12, at 26.
20   Id.
21   Newman, supra note 14, at 47.
22   Junior Lawyers, PARTNER’S REP. FOR L. FIRM OWNERS, Aug. 2007, at 5
     (noting that the 200 highest-grossing firms in the United States “now hire
     about 10,000 new associates a year, or about 50% of the graduates from the
     top 100 of the nation’s 200 law schools”).
23   Ross Todd, The Going Rate: Firms Around the Country are now Paying
     Their First-Years Anywhere from $115,000 to $145,000, AM. LAW., Mar.
     2006, at 28 (“In 1999 the Menlo Park, California-based firm Gunderson
     Dettmer Stough Villeneuve Franklin & Hachigian raised first-year associate
     pay by more than $20,000, to $125,000. After that, a bidding war broke
     out nationwide, and salaries once unheard-of became the national norm.”).
24   Stephanie Francis Ward, Who Will Pay for Associate Raises: Partners or
     Clients?, ABA J. E-REP., Feb. 2, 2007, at 1.
Vol. 1, Issue 1                                                                54

billable hours expectations.25 Firms may be paying associates
more, but they are also expecting them to work harder in
exchange for their increased compensation.
        Studies suggest that increases in billable hours
requirements could yield higher associate attrition rates. The MIT
Workplace Center, for example, recently sent surveys to all
attorneys who graduated law school since 1987 and were at one of
the hundred largest firms in Massachusetts in 2001. The 971
respondents provided detailed information about their career
decisions between 2001 and 2005 and their reasons for them.26
More than half of the respondents who left law-firm practice
between 2001 and 2005 reported that they did so because of
“work load pressures,” and almost 60% cited “long work hours” as
one of their reasons for leaving firm practice.27            Among
respondents who moved to a different law firm rather than leaving
firm practice entirely, workload pressures and long work hours
were not as salient a concern. Nevertheless, more than 20% of
men and more than 30% of women who switched law firms cited
“work load pressures” as a reason for their move.28 Furthermore,
a higher percentage of respondents said that they switched law
firms because of “long work hours” than said that they moved
because of the better wages and benefits offered at their next job.29
These survey results suggest that demanding billable hours
expectations exacerbate the problem of attorney attrition while
increasing compensation does not necessarily persuade attorneys
to stay with their firms.
        Law firms seem to be caught in a sick cycle. Faced with
undesirably high associate attrition rates, law firms recruit
aggressively to replace their departing employees. To attract the
top talent in an increasingly competitive labor market, firms feel
compelled to raise associate salaries to previously unthinkable

25   Todd, supra note 23, at 28.
     IN MASSACHUSETTS LAW FIRMS 6 (2007), available at
27   Id. at 12-13. The study considered the reasons for departure of all attorneys
     leaving firm practice, whether associates, income partners, or equity
28   Id. at 18-19. Again, the study considered all of the respondents’ reasons for
     switching law firms and did not focus specifically on associates’ departure
29   Id.
 55                                                           Spring 2008

levels. To pay for these raises, firms demand that their associates
work harder and longer. But as billable hours expectations
increase, associates are more likely to leave their law firms, and
firms are forced to recruit even more aggressively because of their
failure to retain the associates they hire. Attrition thus begets pay
raises, which in turn yield more attrition as billable hours
requirements rise.
        At first glance, this self-reinforcing cycle seems wholly
irrational. Why, one feels compelled to ask, are law firms
responding to undesirably high associate attrition rates by taking
steps that only seem to compound the problem? Instead of
dedicating so much time, money, and effort to recruiting and
compensating new hires, why do firms not focus more attention
on retaining the attorneys they currently employ? The firms’
actions bring to mind the old story of the man who repeatedly
jumped into the river to save people from drowning, never once
thinking that his time might more effectively be used by doing
something about the person who was throwing the victims into
the water. Why do firms not attack the root causes of associate
attrition instead of focusing on short-term solutions that merely
mitigate the problem’s immediate symptoms?
        This Article attempts to answer these questions by
suggesting that law firms are trapped in a dynamic that
economists ordinarily refer to as the “tragedy of the commons.”30
I argue that associates constitute a “commons” subject to
exploitation by a firm’s partners. Since law firm partners are
usually compensated based on the business and revenue they
generate for the firm, partners have an incentive to cultivate as
much new legal work as possible in order to maximize their
annual income. Partners then rely on associate labor to “staff” the
projects they bring to the firm. Because partners enjoy a
disproportionate share of the benefits of exploiting associate labor
while they share the costs of this exploitation with all the firm’s
members, partners have an incentive to (1) demand that the firm
hire an inefficiently large number of associates to staff their
projects; and (2) overwork those associates that the firm does
hire. Furthermore, partners have little incentive to engage in
personally costly activities, such as mentoring and training, that

30   Garrett Hardin is generally credited with first identifying and fully
     describing this phenomenon. See Garrett Hardin, The Tragedy of the
     Commons, 162 SCIENCE 1243 (1968). For a more detailed description of the
     “tragedy of the commons,” see infra Section II.A.
Vol. 1, Issue 1                                                            56

could bolster associate retention because they bear the full cost of
these endeavors while sharing the benefits with the other
members of the firm. This dynamic creates a “tragedy of the
commons” in which associates tend to be overworked and
undervalued, ultimately resulting in an inefficiently high rate of
associate attrition.
        This analysis of the problem of associate attrition is unique.
To my knowledge, no one else has examined the issue using the
analytical framework of the “tragedy of the commons.” In fact,
most commentators have explained the phenomenon of associate
attrition in terms of a generational divide, positing that members
of Generation Y simply are not willing to sacrifice their personal
lives for work like their more assiduous parents were.31 It is
unsatisfying and unhelpful to describe associate attrition as a
mere “generational issue.” If recent law-school graduates are
simply lazier than their forebears, then associate attrition hardly
seems like a “problem”; instead, it might be seen as a helpful
mechanism for separating out the few ambitious, internally driven
members of a generally slothful generation. If, on the other hand,
controllable factors such as the structure of partner compensation
systems contribute to associate attrition, then law-firm managers
may be able to implement reforms capable of stemming the tide of
associate departures.
        Before proceeding to the body of my Article, I need to
provide an important caveat. By arguing that law firms are caught
in a tragedy of the commons, I do not intend to suggest that my
“tragedy of the commons” analysis is the only viable explanation
of associate attrition. Indeed, it seems that associate attrition is
an over-determined phenomenon with multiple causes. My
Article is simply meant to provide one possible explanation of the
seemingly self-defeating cycle in which law firms respond to high
attrition rates by boosting salaries and billable hours
requirements, thereby producing greater attrition.
        My Article is divided into three parts. Part I reviews the
most recent data on associate attrition and addresses the question
of whether associate turnover is really a “problem” for law firms.
31   See, e.g., Michael Cameron, Young U.S. Lawyers Keen To Get a Life,
     AUSTRALIAN (Austl.), June 30, 2006, at 28 (quoting a Chicago lawyer who
     opined that the problem of associate attrition “stems from a poor work
     ethic among young people in general, the products of the ‘entitlement
     generation’ who give greater priority to web surfing and gossiping than
     producing high-quality work”); Ashby Jones, Law-Firm Life Doesn’t Suit
     Some Associates, WALL ST. J., May 2, 2006, at B6; Stefanie Romine, Gen Y
     Workers Want Balance, CINCINNATI ENQUIRER, Oct. 31, 2007, at 1E.
 57                                                                  Spring 2008

Part II introduces the analytical framework of the “tragedy of the
commons” and explains how partner-compensation systems may
contribute to undesirably high rates of associate attrition. Part III
proposes potential solutions to the tragedy of the commons that
force partners to “internalize” the costs of associate turnover.

I.        A Problem: Associate Attrition

          A.    Recent Data on Associate Attrition

       Associate attrition is a surprisingly difficult phenomenon to
study empirically. Many law firms do not maintain adequate
records to track the extent and costs of attrition,32 and the firms
that do keep such records may be reluctant to share their internal
data.33 The NALP Foundation’s Keeping the Keepers II is perhaps
the most comprehensive and detailed nationwide study of
associate attrition rates currently available.34 The study examined
associate hiring and departures from 1998 to 2003 as reported by
a sample of eighty-four law firms located in major metropolitan
areas throughout the United States.35 The study found that an

32    See, e.g., HARRINGTON & HSI, supra note 26, at 30 (“[O]f the 50 law firms
      responding to the survey on Rates of Attrition in Massachusetts Law Firms,
      none systematically collects information on their attrition costs . . . .”).
33    In preparation for its Keeping the Keepers II study on associate attrition,
      the NALP Foundation distributed survey forms to 804 law offices
      nationwide. Only eighty-four completed data sets were returned,
      producing a response rate of slightly more than 10%. NALP, KEEPING THE
      KEEPERS II, supra note 2, at 121-22. For its follow-up study, Toward
      Effective Management of Associate Mobility, the NALP Foundation
      distributed a survey to 253 law firms and received responses from eighty-
      four—a 33% response rate. NALP, TOWARD EFFECTIVE MANAGEMENT, supra
      note 12, at 10. In its study of associate attrition in Massachusetts law firms,
      the MIT Workplace Center distributed surveys to the hundred largest law
      firms in Massachusetts and received fifty completed responses, yielding a
      response rate of 50%. HARRINGTON & HSI, supra note 26, at 6. Because
      these surveys did not employ random sampling and did not yield 100%
      response rates, they are subject to the possibility of nonresponse bias. See
      AND MODELS 247 (2005) (defining nonresponse bias as “[b]ias introduced
      into a sample when a large fraction of those sampled fail to respond” and
      noting that “[t]hose who do respond are likely to not represent the entire
34    NALP, KEEPING THE KEEPERS II, supra note 2.
35    Id. at 11, 119.
Vol. 1, Issue 1                                                                58

average of 8.4% of entry-level associates36 left their law firms
within sixteen months of their start dates.37 Almost 23% of entry-
level hires departed within twenty-eight months, 35.1% departed
within forty months, 44.9% left within fifty-two months, and
53.4% left within fifty-five months.38
        The study found similar levels of attrition among so-called
“lateral associates.”39 On average, 18.9% of laterals left their law
firms within twenty-four months of their start dates, and within
sixty-three months, 65.3% of laterals had departed.40
Interestingly, the study found that the lowest attrition rates were
in the largest law firms of more than 500 attorneys, but the study
authors noted that this finding was an anomaly that significantly
departed from the findings of earlier studies of associate
        The survey respondents reported higher levels of attrition
among female associates than among male associates. While
32.9% of entry-level male hires left their law firms within forty
months of their start dates, 37.9% of entry-level females departed

