Bill Henderson on the "Cravath System"

Professor Bill Henderson has put up yet another great post about large law firms.  It draws on one of his working papers, Are We Selling Results or Résumés?: The Underexplored Linkage between Human Resource Strategies and Firm-Specific Capital, where he takes a look at why entry level law salaries have developed a bimodal distribution.  He ultimately concludes that large firms have focused too much on hiring lawyers with strong academic credentials and that, as a result, "the wheels of their hallowed business model are falling off."  In his working paper, Bill offers a solution:

The essay draws upon the findings of an innovative study of engineers at the renowned Bell Laboratories to sketch out a plausible alternative law firm model that could profit from client discontent. In an exhaustive study that was designed to identify the various traits of star performers (so Bell Labs could recruit more of them), researchers found no relationship between performance and various social, psychological, and cognitive abilities, such as I.Q. Two years of observational fieldwork subsequently revealed that higher productivity among knowledge workers was attributable to several distinctive work strategies that were teachable. Further, controlled experiments showed large and persistent productivity gains for engineers who completed the training program, with women and minority workers posting the largest increases. I discuss whether these insights could be applied to law firms (the answer is yes) and why law firms nonetheless would resist despite the potential for higher profits. I then outline how the concept could be put to a market test.

It's another must-read for anyone interested in the economics of large law firms.

Comments

[Robert Neal]

I appreciate the curious lack of attention paid by law firms to the performance of prospective new hires. Making decisions based in large part on performance data could be a material benefit. Now think of prospective clients. For them, finding a good lawyer is just as critical. But locating comparative performance data is next to impossible for the common person.

[Robert Neal]

I appreciate the curious lack of attention paid by law firms to the performance of prospective new hires. Making decisions based in large part on performance data could be a material benefit. Now think of prospective clients. For them, finding a good lawyer is just as critical. But locating comparative performance data is next to impossible for the common person.

[Robert Neal]

I appreciate the curious lack of attention paid by law firms to the performance of prospective new hires. Making decisions based in large part on performance data could be a material benefit. Now think of prospective clients. For them, finding a good lawyer is just as critical. But locating comparative performance data is next to impossible for the common person.