March 2010 Archives

Did you ever consider that a society's level of "market integration" (more in a moment) might be strongly and positively correlated with the society's overall level of fairness?

If you haven't thought about that, time to catch up with the scientific literature. Among other things, it's beginning to answer questions like why New Yorkers are (by and large-but I'm unreconstructedly one) happy to help tourists navigate the city when they know they'll never see that person again, or why Americans tip fairly in restaurants they'll probably never return to.

One of the time-tested tools behavioral economists like to use to measure the strength of norms of fairness is the familiar-to-the-point-of-hackneyed zero-sum sharing game where Subject A is given an arbitrary amount of money ($1.00, $10.00, $50.00, whatever) and told that the assignment is to share whatever portion of that amount A feels like with Subject B, who is sitting there in front of A and sees and hears everything that's going on. A is also told that if A wants to keep it all and give B nothing, he can do that, but that B has the right to reject any deal A offers, in which case no one gets anything.

Now, you would think (homo economicus rationalis, at any rate) that anything A offers B which is nonzero is a windfall gain to B and he should accept it.

That's not the way it turns out.

Roughly speaking, when this experiment is conducted multiple times across time and geography-but within the US-the B's of our world generally refuse any offer by A that is less than about 25%, universally decline anything under 10%, and some decline anything under 40%.

What's going on?

We're enforcing our norms of fairness, in a nutshell.

But here's an even more powerful experiment, as reported in The New York Times. Here, researchers changed the game and tried it in very different societies. Here are the societies they visited:

a) a village in the Amazon, foraging with the indigenous Tsimane people.

b) a Dolgan and Nganasan settlement on the Siberian tundra, where they herd reindeer and belong to the Russian Orthodox Church.

c) a Himalayan monastery where you are instructed to "gaze within" and "follow your bliss."

d) a camp of nomadic Hadza hunter-gatherers sharing giraffe meat and honey on the Serengeti savanna.

e) a throng of Wal-Mart shoppers buying groceries on the Missouri prairie.

And they changed the game to make it far less transparent:

One player, the dictator, was given the authority to keep the entire prize or share part of it with the other, unseen player, whose identity remained secret. Along with this power came the assurance that the dictator's identity would also remain secret, so that no one except the researcher would ever know how selfish the dictator had been.

The most lucrative option, of course, was to keep the whole prize and stiff the anonymous partner. But the Missourians on average shared more than 45 percent of the prize, and some other societies were nearly as generous, like the Ghanians living in the city of Accra and the Sanquianga fishermen on the coast of Colombia.

But most of the hunter-gatherers, foragers and subsistence farmers were less inclined to share. The Hadza nomads in the Serengeti and the Tsimane Indians in the Amazon gave away only a quarter of the prize. They also reacted differently when given a chance, in variations of the game, to punish another player for hogging the prize.

Selfishness offended the Missourians so much that they would punish the player even though it cost them money. But the members of traditional societies showed little inclination to punish others at their own expense. "There are lots of norms in these small-scale societies for how to treat one another and share food," says Dr. Henrich. "But these rules don't apply in unusual situations when you don't know anything about the kinship or status of the other person. You don't feel the same sense of responsibility, and you act more out of self-interest."

What's going on here?

Nothing that would have surprised Coase.

The more complex the society (think the US, or, even more so, the global agora), the more reliance people have to place on the trustworthiness of total strangers in a market economy. In fact, and amusingly, the researchers defined the very "market integration" quotient as the extent to which people in the various societies relied on the marketplace to acquire their food--as opposed to being direct hunter-fisher-gatherers.

In other words, it comes down to minimizing transaction costs.

Last weekend, my wife and I decided that, since we no longer own a turntable, keeping a cabinet full of LP records was probably poor space planning in a Manhattan apartment. About 20 blocks down Broadway from where we live is a quaint, chock-a-block, basement-first-floor-second-floor (books piled on the staircases, the floors, everywhere) used bookstore that also sells LPs. 

So we loaded up shopping bag upon shopping bag and marched down to the store, dog in tow (or, actually, most of the time, dog way out in front leading the way), to discover that the owner, who would tell us what our LPs were worth, had stepped out to lunch. We said we'd leave the bags and bags there and come back in an hour or so.