36   An “entry-level” associate is one who begins working at a law firm
     immediately upon graduation from law school or after finishing a post-
     graduation judicial clerkship. See id. at 21-38.
37   Id. at 24.
38   Id.
39   A “lateral associate” is one who had post-graduation legal work experience
     (other than a judicial clerkship) before joining his or her current law firm.
     See id. at 41-53.
40   Id. at 46. The study also found that 35.1% of laterals departed within
     thirty-six months of their start-dates, 45.8% left within forty-eight months,
     and 56.9% departed within sixty months. Id.
41   Id. at 22, 33. The attrition rates of large law firms were especially low
     compared to the attrition rates of midsized firms, which had the highest
     average attrition rates in the study. Among entry-level hires in firms with
     more than 500 attorneys, the NALP Foundation found that 6.1% of the
     associates departed within sixteen months, 18.2% departed within twenty-
     eight months, 29.5% departed within forty months, 39.2% departed within
     fifty-two months, and 46.7% departed within fifty-five months. Id. at 24.
     Among entry-level hires in firms with 251 to 500 attorneys, however, the
     NALP Foundation found that 12.4% of the associates departed within
     sixteen months, 29.3% departed within twenty-eight months, 43.1%
     departed within forty months, 53.6% departed within fifty-two months, and
     63.2% departed within fifty-five months. Id. Large law firms also retained
     higher percentages of their lateral hires than their smaller counterparts.
     See id. at 46. As noted in the text, this finding appears to have been
     anomalous and may have been affected by the uncertain economic climate
     that prevailed in the United States from 1998 to 2002. See id. at 16.
 59                                                               Spring 2008

within the same time period.42 Similarly, 37.1% of lateral females
departed within thirty-six months while only 33.7% of lateral
males did so.43 Attrition rates were also higher among minorities
than among nonminorities. While 68% of minority male entry-
level associates departed within fifty-five months, the average
attrition rate for all male entry-level hires at this point was only
52.3%.44 Furthermore, 77.4% of minority female laterals departed
within sixty-three months while the average departure rate for all
female laterals at this point was only 68.3%.45 Keeping the
Keepers II thus provides some support for the conventional view
that law firms need to bolster their efforts to retain female and
minority associates.46
        Overall, Keeping the Keepers II presents a comparatively
rosy picture of associate attrition. The NALP Foundation found
that entry-level associate attrition was lower in its 2003 study
than in two previous studies conducted in 1997 and 2000.47 In
fact, the attrition data presented in Keeping the Keepers II were
largely in line with statistics reported by Robert Nelson in the
1980s.48 The NALP Foundation’s most recent report on associate

42   Id. at 24-25. By the fifty-five month mark, the difference in attrition rates
     between male and female entry-level hires had declined but had not
     disappeared. The study found that 52.3% of male entry-level hires left their
     firms within fifty-five months while 54.9% of female entry-level associates
     departed within the same time period. Id.
43   Id. at 47. By the sixty-three month mark, 68.3% of female laterals and
     63.4% of male laterals had departed.
44   Id. at 24-25. More than 64% of entry-level minority females departed
     within fifty-five months, compared with an average attrition rate at this
     point for all females of 54.9%. Id. at 25-26.
45   Id. at 47-48. At the sixty-three month mark, the average departure rate for
     all males was 63.4% while the average departure rate for minority males
     was 68.9%. Id.
46   See NALP, KEEPING THE KEEPERS II, supra note 2. See generally Philip L.
     Harris, A Candid Discussion: Enhancing the Status of Black Partners, CHI.
     LAW., July 2007, at 20,008 (discussing barriers to African American
     advancement at law firms); LAUREN STILLER RIKLEEN, ENDING THE
     (examining the slow pace of female advancement in law firms and
     suggesting changes that law firms can implement to increase retention of
     female attorneys).
47   NALP, KEEPING THE KEEPERS II, supra note 2, at 97-98.
     TRANSFORMATION OF THE LARGE LAW FIRM 137-41 (1988). Nelson studied
     the hiring decisions and turnover rates of nineteen of Chicago’s twenty
     largest firms for the years 1971 to 1983. Id. at 187. According to Nelson’s
     calculations, approximately 45 to 51% of the associates hired from 1971 to
Vol. 1, Issue 1                                                                 60

attrition, however, suggests that law-firm managers cannot
become complacent about associate turnover.             In Toward
Effective Management of Associate Mobility, the NALP
Foundation reports that from 2002 to 2004, the eighty-four law
firms49 participating in its study experienced an average annual
attrition rate of 19%, “the highest rate documented by any . . .
NALP Foundation study.”50 This finding means that on average,
approximately one out of every five associates who are employed
by a firm on January 1 will have departed by the end of the year.
The NALP Foundation also found that attrition increased in each
subsequent year of its study, “beginning with a 16% average
attrition rate in 2002, 18% in 2003 and 20% in 2004.”51
        It is impossible to know for certain whether these statistics
indicate a long-term trend toward higher attrition rates, or
whether they represent a short-term hiccup that will level off or
decline over time. As the NALP Foundation admits, the data
presented in Keeping the Keepers II were likely affected by the
unique events that occurred during the study years, such as the
bursting of the dot-com bubble and the economic malaise
following the September 11, 2001 terrorist attacks.52 Similarly, the
recent uptick in attrition rates may simply reflect the loosening of
the labor market as the nation’s economy improved following a

     1976 had left their firms by 1984. Id. Nelson also found that “[o]ver half
     the associates joining firms in 1980 . . . had left by 1984.” Id. Furthermore,
     “[f]ully 30% of associates hired in 1982 were gone within two years; and
     almost one in five (18%) of the 1983 cohort stayed less than a year.” Id. at
     137. Although these attrition rates are broadly similar to the attrition data
     reported in Keeping the Keepers II, Nelson’s findings are not directly
     comparable to the results of the NALP Foundation’s study. First, Nelson
     relied on listings in the Martindale-Hubbell attorney directory to compile
     his data set, id. at 187, and as Marc Galanter and Thomas Palay explain in
     Tournament of Lawyers, Martindale-Hubbell listings are not entirely
     reliable for purposes of gauging firm size and attrition rates. MARC
     TRANSFORMATION OF THE BIG LAW FIRM 141-43 (1991). More importantly,
     Nelson studied only the largest firms in a single city, Chicago, and did not
     differentiate between the attrition rates of entry-level hires and lateral
     associates. NELSON, supra, at 137 The NALP Foundation, on the other
     hand, distributed surveys to small, midsized, and large law firms
     throughout the nation and did distinguish between the attrition rates of
     entry-level and lateral associates. NALP, KEEPING THE KEEPERS II, supra
     note 2.
49   NALP, TOWARD EFFECTIVE MANAGEMENT, supra note 12, at 10.
50   Id. at 16.
51   Id. at 10.
52   Id. at 16-17.
 61                                                                Spring 2008

brief recession in 2001.53 Nevertheless, the NALP Foundation
cautiously concluded in Toward Effective Management of
Associate Mobility that attrition is a “growing, although
apparently manageable problem for legal employers.”54
       Aside from indicating an increase in associate attrition
rates, Toward Effective Management of Associate Mobility also
demonstrates that associates waste little time in reaching their
decisions to leave. The study found that 15% of entry-level
associates who left their firms did so within two years of their start
dates.55 Forty percent of departing entry-level hires left within
three years, and 78% of departures occurred within an entry-level
associate’s first five years with a firm.56 Over three-quarters of
departing entry-level associates thus leave their firms well before
partnership decisions are made.57 Even if we assume that most of
the departing associates would eventually have been forced to
leave under an “up-or-out” partnership model,58 early attrition is

53    See Economists Call It Recession, CNN MONEY, Nov. 26, 2001, recession/index.htm.
54    NALP, TOWARD EFFECTIVE MANAGEMENT, supra note 12, at 8. The report’s
      authors did not clarify what they meant by “manageable.” Since the NALP
      Foundation did not attempt to calculate the costs of associate attrition, its
      data do not reflect whether associate attrition rates are negatively
      impacting firms’ profitability. The NALP Foundation’s findings mirror
      Robert Nelson’s conclusion in the 1980s that associate turnover was
      “likely . . . increasing.” NELSON, supra note 48, at 139. For more
      information about Nelson’s study of associate attrition, see supra note 48
      and accompanying text.
55    NALP, TOWARD EFFECTIVE MANAGEMENT, supra note 12, at 21.
56    Id. The speed of departures is even more startling among lateral associates.
      The NALP Foundation found that 25% of laterals who left their law firms
      did so within two years of their start dates. Fifty-two percent departed
      within three years, 69% departed within four years, and 84% left within five
      years. Id. at 27.
57    See, e.g., HARRINGTON & HSI, supra note 26, at 7 (reporting a median
      partnership track of 9.5 years for survey respondents in a study of attorney
      career decisions).
58    The “up-or-out” rule requires associates who do not make partner to leave
      the firm. GALANTER & PALAY, supra note 48, at 25. Traditionally, firms
      have helped associates passed over for partnership secure jobs with the
      firms’ client corporations or with smaller law firms. Id. at 29. Although the
      up-or-out rule is often seen as a defining feature of law-firm culture, Marc
      Galanter and Thomas Palay note that it is “easy to overestimate the rigor”
      with which the rule is applied. Id. at 28.
Vol. 1, Issue 1                                                               62

robbing firms of years of possible returns on their investments in
human capital.59
        The NALP Foundation’s findings compare favorably with
the results of other studies of associate attrition. As mentioned
above, the MIT Workplace Center surveyed a sample of attorneys
who graduated from law school after 1986 and worked at one of
the hundred largest law firms in Massachusetts in 2001.60 The
Center found that about half of both male and female associates
left their firms sometime between the beginning of 2001 and the
end of 2005.61 Furthermore, a study by the nonprofit research
group Catalyst found that 62% of female associates and 47% of
male associates intend to stay with their current firms for five
years or less.62 These findings largely mirror the results of the
After the JD study, which found that 55% of respondents in law-
firm offices of more than 250 attorneys intended to change jobs
within two years.63
        Where do associates go after they leave? The available data
suggest that most departing associates accept positions with other
law firms. In Toward Effective Management of Associate
Mobility, the NALP Foundation found that 49% of departing
associates “left their law-firm employers for jobs with other law
firms.”64 The study also found that departing male associates
were more likely to take law-firm jobs than departing females.
While 54% of departing entry-level males moved to new law firms,
only 46% of departing entry-level females left to join a different

59   It is not surprising that some associates who believe that their partnership
     prospects are not bright might choose to leave before partnership decisions
     are made. If the associates wait too long, they risk being considered
     “lemons” by potential employers because they were not promoted to
     partner. What is striking, however, is how quickly associates reach their
     departure decisions. The sooner an associate leaves, the less chance a firm
     has to recoup its investment in recruiting and training the associate.
60   HARRINGTON & HSI, supra note 26, at 6.
61   Id. at 8-9.
     FLEXIBILITY 4 (2005), available at
63   AFTER THE JD, supra note 9, at 54. Forty-five percent of respondents in
     law-firm offices of 101 to 250 attorneys said that they intended to change
     jobs within two years, and 41% of respondents in law-firm offices of twenty-
     one to one hundred attorneys expressed a similar intent. The respondents
     had been out of law school for approximately three years at the time the
     survey was conducted. See id. at 89-90 (describing the survey
64   NALP, TOWARD EFFECTIVE MANAGEMENT, supra note 12, at 41.
 63                                                              Spring 2008

law firm.65 Minorities were also somewhat less likely to depart to
another law firm, but the differences between minorities and
nonminorities on this score were rather small.66
        The MIT Workplace Center’s study of the career decisions
of Massachusetts attorneys confirms that not all lawyers who leave
their law firms intend to leave firm practice. The study found that
about 25% of female associates and about 30% of male associates
changed law firms at least once during the years of 2001 to
2005.67 On the other hand, about 31% of female associates and
about 18% of male associates left firm practice during this time
period.68 Of those pre-partner women and men who left firm
practice, the plurality accepted positions as in-house counsels for
        In sum, most departing associates merely move from one
law firm to another, and of those who do leave firm practice, a
large number “go in-house,” performing legal functions for the
same corporations that hire law firms to carry out discrete legal
tasks. These findings suggest that associate attrition does not
necessarily result from the fact that departing associates “aren’t
cut out” for firm practice. Given the high percentage of departing
associates who move to other law firms or positions as in-house
counsels, it appears that at least some of these departures could be
prevented through the implementation of more effective retention

         B.    The Costs of Associate Attrition

               i. Is Associate Attrition Really a “Problem”?

