Friday, December 08, 2006

A law school perspective on the "up-or-out" culture of law firms

Law school lifeJurisdynamics, by way of Workplace Prof Blog, entertains a discussion of the up-or-out culture by which large law firms organize themselves. The scholarly paper at the heart of this debate is James B. Rebitzer & Lowell J. Taylor, When Knowledge is an Asset: Explaining the Organizational Structure of Large Law Firms, NBER (National Bureau of Economic Research) Working Paper No. 12583 (October 2006):
We study the economics of employment relationships through theoretical and empirical analysis of an unusual set of firms, large law firms. Our point of departure is the "property rights" approach that emphasizes the centrality of ownership's legal rights to control important, non-human assets of the enterprise. From this perspective, large law firms are an interesting and potentially important object of study because the most valuable assets of these firms take the form of knowledge -- particularly knowledge of the needs and interests of clients. We argue that the two most distinctive organizational features of large law firms, the use of "up or out" promotion contests and the practice of having winners become residual claimants in the firm, emerge naturally in this setting. In addition to explaining otherwise anomalous features of the up-or-out partnership system, this paper suggests a general framework for analyzing organizations where assets reside in the brains of employees.
Rather obviously, law schools and other academic institutions are "organizations [whose] assets reside in the brains of employees." But the dissimilarities between law schools and law firms are just as obvious:
  • Law schools (with at least one salient exception) do not operate for profit.

  • Tenure, the academic equivalent of law firm partnership, is the rule rather than the exception.

  • Although this question, like so many others raised in this forum, warrants more empirical investigation, the grant of tenure seems to open the door to lateral movement within the academy. Partners also move between law firms, to be sure, but tenure plays a stronger role within the academic culture of informing other organizations (i.e., law schools) that an individual is worthy of employment elsewhere.
I stress that these are merely instinctive reactions on my part. I hope to engage MoneyLaw's readers in a deeper discussion of the implications of Rebitzer and Taylor's study for promotion practices within legal academia.


Blogger Ivan Ludmer said...

A part of law schools not operating for profit is that they are not client-based in the same way. A professor leaving to teach at another school won't bring the best students along with him, like an attorney might bring big clients. And graduates' loyalty is usually to the school rather than a particular professor. An alumna likely won't choose to donate to school X rather than school Y because their favorite teacher switched locations. This all adds up to less up-or-out pressure, since there's no direct pecuniary loss when a professor switches schools.

12/08/2006 11:39 AM  

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