Stop there.

Why am I telling you this story? Because, of course, we had entrusted our records (not worth a lot, to be sure, but surely worth something) to a total stranger, sight unseen, at a store we had admired far more than we had patronized.

An hour later we returned, the owner was there, he evaluted our collection in a professional, done-this-before fashion, made us a cash offer, and we accepted. And have a small empty cabinet to show for it.

Next time you're drafting a legal settlement or crafting deal terms, pause for at least one brief moment to reflect upon how powerfully rooted in our gestalt is not just the rule of law but trust in strangers in the marketplace. It makes everything we do possible.

---

Thanks for the reminder and research-based confirmations.  I'm thinking this is again what Adam Smith saw and explained in Theory of Moral Sentiments and Wealth of Nations. 

We innately struggle at the internal tipping point which leads us out of selfishness and toward fairness in regard to "others."  The pivot seems to turn on the warrant of our expectations and perceptions of (i) our substantial equality with the "other(s)" with whom we must deal; and (ii) the reasonable availability of just remedy(ies) when "fairness" toward us seems to have been violated. 

 The actual and perceived degree of availability of fair recourse to tolerably unbiased tribunals therefor goes hand in hand (in a self-reinforcing cycle) with cultural growth toward or decline away from an ethos of "fairness."  But where does growth toward fairness germinate?  The tipping point away from fairness concerning the "other" seems to remain at least a lively temptation for each of us, so our ethos of fairness is always up for grabs.  Let go of it, and everything we do begins to become impossible, at least until some courageous others take hold of it again.

Very throughtful indeed.  And a useful reminder to those of you who think that Wealth of Nations was all Adam Smith wrote.  Theory of Moral Sentiments is actually equally profound.

With humblest apologies:  

A few days ago the juxtaposition of two articles, one in The Wall Street Journal and the other in The Times (UK), struck me as too rich not to point out.

The WSJ wrote, in "Gap Widens Between Tech Richest and the Rest," that:

A handful of cash-rich companies are consolidating power in the technology industry, using their wealth to expand into new businesses and making it harder for small and midsize competitors to break through.

In the past two years--in the teeth of the recession (think about it)--Apple, Google, Microsoft, Oracle, and six other large tech companies generated over $68-billion in new cash, compared with $13.5-billion, just 20% as much, for all of the other 65 tech companies in the S&P 500 combined.  The results are clear:

Because of their massive cash accumulation, these companies can afford to take risks that smaller companies can't at a time when the economy remains fragile. The result is a bifurcated tech landscape, says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology's Sloan School of Management. [...]

The repercussions from the cash discrepancy are being felt throughout the industry. Some midsize tech companies are giving up trying to compete with their larger rivals.

"I'm not going to fight" being a mid-tier company, says Enrique Salem, chief executive of security-software maker Symantec Corp., which has annual revenue of $6.1 billion and cash reserves of $2.6 billion. "It's a losing proposition for me to try to catch up with Oracle."

So what's a smaller or mid-size competitor to do?  Assuming that folding one's tent is not an option, the only answer is to take on more risk.  In plain English, you have to really stick your neck out:

Says Ciena CEO Gary Smith. "A large company can make a mistake in one of these acquisitions and it isn't going to be hugely impactful to them."

Ciena has no such luxury, he says. "Clearly, if we get this wrong, it will not have a good outcome."

Meanwhile, The Times (UK) wrote in "Law firms turn to banks, not partners, for cash," that:

Leading law firms increased borrowing by 40 per cent in response to the financial crisis, despite the sector's traditional aversion to taking on bank debt.

Debts among the 40 biggest legal practices whose accounts are publicly available rose to £591 million in 2008-09, according to data compiled by Grant Thornton, the accounting firm. The previous year the debts were £425 million.

Peter Gamson, head of the professional practices group at Grant Thornton, said that many firms had turned to their banks for funding rather than asking their partners to contribute more capital. The average partner now has £138,000 invested in his or her firm, compared with £128,000 before the crisis hit.