       Associate attrition rates are high and likely increasing.
Furthermore, it seems that with some effort, firms could
substantially improve their retention of young associates. Why,
then, have firms not devoted more time and resources to tackling

65   Id. at 45. The difference between male and female departure destinations
     was even more pronounced among departing laterals. While 56% of
     departing male laterals moved to new law firms, only 39% of departing
     female laterals did so. Id.
66   Id. at 46. While 51% of departing nonminority entry-level associates moved
     to different law firms, only 48% of minority entry-level associates did so.
     Furthermore, 46% of departing minority laterals took jobs with new law
     firms, compared to 49% of departing nonminority laterals. Id.
67   HARRINGTON & HSI, supra note 26, at 9.
68   Id.
69   Id. at 10.
Vol. 1, Issue 1                                                  64

the problem of associate attrition? The answer may be that firms
consider associate attrition not as a “problem” but as a necessary
cost of doing business. Since not all associates can make partner,
some attrition is to be expected. Associate turnover is thus a vital
component of the law-firm business model.
        Marc Galanter and Thomas Palay have argued that law
firms are structured around a “promotion-to-partner
tournament,” and they have used this theory to explain the
exponential growth of large law firms in the past half century.70
Galanter and Palay view a law firm as a mechanism for the sharing
of human capital.71 Seasoned attorneys may have “surplus”
human capital insofar as they are able, based on their experience,
training, reputation, and client relationships, to generate more
legal work than they are able to complete on their own given their
limited supply of personal labor.72 Inexperienced attorneys, on
the other hand, may have surplus labor because they lack the
skills, training, reputation, and expertise necessary to attract
much legal work.73 Both a seasoned and an inexperienced
attorney would be better off if they could design a way for the
seasoned attorney to rent or sell her surplus capital to the
inexperienced lawyer, who has the surplus labor necessary to put
the capital to productive use.74 For example, the seasoned
attorney could solicit work from an established client and then
assign the work to the inexperienced lawyer. The seasoned
attorney would offer her own reputation as a guarantee to the
client that the inexperienced lawyer would produce a satisfactory
work product, and the seasoned attorney might share additional
capital with the inexperienced attorney by providing advice and
guidance as the inexperienced attorney attempted to complete the
project. In the end, the seasoned attorney would pay the
inexperienced attorney “the marginal product of his labor and
capital as a wage” and would retain the remainder of the client’s
fee as compensation for her capital investment.75
        In a world without transaction costs, seasoned and
inexperienced attorneys could simply enter into ad hoc capital-
sharing contracts, and the need to create law firms would never

70   GALANTER & PALAY, supra note 48, at 77-120.
71   See id. at 89.
72   Id. at 89-91.
73   See id. at 92.
74   See id.
75   Id.
 65                                                    Spring 2008

arise.76 Unfortunately, however, the “world without transaction
costs” is a fairytale, and a number of barriers impede the effective
sharing of human capital outside the safe confines of the law-firm
structure. Seasoned attorneys may fear that the inexperienced
attorneys with whom they contract will “grab” their assets by, for
example, stealing their clients.77 Seasoned attorneys may also be
concerned that inexperienced lawyers will prematurely “leave” the
relationship, departing before the seasoned attorney has fully
amortized her initial investment of human capital.78 Finally, a
seasoned attorney might worry that the inexperienced attorney
will “shirk,” producing a mediocre work product that may harm
the seasoned attorney’s reputation and produce an inferior return
on her capital investment.79 Inexperienced attorneys, on the other
hand, may fear that seasoned lawyers will not fairly compensate
them for their labor and any capital investments they may make
on the seasoned lawyer’s behalf.80 As a result, a seasoned attorney
will not share her surplus human capital with an inexperienced
lawyer unless a mechanism is established whereby she can
effectively monitor the inexperienced lawyer’s performance and
behavior.81 Similarly, an inexperienced attorney will not supply a
seasoned attorney with his surplus labor unless the seasoned
attorney can credibly commit to fully compensate the
inexperienced attorney for his work.82
        The law firm is the mechanism by which seasoned and
inexperienced attorneys overcome these obstacles to the efficient
sharing of human capital. To deter grabbing, shirking, and
leaving by inexperienced lawyers, law firms implement a system of
deferred compensation in which inexperienced lawyers spend a
number of years as salaried “associates” before they become
eligible “for a ‘super-bonus,’ consisting of promotion to
partnership.”83 This “promotion-to-partner tournament” gives
inexperienced attorneys an incentive to provide the firm with their
maximum effort in the hope that their work will be rewarded with
the lucrative prize of partnership status.84 In addition, because

76   Id. at 93.
77   Id. at 94.
78   Id.
79   Id. at 94-96.
80   Id. at 96-97.
81   Id. at 96.
82   Id. at 96-97.
83   Id. at 100.
84   Id. at 100, 101.
Vol. 1, Issue 1                                                              66

inexperienced attorneys can easily observe how the firm awards
partnerships to associates in the classes ahead of them, they will
be less fearful that the firm will renege on its promise to
compensate the most productive associates with equity shares in
the firm.85 In this way, law firms quell fears of opportunistic
behavior and thus facilitate the sharing of human capital and
labor between seasoned and inexperienced attorneys.86
       Associate attrition is an almost inevitable byproduct of the
promotion-to-partner tournament. In fact, Gilson and Mnookin
assert that law firms have traditionally followed a strict “up-or-
out” system in which they almost never retain associates who are
not promoted to partnership.87 According to Gilson and Mnookin,
the up-or-out rule is a bonding mechanism that allows firms to
credibly commit not to “cheat” hardworking associates by
opportunistically offering them permanent salaried positions even
though they actually qualify for promotion to partnership.88
Although Galanter and Palay find Gilson and Mnookin’s analysis
“thoughtful and interesting,”89 they note that it is “easy to
overestimate the rigor with which the up-or-out rule” is applied.90
Faced with a competitive market for top legal talent, firms seem
increasingly willing to allow attorneys who are passed over for
partnership to stay on as “permanent associates.”91

85   Id. at 101-02.
86   Galanter and Palay offer the “promotion-to-partner tournament” as an
     explanation for the exponential growth of law firms. Id. at 102-103.
     According to Galanter and Palay, law firms typically promote a fixed
     percentage of each “entering class” of associates to partner. Id. at 103.
     Firms are loath to tamper with their promotion percentages because they
     fear upsetting the implicit deferred compensation agreement that
     incentivizes associates to provide maximum effort on the firm’s behalf. See
     id. As long as firms promote a fixed number of associates to partner each
     year and then hire new associates to maintain a constant or increasing
     associate-to-partner ratio, they are almost guaranteed to experience
     exponential growth. See id. at 108.
87   Ronald J. Gilson & Robert H. Mnookin, Coming of Age in a Corporate Law
     Firm: The Economics of Associate Career Patterns, 41 STAN. L. REV. 567,
     567, 575 n.28 (1989).
88   See id. at 576-81.
89   GALANTER & PALAY, supra note 48, at 100 n.46.
90   Id. at 28.
91   See Peter D. Zeughauser, A United Front; One Way to Make Sure That a
     Firm’s Personnel Policies Support Its Business Strategies: Combine Its
     Marketing and Human Resources Function, AM. LAW., Aug. 2006, at 61, 61
     (“At all but a few firms, the up-or-out talent development model has been
     replaced by a multiclass structure that includes nonequity partners,
     permanent associates, and contract lawyers.”).
 67                                                               Spring 2008

        Despite the recent erosion of the traditional up-or-out
paradigm, attrition remains a central component of the law-firm
business model. Law firms generate profit by buying associates’
labor at “wholesale” and selling it to clients at “retail.”92 Under
the traditional “Rule of Thirds,” one-third of the revenue
generated by an associate is used to pay his salary and benefits,
one-third is used to pay overhead, and the remaining third goes to
the partners as profit.93 Since associates are law firms’ cash cows,
firms maximize their profitability by maintaining high associate-
to-partner ratios.94 Because firms wish to keep their associate
classes large and their partnership ranks small, they promote only
a small percentage of their associates to partner. Furthermore,
firm managers could conceivably have good economic reasons for
wanting at least some associates to depart well before partnership
decisions are made. Assuming that an associate’s salary increases
at a faster pace than his billing rate, an associate’s profitability
may decline as his tenure with the firm increases. A firm might
reasonably prefer to pay a first-year associate $160,000 to bill at a
rate of $300 per hour than to pay a fifth-year associate $240,000
to bill at a rate of $400 per hour.95 To the extent that the fifth-
year associate’s departure frees up resources that can be used to
hire additional entry-level associates, the firm might view the
departure as a blessing, not a curse.96

92   Ronald J. Gilson & Robert H. Mnookin, Sharing Among the Human
     Capitalists: An Economic Inquiry into the Corporate Law Firm and How
     Partners Split Profits, 37 STAN. L. REV. 313, 350 (1985).
93   S.S. Samuelson & L.J. Jaffe, A Statistical Analysis of Law Firm
     Profitability, 70 B.U. L. REV. 185, 193-94 (1990).
94   See, e.g., Two-Tier Partnerships: Exclusive Insights Illustrate Why Law
     Firms Make the Switch, COMPENSATION & BENEFITS FOR L. OFFS., Sept.
     2007, at 1, 1 (“Increasing associate-to-partner leverage is, for the vast
     majority of firms, a crucial part of their overall economic strategy.”).
95   If the first-year associate in my example bills 2000 hours, he will generate
     revenue of $600,000, and his yearly salary of $160,000 will account for
     only 26.7% of the revenue he generates. If the fifth-year associate bills
     2000 hours, however, he will generate revenue of $800,000, and his
     annual salary of $240,000 will account for 30% of the revenue he
     generates. In this case, then, the law firm would make more profit from the
     first-year’s work than the fifth-year’s work.
96   See generally NALP, KEEPING THE KEEPERS II, supra note 2, at 15 (listing
     reasons why associate attrition is “a fact of life in law firms”).
Vol. 1, Issue 1                                                                 68

               ii. Calculating the Costs of Attrition

        The analysis in the previous subsection suggests that
associate attrition may simply be the natural consequence of the
efficient exploitation of associate labor by profit-maximizing
firms. Before acceding to this view, however, it is essential to
consider carefully the substantial costs that attrition imposes on
firms. Even if some attrition is to be expected, a firm’s attrition
rate may rise so high that the marginal cost of attrition is greater
than its marginal benefit to the firm in terms of increased revenue.
This insight suggests that some law firms may have inefficiently
high attrition rates, which in turn raises the possibility that firms
could increase their profitability by implementing measures to
bolster associate retention.
        The available data suggest that associate attrition is a costly
phenomenon. It is estimated that the cost of replacing a departing
attorney ranges from $200,000 to $500,000.97 Furthermore, it
may take three to four years for a firm to recoup the costs it sinks
into recruiting and training a new associate.98 If accurate, these
figures suggest that law firms may lose money on more than a
third of their new hires.99
        In one of the most thorough studies of the costs of associate
turnover, the nonprofit research group Catalyst worked with the
Toronto offices of four major Canadian law firms to develop a
comprehensive model of the costs of attrition.100 In Catalyst’s

97    WILLIAMS & CALVERT, supra note 13, at 7; see also Newman, supra note 14,
      at 50-52.
98    WILLIAMS & CALVERT, supra note 13, at 8; see also Associate Management,
      supra note 14, at 4 (“It takes three to five years for partners to break even
      with new lawyers.”).
99    See NALP, KEEPING THE KEEPERS II, supra note 2, at 24 (noting that 35.1%
      of all entry-level hires leave their law firms within forty months of their
100   CATALYST, supra note 62, at 3. The process for recruiting law-firm
      associates in Canada differs from the American recruitment model. Most
      importantly, Canada requires students to complete a year of “articling”
      before they are eligible to “be called to the Bar.” Id. at 38. Although
      summer and articling students record the time they spend working on
      client files, “[m]any of the hours generated . . . by summer and articling
      students are written off as a necessary training and development expense.”
      Id. Canada’s longer apprenticeship period might cause the upfront training
      costs of Canadian firms to be higher than the upfront training costs of
      American firms. American firms, however, must provide similar training to
      young associates during their early years with the firm. Furthermore,
      American firms may be forced to write off at least some of the hours billed
      by young associates given their inexperience. Given the high compensation
 69                                                                 Spring 2008

model, turnover costs are equal to the sum of “investment costs,”
which include recruitment and training costs, and “separation
costs,” which include such costs as the labor costs for exit
interviews and the opportunity costs resulting from the decrease
in a departing associate’s productivity from the time he decides to
leave to the day he actually departs.101 Using this formula,
Catalyst calculated that the average total cost of an associate’s
departure for the four firms in its study was $315,000 (Canadian),
“approximately twice the average associate’s salary.” 102 Catalyst
also calculated that the average “breakeven point”103 for an
associate was 1.8 years.104 In other words, the average associate
did not become profitable until near the end of his second year.
       In sum, the available data indicate that it costs firms
hundreds of thousands of dollars when an associate walks out the
door.    Furthermore, the studies suggest that a substantial
percentage of associates leave their firms before they become
profitable. These “early departers” represent net losses to the

              iii. How High Is Too High When It Comes to
                   Attrition Rates?

       Although some attrition is to be expected in a law firm, the
difference between the costs of an acceptable level of attrition and
a firm’s actual turnover costs can be quite dramatic. Consider a
firm with 200 associates. Let’s assume that an acceptable attrition

      paid to American summer associates and the exorbitant sums that
      American firms spend on recruiting, there is no reason to think that
      turnover costs in the United States would be significantly lower than
      turnover costs in Canada. Indeed, the costs of attrition may very well be
      higher in the United States.
101   Id. at 10-12.
102   Id. at 9.
103   “The breakeven point is the point at which revenues generated by an
      associate equal the cost of recruitment, training (investment costs), and the
      potential cost of departure from the firm (separation costs).” Id. at 9; see
      also id. at 15.
104   Id. at 9. Catalyst found some variability in breakeven points across the four
      study participants. “The figures ranged from one firm that saw associates
      break even almost immediately after they began their tenure as junior
      associates . . . to another firm that did not see their associates break even
      until they reached their fourth year as an associate.” Id. at 15. According to
      Catalyst, “[t]he differences in the firms’ breakeven points are due largely to
      differences in revenue generation among the four firms (i.e., differences in
      firms’ billable rates and billable hours).” Id.
Vol. 1, Issue 1                                                                  70

rate for this firm is 10%. Following the Catalyst data, let’s also
assume that the average cost of an associate departure is
$315,000.105 At an acceptable rate of attrition, the firm would
thus incur $6,300,000 in turnover costs each year.106 If, however,
the firm instead has an actual turnover rate of 25%, then the firm’s
annual turnover costs are $15,750,000.107 The difference between
the firm’s actual and acceptable turnover costs would be
       To put these numbers in context, let’s consider how these
additional turnover costs would affect the balance sheet of an
actual firm. The Dallas-based firm Haynes & Boone currently
ranks 105th on American Lawyer’s list of the 200-top grossing
law firms in the United States, and the firm generated
$235,500,000 in gross revenue in 2006.109 Much like the law firm
in my example, Haynes & Boone has slightly over 200
associates.110 With an actual attrition rate of 25%, a firm like
Haynes & Boone could thus expect to spend about 7% of its
revenue on turnover costs.111 If the firm’s “acceptable” level of
turnover were 10%, then approximately 4% of the firm’s gross
revenue would be consumed by “unacceptable” attrition-related
       The Catalyst study lists a number of factors that firms
should consider when evaluating whether their attrition rates are
undesirably high. For example, attrition may be welcome when a
firm is experiencing excess capacity because of an economic
downturn, but associate turnover may be undesirable when it
occurs in a profitable practice area with a growing caseload. 113
Firms must also consider the individual work records of their

105   For purposes of my example, I ignore the fact that the Catalyst data were
      collected in 2003 and were calculated in terms of Canadian dollars. See id.
      at 25. If exchange and inflation rates were taken into account, the numbers
      in my example would be somewhat different, but the lesson would remain
      the same: inefficiently high attrition rates cost firms substantial amounts of
106   200 x 0.1 x $315,000 = $6,300,000.
107   200 x 0.25 x $315,000 = $15,750,000.
108   $15,750,000 - $6,300,000 = $9,450,000.
109   Revenues on the Rise, AM. LAW., June 2007, at 141, 141.
110   Haynes & Boone currently employs approximately 218 associates, but for
      consistency’s sake, I will continue to use the 200 figure in my calculations.
      Haynes & Boone, (last visited Mar.
      31, 2008) (listing 218 names under the “position” title of “associate”).
111   $15,750,000 / $235,500,000 = 0.067 = 6.7%.
112   $9,450,000 / $235,500,000 = 0.040 = 4.0%.
113   CATALYST, supra note 62, at 16-17.
 71                                                               Spring 2008

departing associates. As Catalyst explains, “[l]osing a productive
associate from a busy practice area to a competitor represents a
greater cost to a firm and may not be acceptable, whereas losing a
weaker associate in a slower area to a different market player
might be more acceptable.” 114 Finally, firms must not overlook the
“indirect” or “intangible” costs of associate turnover. Clients may
become dissatisfied when the attorneys working on their cases are
constantly changing, and high rates of associate departures may
lower the morale of those associates who do not leave the firm.115
Because these costs are difficult to measure, they are not fully
accounted for in Catalyst’s turnover cost model, which suggests
that the actual long-term cost of associate attrition may be even
higher than the $315,000 estimate provided in the Catalyst
        Perhaps the best evidence that associate attrition rates are
inefficiently high is the fact that law firms appear to be
increasingly worried about associate turnover. As explained in the
Introduction, periodicals focusing on issues of law-firm
management are filled with articles discussing the problem of
associate attrition and suggesting means by which managers can
improve their retention of productive associates.117 In addition, at
least one elite New York law firm has responded to its high
attrition rates by holding a crash course on etiquette for its
partners, and law firms continue to spend thousands of dollars to
attend commercial seminars promising to help them reduce their
number of associate departures.118
        It appears that law firms have reason to be concerned about
their attrition rates. Ron Beard, a legal consultant and former
managing partner of Gibson, Dunn & Crutcher, estimates that
firms of 250 lawyers or more are losing about 20% of their
associates per year, which is about five to ten percentage points
higher than the level of associate attrition that firms would prefer
to maintain.119 According to Beard, associate attrition is making it
more difficult for firms to maintain high associate-to-partner
ratios, and as explained above, maintaining or increasing
associate-to-partner leverage is a crucial component of a firm’s

114   Id. at 17.
115   Id.
116   See id.
117   See supra note 14 and accompanying text.
118   See supra notes 15-16 and accompanying text.
119   Elizabeth Goldberg, Exit Strategy, AM. LAW., Aug. 2006, at 110, 112.
Vol. 1, Issue 1                                                                  72

business strategy.120 Law firms report that over half of associate
departures each year are “unwanted,”121 and a recent survey
conducted by American Lawyer indicates that poor associate
retention is one of the greatest disappointments of law-firm
leaders.122 As the NALP Foundation concludes in Keeping the
Keepers II, the legal profession’s continued interest in the topic of
associate turnover suggests that the issue is significant and thus
merits further study.123

          C.    Why Are So Many Associates Leaving?

        What causes associates to leave their law firms? Do they
depart for purely personal reasons, such as a desire to pursue a
new practice interest or to move to a new city? Or do they become
disillusioned with the workload pressures of law-firm life and thus
move to jobs that provide for a more manageable work-life
        In its two most recent studies of associate turnover, the
NALP Foundation attempted to answer these questions by asking
the law firms it surveyed to provide reasons for their associates’
departures. Unfortunately, in Toward Effective Management of
Associate Mobility, the reasons listed for 57% of entry-level
departures were either “unknown” or “other.”124 The next most
common reason for departure was “unmet performance
standards,” which firms listed as a reason for 20% of their entry-
level departures.125 According to the firms’ responses, 14% of
entry-level associates left to pursue different practice interests.126
Although 10% of associates left to pursue better work-life balance,
this reason was listed more commonly in the case of departures by
female associates than by male associates.127 Only 2% of entry-
level associates left their firms for higher compensation or

120   See id.; see also supra note 94 and accompanying text.
121   Goldberg, supra note 18, at 93.
122   Goldberg, supra note 119, at 113.
123   See NALP, KEEPING THE KEEPERS II, supra note 2, at 15.
124   NALP, TOWARD EFFECTIVE MANAGEMENT, supra note 12, at 36.
125   Id.
126   Id.
127   “Pursuit of better work-life balance” was listed as a reason in 15% of entry-
      level female departures. It was listed as a factor in only 8% of male entry-
      level departures. Id.
128   Id.
 73                                                                  Spring 2008

        Similarly, Toward Effective Management of Associate
Mobility reported that the reasons for 54% of lateral departures
were either “unknown” or listed as “other.”129 Twenty-five percent
of laterals left because of unmet performance standards while 11%
left to pursue different practice interests.130 Nine percent left their
firms because of a desire for a better work-life balance,131 and only
3% left for higher compensation or bonuses.132
        In Keeping the Keepers II, NALP’s law-firm respondents
provided similar explanations for their associates’ departures. For
37% of entry-level departures, the reasons for departure were
either “unknown” or listed as “other.”133             Again, “unmet
performance standards” proved a popular response; it was listed
as a reason in 20.4% of entry-level departures.134 According to the
firms’ responses, 6.1% of entry-level associates left because of
billable hours pressures, and only 1.9% left for better
        The utility of NALP’s figures is undermined by the high
percentage of departures for which reasons were “unknown” or
listed as “other.” In fact, the most important lesson to be drawn
from the NALP data may be that law firms do not do a particularly
good job of tracking the reasons for associate departures.
Fortunately, other studies have asked the departing attorneys
themselves about their reasons for leaving rather than relying on
the data provided by firms. The MIT Workplace Center’s study of
attorneys in the top hundred Massachusetts law firms, for
example, considered the reasons for departure of all attorneys
leaving firm practice, whether associates, income partners, or
equity partners.136      The study found that almost 60% of
respondents who left firm practice said that they did so because of

129   Id. at 39.
130   Id.
131   Again, a higher percentage of female lateral associates left their firms to
      pursue a better work-life balance than did their male counterparts. While
      12% of female laterals left their firms because of issues related to work-life
      balance, only 7% of male laterals did so. Id.
132   Id.
133   NALP, KEEPING THE KEEPERS II, supra note 2, at 64.
134   Id.
135   Id. For 49.7% of lateral departures, the reason for the departure was either
      “unknown” or listed as “other.” The study also found that 21.5% of laterals
      left because of unmet performance standards, 8.9% left because of
      geographic preference, 3.7% left because of billable hours pressures, and
      1.7% left in pursuit of better compensation. Id. at 65.
136   HARRINGTON & HSI, supra note 26, at 12-13.
Vol. 1, Issue 1                                                                  74

“long work hours,” and over 50% gave “work load pressures” as a
reason for departure.137 Almost 20% of men and 30% of women
left firm practice because of “lack of flexibility in work hours,” and
over 40% of men and 60% of women left because of the difficulty
they experienced with integrating their work with their personal
or family lives.138 In addition, about 30% of respondents left firm
practice to escape an “unsupportive work environment.”139 Much
less than 10% of respondents, on the other hand, left firm practice
because of the better wages or benefits offered at their next job.140
        Among those attorneys who switched law firms rather than
leaving firm practice entirely, work-life balance was a less salient
concern than promotion opportunities and the quality of the
attorneys’ work environment.141 Nevertheless, more than 20% of
male “switchers” and more than 30% of female “switchers” listed
workload pressures and long work hours as reasons for their
change in law firms.142 Again, attorneys who switched law firms
seemed more concerned about work-life balance and career
advancement than they did about the pursuit of increased
        The results of Catalyst’s survey of more than 800 Canadian
associates support the MIT Workplace Center’s findings. In the
Catalyst study, 84% of female associates and 66% of male
associates said that they would consider “an environment more
supportive of [their] family and personal commitments” as an
important factor to consider when deciding whether to work at
another law firm.144 Catalyst also found that “four out of five
women (81%) and 67% of men indicate more control over their
work schedules as important in choosing to work at another
firm.”145 Finally, the study shows that a majority of women (66%)

137   Id.
138   Id.
139   Id.
140   Id.
141   See id. at 18-19. Approximately 40% of respondents said that they switched
      firms because of “poor promotion opportunities” while more than 35%
      listed an “unsupportive work environment” as a reason for their change in
      law firms. Id. at 19.
142   Id. at 18-19.
143   Slightly more than 20% of male “switchers” and 15% of female “switchers”
      listed “better wages/benefits offered in next job” as one of their reasons for
      changing law firms. Id. at 19.
144   CATALYST, supra note 62, at 5.
145   Id.
 75                                                                Spring 2008

and men (54%) consider the possibility of working fewer hours to
be an important factor in deciding whether to change law firms.146
        These studies suggest that associate attrition is not solely
the product of idiosyncratic decisions stemming from associates’
familial obligations or practice area and geographic preferences.
Instead, associates routinely cite similar factors when explaining
their reasons for departure. These factors include long hours,147
unmanageable workloads, inability to work on projects in the
associate’s field of interest, lack of responsibility, opacity about
firm finances, lack of guidance about partnership opportunities,
and insufficient mentoring and training.148 Interestingly, the data
suggest that associates generally do not leave their firms in pursuit
of greater compensation.
        In the remainder of my Article, I will assume that
associates are more likely to stay with their firms when they (1)
receive engaging assignments in fields that interest them; (2) are
permitted to work according to a flexible schedule that leaves
sufficient time for them to pursue personal objectives and fulfill
familial obligations; (3) are entrusted with a level of responsibility
appropriate to their skills, experience, and ability; (4) are provided
with mentorship and training by more senior attorneys; and (5)

146   Id.
147   The After the JD study chose to examine the work hours of young attorneys
      by asking its respondents how many hours they worked in the past week.
      The median response for all attorneys in firm practice was fifty hours, but
      the distribution of hours worked became increasingly skewed as the
      number of attorneys in respondents’ offices increased. In offices of 101 to
      250 lawyers, the mean number of hours worked was 51.03, and 28% of
      young associates in these “mid-sized” offices worked over sixty hours in the
      previous week. In offices of more than 250 lawyers, the mean number of
      hours worked was 52.15, and almost one-third (32%) of respondents in
      these “large” offices worked over sixty hours in the past week. AFTER THE
      JD, supra note 9, at 36. Furthermore, 39% of respondents in New York
      City’s largest private offices reported working more than sixty hours in the
      previous week. Id. at 33. Law-firm associates reported working longer
      hours than young attorneys in the government, nonprofit, public-interest,
      and business sectors, id. at 36, and the hours worked by young associates
      were significantly higher than the national median of forty hours per week.
      Id. at 33.
148   See Newman, supra note 14, at 52 (“Associates cite several reasons for
      leaving their firms: ineffective mentoring programs, the opaque road to
      partnership, work-life balance issues, and lack of training and
      development.”); see also Aruna Viswanatha, New York State of Mind, AM.
      LAW., Aug. 2007, at 104, 106-07 (discussing sources of dissatisfaction
      among associates in New York firms).
Vol. 1, Issue 1                                                                   76

are given constructive criticism that includes suggestions of ways
in which the associate can improve his work product in order to
increase his chances of promotion. On the other hand, I will
assume that associates are more likely to leave their firms when
they feel overworked and undervalued. My central thesis, which I
develop in Part II, is that partner-compensation systems that
prioritize rainmaking and revenue generation contribute to
inefficiently high rates of associate attrition by encouraging
partners to overly exploit associate labor while discouraging them
from taking steps that could bolster associate retention.

II.       A Cause: The Tragedy of the Commons

          A.    What is the “Tragedy of the Commons”?

      In this Article, I examine the problem of associate attrition
through the theoretical framework of the “tragedy of the
commons.” The tragedy of the commons provides an intuitive yet
theoretically powerful explanation for the overexploitation of
common-property resources, such as “fish, air, water, and publicly
owned parks and forests.”149 In a system of private property,
owners “reap the rewards of their successes and suffer the
consequences of their failures”; therefore, they have an incentive
to manage the use of their resources carefully in order to
maximize their net returns from those resources.150 When a
resource is instead managed collectively, however, the proper

      distinguishes between “three different kinds of property: private property,
      communal or jointly owned property, and ‘open access.’” Id. at 143. He
      offers the case study of Maine’s “lobster gangs” as evidence that the
      problems of joint ownership can be overcome in the context of a tightly knit
      community capable of enforcing internal norms and preventing outsiders’
      use of the communal resource. Id. Acheson thus argues that the tragedy of
      the commons occurs primarily in the case of “open access” property, where
      “no controls at all” are placed on usage of the resource. Id. In many ways,
      a law firm resembles the lobster-fishing communities studied by Acheson.
      They both face the problem of how to manage the utilization of a common-
      property resource (associates in the case of law firms, lobsters in the case of
      the communities in Acheson’s study). Unfortunately, the lobstermen in
      Acheson’s study have proved more adept at solving the problem of
      collective ownership than have the partners of large law firms. In Part III, I
      discuss how law firms can restructure their partner-compensation systems
      to promote the efficient exploitation of their communal resource—associate
 77                                                               Spring 2008

incentives for efficient use of the resource might not exist “because
individuals do not bear the full costs of their own decisions but do
enjoy the full benefits.”151
        Consider a herdsman attempting to decide how many cattle
to place on a common grazing field.152 The herdsman will ask
himself, “What is the utility to me of adding one more animal to
my herd?” In answering this question, the herdsman will weigh
the benefit he receives from an additional cow in terms of
increased income against the costs he will incur to buy and
maintain the cow. The herdsman’s individual costs, however, will
only be a small fraction of the total costs of the cow’s maintenance
since the costs of additional overgrazing will be shared by all users
of the open field. Since the herdsman enjoys all the benefits of a
larger herd but internalizes only some of the costs, the herdsman
will graze more cows than is efficient from society’s perspective,
and since all herdsmen will employ the same self-interested
calculus, the commons will be driven toward overexploitation and,
ultimately, tragedy.153
        The net returns from the community’s exploitation of the
field could be increased if each user of the field grazed fewer cows.
Why, then, do the users of the field not reach some agreement to
limit the size of their herds? The answer is that in the absence of
an effective enforcement mechanism, the users’ promises to graze
fewer cows are not credible. While the community as a whole
would benefit from the reduced exploitation of the field, each
herdsman has an incentive to “cheat,” grazing more than the
promised number of cattle in order to maximize his individual
profit. The herdsmen are thus trapped in a prisoners’ dilemma.154
As a group, the herdsmen would be better off if they could bind
themselves to reduce the sizes of their herds. Since credible
commitments cannot be made, however, the herdsmen continue
to maintain large herds, resulting in the predictably tragic effect
that the field becomes overgrazed.

151   Id. at 454.
152   This illustration is taken directly from Garrett Hardin’s famous article The
      Tragedy of the Commons. See Hardin, supra note 30, at 1244.
153   See id.
154   See generally Barry Nalebuff, Prisoners’ Dilemma, in 3 THE NEW PALGRAVE
      DICTIONARY OF ECONOMICS AND THE LAW 89 (Peter Newman ed., 1998)
      (describing the prisoners’ dilemma and discussing some of its applications).
Vol. 1, Issue 1                                                                78

          B.    Law Firms and the Tragedy of the Commons

       The tragedy of the commons describes a particularly
prevalent form of “externality” involving the overuse of a
common-property resource.155 I argue that the structure of
partner compensation systems gives rise to this externality in law
firms, yielding undesirably high levels of associate attrition. As
Marc Galanter and Thomas Palay have noted, a law firm is a
mechanism designed to facilitate the sharing of human capital
among attorneys.156 Based on their reputation, expertise, and
legal skills, partners are often able to attract more legal business
than they are able to complete on their own; these partners have a
surplus of human capital.157 Young associates, on the other hand,
may have a surplus of labor; they may not be able to attract as
much legal work as they would like because of their lack of
experience and expertise.158 The structure of a law firm allows a
partner to “share” her surplus capital with an associate who can
use his surplus labor to put the capital to productive use.159
Partners thus rely on associates to “staff” their legal projects and
cases. By fulfilling many of the more mundane but essential tasks
involved in representing a particular client, associates lessen a
partner’s legal workload and allow her to focus more time and
energy on developing new clients and business for the firm.
       If a partner’s income depends at least in part on the
amount of new business that the partner generates,160 then the

      (6th ed. 2003); see also ROBERT S. PINDYCK & DANIEL L. RUBINFELD,
      MICROECONOMICS 622 (5th ed. 2001) (defining “externality” as an “[a]ction
      by either a producer or a consumer which affects other producers or
      consumers, but is not accounted for in the market price”).
156   See GALANTER & PALAY, supra note 48, at 87-110; see also supra notes 69-
      84 and accompanying text.
157   Id. at 91.
158   Id. at 92.
159   Id. at 92-98.
160   A recent survey by Altman Weil Inc. confirms that partner compensation
      depends heavily on business generation. “When asked to rate the
      importance of 18 formal compensation factors, law firms placed business
      origination and personal fees collected in a tie for the top ranking. Client
      responsibility, case responsibility, client service, legal expertise, and
      profitability of work were cited in the second tier of importance.”
      Compensation Plans, PARTNER’S REP. FOR L. FIRM OWNERS, Sept. 2006, at
      6. As an article discussing the survey concluded, the survey’s findings
      demonstrate that “[r]ainmakers still rule the roost.” Id.; see also Harris,
      supra note 46, at 20,008 (“A rainmaker is a partner who originates
      business that in many cases is portable, meaning that it will go with the
 79                                                               Spring 2008

partner has an incentive to focus her time and effort on cultivating
new business for the firm. The partner will thus attempt to
generate many new legal projects and will rely to the greatest
extent possible on associate labor to complete these projects. This
dynamic creates a “tragedy of the commons.” Partners enjoy a
disproportionate share of the revenue from the new business they
generate, but the costs of staffing and completing these projects
are shared equally by all of the partners at the firm. A partner will
continue to cultivate new projects until the partner’s marginal
benefit from generating an additional project equals the marginal
cost to her of managing the project and overseeing its completion.
Since the partner enjoys a disproportionate share of the benefits
of the new projects she generates but does not internalize a
disproportionate share of the projects’ costs, the partner will
cultivate more projects than is optimal from the firm’s
perspective. Partners thus have an incentive to cultivate an
inefficiently high number of new projects. This fact, in turn, leads
partners to (1) demand that their firms hire an inefficiently large
number of associates to staff their projects, and (2) overwork the
associates that the firm does hire. While partners have an
incentive to overly exploit associate labor, they have insufficient
incentives to take steps that could increase associate retention,
such as forming close mentorship relationships with associates or
becoming significantly involved in associate training activities. A
partner bears the full costs of these individual initiatives while she
shares the benefits of increased associate retention with all of the
firm’s partners.161 Because of this “tragedy of the commons,”
associates are likely to feel overworked and undervalued, and over
time, an undesirably large number of associates will likely leave
their firms in search of new opportunities. In this way, the
compensation and incentive structures of a law firm may
contribute to the problem of associate attrition.

      partner if he leaves for another firm. Partners who are rainmakers often
      are compensated at high levels to discourage them from leaving the firm.”).
161   The study by Altman Weil suggests that involvement in associate training
      and mentoring does not factor heavily into the determination of partner
      compensation. Compensation Plans, supra note 160, at 6. Since most
      firms’ compensation systems provide partners with inadequate incentives
      to engage in activities that might increase associate retention, firms can
      expect partners to engage in a less-than-optimal amount of these retention-
      bolstering endeavors.
Vol. 1, Issue 1                                                             80

                i. The Pure Expense-Sharing Firm

       To see more clearly how partner compensation structures
can lead to a “tragedy of the commons,” let’s consider a
hypothetical law firm that exists only for the purpose of sharing
overhead and other expenses.162 For convenience’s sake, let’s
name this pure expense-sharing firm Dewey, Cheatem & Howe.
Dewey’s partners receive a share of the firm’s profits equal to the
percentage of their contribution to the firm’s gross revenue. In
other words, a partner’s yearly income is the difference between
the revenue that the partner generated and the partner’s pro rata
share of the firm’s annual expenses. Since each partner at Dewey
enjoys the full benefit of the revenue she generates but shares
costs equally with the firm’s other partners, the situation is ripe
for the tragedy of the commons.
       Unfortunately, the most salient common resource at Dewey
is associate labor. A Dewey partner generates revenue by
developing client connections and convincing these clients to
entrust the partner to handle their legal issues. The more legal
projects credited to the partner’s name, the more income the
partner makes. Dewey’s partners will thus focus their time and
attention on generating new legal projects and will rely to the
greatest extent possible on associate labor to “staff” and complete
these projects. Since Dewey’s partners enjoy the full benefit of the
legal work that associates complete on their behalf while sharing
the costs of their exploitation of associate labor with the firm’s
other members, they will tend to work Dewey’s associates more
intensively than is desirable from the firm’s perspective.
       Figure 1 demonstrates how this “tragedy of the commons”
can arise:

162   See Gilson & Mnookin, supra note 92, at 346-47 (discussing the example of
      a pure expense-sharing firm).
 81                                                                 Spring 2008

Figure 1 presents the marginal costs and benefits of exploiting
associate labor at Dewey.163 The benefit that the firm receives

163        Although a picture is worth a thousand words, Figure 1 could be a
      source of confusion rather than illumination if some important components
      of the graph are not clarified. First, “associate hours worked” refers to the
      total number of hours associates worked on the projects of a particular
      partner. Therefore, if a Dewey partner worked with ten associates, and
      each associate spent 2400 hours working on the partner’s various projects,
      then the total number of “associate hours worked” would be 24,000.
           Additionally, I assume in Figure 1 that as the total number of associate
      hours worked increases, the marginal cost of each associate hour worked
      increases as well. This assumption seems reasonable, at least at the point
      where the total number of associate hours worked is already quite high.
      Since law firms have yet to find a way to increase the total number of hours
      in a single day, they must occasionally hire more young lawyers if they wish
      to increase the aggregate number of hours worked by their pool of
      associates. As the number of associates employed increases, the firm’s
      costs increase as well. For example, the firm might need to expand the size
      of its training programs to accompany the additional associates, or it might
      need to build or lease additional office space so that the new associates will
      have a place to work. Furthermore, the cost of monitoring associates rises
      as the firm hires new associates and demands that associates work longer
      hours. Since it is likely much more costly for a partner to monitor ten
      associates who spend a total of 24,000 hours working on twenty
      assignments than it is for a partner to monitor one associate who spends
      1600 hours working on one large project, it is not unreasonable to think
      that the cost of each additional hour of associate labor might increase as the
      total number of associate hours worked increases.
           My most important assumption is that an individual partner’s marginal
      cost curve is a fraction of the firm’s marginal cost curve. Since Dewey’s
Vol. 1, Issue 1                                                                   82

from an additional hour of associate labor is equal to an
associate’s “marginal revenue product,” which measures the
additional revenue generated by each additional hour of associate
labor.164 In Figure 1, I assume that the marginal revenue product
is constant. This assumption seems reasonable given the fact that
an associate’s billing rate does not depend on the number of hours
that the associate has worked. Like all firms, Dewey maximizes
profit by setting the marginal cost of its exploitation of associate
labor equal to the marginal revenue product of associate labor.165
As Figure 1 demonstrates, however, a partner’s actual utilization
of associate labor is likely to be quite greater than the amount of
exploitation that is optimal from the firm’s perspective. This
result occurs because the marginal cost a Dewey partner incurs
from her exploitation of an additional unit of associate labor is a
fraction of the marginal cost borne by the firm. Since a Dewey
partner captures all of the additional revenue generated by an
extra hour of associate labor but bears only a fraction of the
additional costs, the partner is likely to overwork the firm’s
       In Figure 1, I use the number of hours worked by associates
as a proxy for the “intensiveness” of a partner’s exploitation of
associate labor. In a pure expense-sharing firm, a partner would
not only have an incentive to demand that the firm’s associates
devote long hours to her legal projects; the partner also would be
discouraged from engaging in personally costly activities that
might increase associates’ satisfaction with their jobs and their
workplace. For example, a Dewey partner would bear all the costs
involved in ensuring that associates were assigned work they
found interesting, but the benefits of increased associate
satisfaction would be shared by all the firm’s members.

      partners share such costs as an associate’s salary, overhead, and training
      expenses, this assumption seems reasonable. Some of the costs of
      exploiting associate labor cannot be shared, however. For example, a
      Dewey partner bears the full cost of monitoring the associates who have
      been assigned to work on her legal projects, and the partner’s marginal
      monitoring costs are likely to rise as the total number of associate hours
      worked increases. Nevertheless, since some of the costs of exploiting
      associate labor are shared by all the firm’s partners, an individual partner’s
      marginal cost curve will by definition be a fraction of the marginal cost
      curve of the firm as a whole.
164   See PINDYCK & RUBINFELD, supra note 155, at 502 (defining “marginal
      revenue product” as the “[a]dditional revenue resulting from the sale of
      output created by the use of one additional unit of an input”).
165   See id. at 256 (explaining that for all firms, “profit is maximized when
      marginal revenue is equal to marginal cost”).
 83                                                    Spring 2008

Furthermore, partners could not capture all of the benefits of their
engagement in training and mentorship activities, but they would
bear the full brunt of the costs of these activities. In equilibrium,
then, we would expect partners to engage in inefficiently high
amounts of exploitative activities that increase the likelihood that
associates will depart while indulging in inefficiently low amounts
of activities that are likely to boost the firm’s retention of young
       To see how the tragedy plays out in practice, let’s consider
the actions of a Dewey partner who receives a call from a major
client at 4:00 p.m. on a Friday. The client asks the partner an
important, but not especially pressing, legal question, and the
partner of course informs the client that she will respond with an
answer as soon as possible. After hanging up the phone, the
partner reflects for a moment on the situation. She knows that the
legal question will take an associate approximately two days to
research and answer. She also knows that the client would like to
receive the answer soon but has no particular need for the answer
earlier than Wednesday or Thursday of the following week.
Nonetheless, the partner would like to impress the client with a
prompt response, so she calls an associate and demands that he
present her with a memo addressing the issue first thing Monday
morning. Since Dewey is a pure expense-sharing firm, the partner
reaps all of the benefits of dazzling her client with the quick
response, but she shares the costs of the associate’s dissatisfaction
over his ruined weekend plans with the firm’s other partners.
Over time, seemingly small slights such as this are likely to erode
associates’ loyalty to their firms, ultimately yielding inefficiently
high rates of attrition.

              ii. Refining the Model

       In the analysis above, I assumed that partners enjoy the full
benefit of their exploitation of associate labor. In actual practice,
however, a firm rarely compensates its partners solely on the basis
of their individual contribution to the firm’s gross revenue.
Instead, firms tend to base “at least some percentage . . . of a
partner’s income on the average productivity of the firm” as a
whole.166 Figure 2 takes this factor into account by differentiating
between an individual partner’s marginal benefit from the

166   GALANTER & PALAY, supra note 48, at 106.
Vol. 1, Issue 1                                                   84

exploitation of associate labor and the marginal benefit of the
exploitation to the firm as a whole:

       As Figure 2 demonstrates, an externality continues to exist
as long as the benefits a partner enjoys from exploiting associate
labor are disproportionate to the costs that the partner incurs
from her exploitative activities. In Figure 2, the partner captures
about two-thirds of the additional revenue generated from an
extra hour of associate labor, but the partner only incurs about
one-seventh of the additional costs. As a result, the partner
continues to overexploit associate labor, and the law firm remains
trapped in the tragedy of the commons.

           iii. Explaining the Sick Cycle

        In the Introduction, I suggested that law firms are caught
in a self-defeating cycle. Faced with high attrition rates, law firms
are compelled to recruit aggressively to replace their departing
associates. To attract top talent in a competitive market for
associate labor, law firms offer their entry-level hires large
salaries. To pay for these salaries, however, law firms must raise
their billable hours expectations, which in turn exacerbates the
problem of associate attrition.
        Why have law firms not found a way to break out of this
cycle? My analysis suggests that partner compensation systems
perversely discourage partners from taking actions that could
 85                                                            Spring 2008

bolster associate retention. A partner who engages in activities
capable of improving retention rates, such as associate training
and mentoring, bears the full costs of these actions but shares the
benefits of increased associate satisfaction with all the firm’s
partners. On the other hand, since the costs of associate salaries
are shared by every member of the firm, partners are willing to
allow their firms to increase entry-level salaries in order to attract
new associates to staff their cases. As long as firms continue to
reward rainmaking while undercompensating partners for the
actions they take to help retain associates, firms will remain
trapped in a sick cycle, paying associates ever increasing salaries
only to see a high percentage of them depart soon after their start

         C.    Why Have Firms Not Taken More Aggressive
               Action To Solve the Tragedy?

       As stated so far, my argument does not account for many of
the practical realities of law-firm partnerships. For example, the
argument outlined above suggests that all partners focus their
time and energy on client generation while leaving the bulk of the
substantive legal work on their cases to the associates they
supervise. Even for the top rainmakers, this suggestion is an
exaggeration of actual practice. All lawyers must perform
substantive legal work. The entirety of a legal project—or even the
bulk of it—cannot be left in the hands of younger associates.
       More relevant to my argument, however, is the fact that
most partners are not—and do not try to be—rainmakers.167
Robert Nelson has argued that a law firm’s partners can be
divided into three strata—“the finders, the minders, and the
grinders.”168 The “finders” are a firm’s rainmakers, the partners
who bring in new clients and focus on the law firm’s long-term
business objectives.169 The “minders” take care of the clients who
have already retained the firm’s services and also oversee the
firm’s day-to-day administration.170 The “grinders” do the bulk of

167   See Characteristics that Distinguish Successful Law Firms from
      Marginally Successful Ones, LAW OFFICE MGMT. & ADMIN. REP., Aug. 2007,
      at 10 (suggesting that “[i]n most law firms, only about 20% of partners,
      maximum, can successfully generate profitable business”).
168   NELSON, supra note 48, at 69.
169   Id. at 69-73.
170   Id. at 69-70, 73-75.
Vol. 1, Issue 1                                                   86

the firm’s substantive legal work.171 Obviously, these distinctions
are to a large degree artificial. Every partner in a firm likely
“finds,” “minds,” and “grinds,” at least to a certain extent. The
distinctions, however, help shed light on the problem of associate
attrition. If the “finders” are primarily responsible for the
“tragedy of the commons” dynamic discussed above, why do the
“minders” and the “grinders” not take action to rein in the
exploitative finders?
        One answer might be that law firms are notorious for their
poor management practices. Since law firms have historically
“focus[ed] on revenue generation rather than bottom-line
profitability,” it is not entirely surprising that these conservative
institutions have not acted to stem the tide of associate attrition
given the important contribution that associate labor makes to a
firm’s gross revenue.172 Why, after all, tinker with a formula that
has served most law firms rather well for about a century?
Furthermore, since managing partners at law firms generally
retain case loads and work as managers part-time, it makes sense
that they may be more focused on the short-term goal of attracting
new associates by providing higher compensation than on the
long-term goal of improving the firm’s associate retention rates.173
        Another answer might be that minders and grinders, the
individuals who seem to suffer the most from the costly
exploitation engaged in by rainmakers, actually contribute to the
tragedy of the commons along with their more prestigious
brethren. Given a compensation system that rewards revenue
generation above all else, minders and grinders have an incentive
to do more minding and grinding, and, like finders, they exploit
associate labor to help them do more work in the hope that their
efforts will be rewarded with fatter paychecks.
        The most salient explanation for the continued existence of
the “tragedy of the commons” dynamic, however, appears to be
fear—the fear of less exploitative partners that if they confront
their more “productive” cohorts, these rainmakers will leave the
firm with their clients in tow.174 Even if a firm could in theory
increase its profitability by implementing work-life balance
initiatives capable of reducing the firm’s associate attrition rates,
the firm may be hesitant to adopt such programs if they would
upset the firm’s key rainmakers, who rely on a readily available

171   Id. at 70, 75-77.
172   WILLIAMS & CALVERT, supra note 13, at 4.
173   RIKLEEN, supra note 46, at 233-34, 242.
174   See id. at 329-30.
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supply of associate labor to staff the legal projects they bring to
the firm.175 As Robert Nelson explains, law firms tend to grant
rainmakers a substantial amount of power within the firm because
of their control over the firm’s client-base.176 According to Nelson,
“[m]any firms now consist of a dual partnership in which lawyers
with substantial client responsibility run the firm and take home a
major portion of the profits while other lawyers function as little
more than salaried staff.” 177 Given the power wielded by
rainmakers, it comes as no surprise that partner compensation
systems tend to reward the things that rainmakers do best—
developing client connections and generating revenue.178
       Why should non-rainmakers fear the departure of
rainmaking partners, especially given the costs that rainmakers
impose on the firm? It appears that non-rainmakers benefit from
other partners’ rainmaking in at least two ways. First, in most
firms, a rainmaker does not capture all of the revenue she helps
generate on the firm’s behalf, so some of this revenue is shared
with the non-rainmaking members of the firm. Even more
importantly, however, synergies exist in law-firm practice.179
Non-rainmakers may be able to work on some of the rainmakers’
cases or encourage the rainmakers’ clients to provide the non-
rainmakers with additional work. Although non-rainmakers
would prefer that rainmakers rein in their exploitative activities in
order to decrease the costs they impose on the firm as a whole,
non-rainmakers may be better off in a firm with exploitative
rainmakers than they would be in a firm where all the rainmakers

175   Stephanie Francis Ward, The Ultimate Time-Money Trade-Off, ABA J. E-
      REP., Feb. 2, 2007, at 2 (discussing the opinions of Susan C. Robinson,
      associate dean for career services at Stanford Law School, who “suspects
      that partners, particularly successful ones, would be reluctant to cut
      associate time requirements” and believes that such an initiative might
      cause “[r]ainmakers [to] leave for higher profits, taking their clients with
176   NELSON, supra note 48, at 224.
177   Id. at 275.
178   RIKLEEN, supra note 46, at 329-30 (“The fear of many firms . . . that major
      business producers will leave if not highly rewarded has generally led to
      compensation systems which favor the firm’s ‘stars.’”); see also S.S.
      Samuelson, The Organizational Structure of Law Firms: Lessons from
      Management Theory, 51 OHIO ST. L.J. 645, 666 (1990) (noting that law
      firms have historically rewarded client generation while ignoring
      contributions to management even though “[g]ood management can do as
      much for the bottom line as superior rainmaking”).
179   See, for example, Gilson and Mnookin’s discussion of economies of scope in
      law firms. Gilson & Mnookin, supra note 92, at 316 n.11, 317.
Vol. 1, Issue 1                                                              88

have left to avoid the restrictions imposed on their utilization of
associate labor. This insight suggests that the problem of
associate attrition cannot be tackled until firms find a way to
present a persuasive business case for retention initiatives capable
of overcoming the opposition of rainmaking partners.

         D.     Evaluating My Analysis and Understanding Its

       I have hypothesized that partner compensation systems
that prioritize revenue generation and client cultivation lead to
externalities that ultimately result in inefficiently high levels of
associate attrition.        Unfortunately, the wide-range of
compensation systems employed by law firms makes it difficult to
test my hypothesis empirically,180 and this difficulty is
compounded by law firms’ historical reluctance to publicize the
means by which they compensate their partners.181 The available
data, however, suggest that the “tragedy of the commons” is a
useful theoretical framework for explaining the phenomenon of
associate attrition.
       There is no doubt that partners are requiring their young
associates to work long hours.           In its study of law-firm
practitioners in Massachusetts, the MIT Workplace Center found
that 47% of female associates worked fifty-one or more hours per
week, and 78% of male associates did so.182 Furthermore, about
one-quarter of male and female associates worked more than sixty
hours per week.183
       Furthermore, my analysis of partner incentives suggests
that partners are likely to give associates routine assignments that
do not necessarily comport with the associates’ practice interests.
We are likely to see this result for two reasons. First, it is costly
for partners to investigate their associates’ practice interests, and
it is even more costly for them to manage their associates’
workloads so that the associates work mainly in their fields of

180   See Characteristics that Distinguish Successful Law Firms from
      Marginally Successful Ones, supra note 167, at 10 (“[O]nly three Am Law
      100 firms continue to use [compensation] formulas . . . , about 12 use a
      pure lockstep system, and the remaining firms use subjective systems.”);
      RIKLEEN, supra note 46, at 92 (noting that there are “nearly as many
      compensation systems as there are law firms, each with their own
181   See supra note 33 and accompanying text.
182   HARRINGTON & HSI, supra note 26, at 15; see also supra note 147.
183   Id.
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interest. Since partners are not rewarded for bearing these costs,
they will likely pay insufficient attention to associates’ satisfaction
with the quality of their work. Furthermore, partners can
minimize the amount of time and effort they spend on supervision
by assigning associates relatively routine tasks that associates can
complete with minimal guidance from their supervising attorney.
As a result, my analysis in this Article is supported by studies
showing that partners tend to delegate “specialized and mundane
tasks” to associates.184 The After the JD study found that law-firm
associates generally spend 50% or more of their time working in
one practice area,185 and the study also found that lawyers in
private practice tend to experience relatively low levels of “trust”
and “independence” in their work, with strikingly low levels in the
largest law firms.186 These large-firm attorneys also reported
spending large amounts of time on “routine” tasks, such as basic
legal research and due diligence.187 This surfeit of mundane and
routine work is a product of the tragedy of the commons.
       Also providing some support for my central hypothesis is
the fact that the recent move toward more productivity-based
compensation systems has gone hand-in-hand with increased
concern about the problem of associate attrition.188 While this
apparent correlation certainly does not prove causation, it at least
does not tend to show that the adoption of compensation systems
that prioritize revenue generation mitigates the problem of
associate attrition.

III.      Potential Solutions

          A.    Moving to a Lockstep or “Income Sharing”

      Based on my analysis of productivity-based compensation
systems, one might expect associate retention rates to be higher in

184    NELSON, supra note 48, at 184.
185    AFTER THE JD, supra note 9, at 37.
186    Id. at 34.
187    Id.
188    Samuelson & Jaffe, supra note 93, at 195-96 (noting that productivity-
       based compensation systems now appear to be more common than lockstep
       models); see Compensation Plans, supra note 160, at 6; see also Gilson &
       Mnookin, supra note 92, at 319, 340 (discussing the growing consensus
       among academics and consultants that productivity-based compensation
       models are superior to lockstep models in which partners are compensated
       based solely on their seniority).
Vol. 1, Issue 1                                                                 90

firms where partners share profits evenly or use a “lockstep”
system in which partners are compensated solely based on their
seniority. In such firms, partners would maximize their individual
payout by maximizing the firm’s profits. Therefore, they would
not have an individual incentive to exploit associate labor beyond
the point where the marginal benefit of an additional unit of labor
equaled the marginal cost to the firm of that unit of labor. In this
way, a lockstep or sharing model may help a firm avoid the
perverse incentives of a compensation system that focuses mainly
on revenue generation.189
       There is reason to doubt, however, that associates in
“sharing” or “lockstep” firms would work fewer hours and would
be treated more humanely than associates in firms where partner
compensation is tied to business generation. When compensation
does not depend on performance, firms face the threat of
“shirking.” In other words, partners may work just hard enough
to maintain their status as partners rather than actively seeking
out new business opportunities for the firm. “Sharing” or
“lockstep” firms may thus attempt to weed out “shirkers” by
providing their associates with highly demanding workloads and
then promoting only those associates who show that they are
“driven” to perform, regardless of monetary compensation. In
other words, seemingly high attrition rates may be a necessary
attribute of “sharing” or “lockstep” firms. To avoid the problem of
shirking among its partners, the firm must promote only a select
number of associates who have shown that they are highly
unlikely to shirk.190

          B.    Making Associate Retention a                        Factor      in
                Partner Compensation Decisions

       Even if firms cannot reduce their attrition rates by moving
to a sharing or lockstep model, they can mitigate the perverse
incentives that lead to the tragedy of the commons by tinkering
with their compensation metrics. As Lauren Rikleen notes:

          The internal life of lawyers within a law firm can be
          summarized in three simple words: compensation
          drives behavior. If you want to understand the

189   See Gilson & Mnookin, supra note 92, at 352. Gilson and Mnookin also
      endorse the sharing model as a means of risk diversification. See id. at 321-
190   See id. at 351-80.
 91                                                     Spring 2008

          firm’s culture, then look first at the way in which
          partner profits are distributed. Knowledge of a
          particular firm’s compensation system provides the
          key to understanding the behaviors and
          interpersonal relationships that are likely to exist
          among the firm’s attorneys.191

        If Rikleen is right, then firms can improve their retention
rates by implementing simple changes in their partner
compensation systems. For example, firms could institute “a
mutual evaluation process which allows junior attorneys to
evaluate their superiors,” and the results of these “360” or
“bottom-up” evaluations could be taken into account in the firm’s
compensation decisions.192 Furthermore, law firms could set
retention goals for particular departments or practice areas and
then hold the partners in those fields responsible for ensuring that
the retention goals are met.193 Similarly, if an unusually high
percentage of associates who work closely with a particular
partner ultimately decide to leave the firm, the firm could penalize
the partner by decreasing her annual share of the firm’s profits.
        All of these steps are simple means of “internalizing” the
externality produced by compensation systems that prioritize
revenue generation and ignore the costs that partners impose on
their firms through their overexploitation of associate labor. In
this sense, the suggestions listed above are similar to the
Pigouvian taxes often used by government regulators to deal with
such classic externalities as air and water pollution.194 By forcing
partners to bear at least some of the costs of associate attrition,
the suggested strategies discourage partners from overly
exploiting associate labor.
        If partners are forced to bear too high a share of the costs
they impose on the firm through their exploitation of associate
labor, it is theoretically possible that a new form of externality
may arise. As Figure 3 shows, partners may underexploit
associate labor if they are forced to bear all of the costs of this
exploitation but enjoy only a fraction of the benefits:

191   RIKLEEN, supra note 46, at 91.
192   Id. at 305.
193   Id. at 306.
194   VARIAN, supra note 155, at 613-14.
Vol. 1, Issue 1                                                   92

Although law-firm managers should be cognizant of this potential
issue, the probability that such a problem will arise seems so
remote that it should not deter law firms from taking decisive
action to ameliorate the perverse incentives created by their
current compensation systems.
       As explained above, law firms that implement retention-
bolstering initiatives risk provoking the ire of their rainmaking
partners. Firm managers, however, should think critically about
the costs of the rainmakers’ exploitative activities, and they should
forcefully present the business case for reforms that have the
potential of reducing the firm’s costs and thus increasing its
profitability. To make this case, firms will need to improve their
tracking of attrition-related data, and most importantly, they will
need to carefully calculate the costs that associate attrition
imposes on the firm. Furthermore, firm managers should remind
recalcitrant partners that it is inconvenient for clients when the
roster of attorneys working on their cases keeps changing.195 In
fact, Rikleen suggests that the most successful arguments in favor
of retention measures will focus on improving client services, not
on maximizing the firm’s profit margin.196 Since all attorneys—
and rainmakers in particular—are deeply interested in keeping
their clients satisfied, partners may be more willing to support
changes that they believe will allow them to better serve their

195   RIKLEEN, supra note 46, at 341.
196   Id. at 386.
 93                                                                 Spring 2008

        Given the level of power that rainmakers wield, however, it
will be difficult for change in law firms to come entirely from
within. Without pressure from outside forces, it appears that law
firms will cleave to the status quo, and associate attrition rates will
continue their steady and ineluctable ascent. Given law firms’
high demand for top legal talent, young attorneys seeking jobs
have considerable leverage to shape the way that the nation’s
leading firms practice law. If interviewees regularly demand
information about law firms’ attrition rates, law firms will get the
message that associate retention is an important issue for young
lawyers in choosing a firm, and competitive pressures will lead
firms to implement policies to decrease their attrition rates.
        Even more importantly, law-firm “watchdogs” such as
Vault,197 American Lawyer, and NALP198 should ask firms to
disclose their attrition statistics. By offering to publish firms’
attrition data, these watchdogs could initiate a process of
“information unraveling” that would lead most firms to disclose
their attrition rates.199 The firms with the best retention statistics
would disclose their data to the watchdogs as a means of
attracting more lawyers to their firms. Firms with average
attrition statistics would then feel compelled to disclose their data
in order to counteract possible speculation that they were not
disclosing their statistics because their attrition rates were even
worse than average. At this point, the firms with above average
attrition rates would be essentially indifferent between disclosing
and not disclosing. If they did not disclose, job seekers would
simply assume that the firms’ attrition statistics were worse than

198   See NALP Directory of Legal Employers,
      (last visited Mar.30, 2008).
199   For a more formal treatment of the phenomenon of “information
      unraveling,” see Robert H. Gertner, Disclosure and Unravelling, in 1 THE
      605. Admittedly, law firms with stellar attrition rates could initiate this
      process of information unraveling without the help of the law-firm
      watchdogs. For example, these firms could publish their retention rates in
      the informational materials they provide to job applicants. Since attrition
      is not currently a topic at the forefront of most job seekers’ minds, however,
      it seems unlikely that firms will voluntarily publish their attrition data
      without some goading from organizations such as Vault and American
      Lawyer. Furthermore, exposés on associate attrition would certainly be a
      welcome change from the legal media’s usual preoccupation with the size of
      associate salaries and bonuses.
Vol. 1, Issue 1                                                                 94

the statistics of the firms that had disclosed. By disclosing, the
firms could at least clarify what their real attrition rates were
instead of leaving job applicants to speculate about the matter.
        By initiating this process of information unraveling, law-
firm watchdogs could push firms to implement retention-
bolstering strategies in order to avoid the negative reputational
effects of high attrition rates. Furthermore, this outside pressure
might empower firm managers by allowing them to argue that
high attrition rates negatively affect a firm’s ability to attract top
legal talent. Since rainmakers rely heavily on the labor of young
associates, they might be concerned about the possibility of a drop
in the firm’s intake of new associates and may therefore accede to
measures designed to decrease associate attrition.


       Associate attrition challenges traditional assumptions
about the structure and economics of law-firm practice. Contrary
to the tradition in which law students chose one law firm after
graduation and worked diligently toward the goal of making
partner with that firm, modern associates generally have little
expectation that they will make partner at their current firms. In a
survey of associates in Texas law firms, Susan Fortney found that
only 8% of respondents identified “full partnership participation”
as the professional goal they were most interested in attaining.200
Similarly, American Lawyer found in its most recent nationwide
survey of midlevel associates that only 11.7% of respondents
expected that they would become equity partners at their current
       If, however, associates do not expect to make partner and
are not particularly interested in doing so, then it becomes
necessary to revisit Galanter and Palay’s canonical conception of
the law firm as a form of “promotion-to-partner tournament.”
According to Galanter and Palay, firms use the carrot of a
potential partnership share to discourage shirking and incentivize
hard work by associates. But if many associates have no particular
desire to make partner, then something other than the prospect of
partnership must be leading them to join firms and then work
hard once there. The factors that draw today’s young attorneys to

200   Susan Saab Fortney, An Empirical Study of Associate Satisfaction, Law
      Firm Culture, and the Effects of Billable Hour Requirements (pt. 1), 64
      TEX. BAR J. 1060, 1062 (2001).
201   Press, supra note 7, at 91.
 95                                                    Spring 2008

law firms likely include: a desire for high compensation and
benefits; the need to pay off law-school debt; the pursuit of high-
quality training; the ease of obtaining a law-firm job through
institutionalized on-campus interviewing programs; the desire to
work on high-profile cases and do “sophisticated” legal work; and
the students’ perceived lack of better options. Furthermore, a
number of factors might lead young associates to devote a great
deal of effort to their jobs even though they do not expect to make
partner. These factors include: the desire to build and maintain a
reputation as a hard worker in order to ease future job searches;
the associate’s internal motivation and drive; the fear of being
fired; the desire for year-end bonuses; and the feeling that hard
work will increase the associate’s chances of working on high-
profile cases with leading partners.
        These factors, however, may not be sufficient to secure the
level of commitment desired by a firm’s rainmaking partners. As
Lauren Rikleen notes, the so-called “generation gap” bemoaned by
popular commentators may not be the result of “an altered work
ethic”; instead, the generational difference may be viewed “as the
logical result of recognizing that the opportunities for partnership
are small and, therefore, [associates’] relationship with their law
firm employers will be of diminished duration.”202 Put simply,
young associates may understandably be unwilling to sacrifice
their personal and familial lives for a firm with which they expect
to be affiliated for only a few years.
        As the joke with which I began this Article demonstrates,203
associate-partner relations are a topic of increasing comment,
controversy, and even mirth. Associate attrition, however, is no
laughing matter. It robs firms of millions of dollars of profit each
year. In this Article, I have argued that partner compensation
systems that prioritize revenue generation ultimately lead to a
tragedy of the commons in which associate labor is overly
exploited, yielding inefficiently high rates of associate attrition.
Firms can break out of the attrition cycle by restructuring the way
in which they compensate their partners. To tackle the problem of
associate attrition, however, firm managers will have to show an
increased willingness to confront exploitative partners; ultimately,
managers must find a way to convince a firm’s rainmakers that
they can in fact live without another Picasso.

202   RIKLEEN, supra note 46, at 274.
203   See supra note 1 and accompanying text.

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