"It certainly looks like a lot of firms are going to a bank to get funding rather than sitting partners down and saying: 'Look, guys, we've got to put some more money in,' " Mr Gamson said.

Now, that may be lovely insofar as it helps partners sleep at night, but the clear message of our friend Mr. Gamson--as well, of course, as that of the entire tech industry as recounted in the WSJ--is that it leaves firms on very tenuous footing indeed.

The lack of working capital left many firms stretched when the downturn began, Mr Gamson said. "As a sector, [legal services] looks very undercapitalised. There's a huge reluctance to ask partners to contribute more capital. The question is how long you can play that game?"

Mr Gamson warned that the low ratio of capital to debt at many mid-tier firms could make it harder for them to grow when the market recovers. In addition it could deter funding from investors when new rules on outside ownership take effect next year. "Any investor is going to look at the business and think: 'Are the owners of this business being realistic about how much they're putting on the line?' " he said.

But we should not be surprised.  After all, the typical law firm (I'm hard-pressed to think of any exceptions, now that I think about it) "strip-mines" the firm of cash at the end of every year to pay partner compensation.  

Here's a parlor game for you next time you're feeling a bit churlish towards a colleague:  Challenge them to identify the balance sheet entry that appears on every corporation's statement but no law firm's.  The answer?  The line for "retained earnings."  I promise you no one guesses right.

Mr. Gamson puts it just about right:  "How long can you play that game?" 

And Ciena's Gary Smith completes the thought:  If you're playing with limited capital and make a mistake, "it will not have a good outcome."

You have been warned.2

I am in my first year of law school (Ivy League). But the stories from the trenches are horrendous. Recent graduates are telling us that there are no jobs, and that when someone finds a job, it comes with no security. Should I cut my losses and get out now?

C. B., New York, N.Y.

Dear C. B.,

I saw the best minds of my generation destroyed by madness, starving hysterical naked, dragging themselves through LSATS at dawn looking for job security, angelheaded hipsters burning for the ancient heavenly connection to the starry dynamo in the machinery of night and to partner-track slots at Skadden Arps, who poverty and tatters and hollow-eyed and high sat up smoking in the supernatural darkness of cold-water flats floating across the tops of cities contemplating the idea of billing clients in 15-minute increments for the rest of their lives. So yes. Get out now. Why don't you try journalism?

[Courtesy of The Atlantic]

We  now return to our regularly scheduled programming.

A perennial question, not susceptible to any definitive resolution, is the classic, "Do you hire the lawyer or the law firm?" 

I actually think this is one of those too-cute-by-half semantic tricks designed to inveigle the unwary into Talmudic debates where only the person who originally posed the preposterous query can possibly come out ahead.  Because the answer is, of course, both (or neither).  Even Atticus Finch or Clarence Darrow would have been more successful with a powerful firm's infrastructure and support behind them, and conversely I dare you to find a great firm featuring second-rate lawyers.

This train of thought was prompted by an observation over dinner a few days ago by a friend who is both a lawyer and a McKinsey alum.  He remarked that McKinsey relies on its brand for attracting clients, but law firms seem to rely on high-profile individual practitioners.  As evidence, he pointed to the striking difference between mckinsey.com and the website of virtually any law firm:  On mckinsey.com, it's virtually impossible to find any individuals at all, whereas a prominent--sometimes the most prominent--feature of law firms' sites is always "Professionals" or "Attorneys" or "Our People," with extremely detailed bios of each individual.

Doubt me?  Take a look:

This is the page at McKinsey-->Home-->About Us-->Who We Are-->Leadership (under "Who We Are," there is no option other than Leadership, making the navigation a bit redundant, but there you have it).  Now, as best I can determine it's the only page at mckinsey.com that features any identifiable individuals. 

Caveat:  If you navigate to a specific location (e.g., their New York office), you can them use their "profile matcher" to find individuals, but you can only search by continent (Americas, Europe, Asia) and by one of 10-12 background areas.  If you click on the (first name only!) of any individual thus identified, you learn where they are and when they joined McKinsey, but nothing about their educational background or any real professional details beyond an explanation--seemingly in their own words--about why they love working at McKinsey.

By contrast, here are just two randomly selected law firm home pages.  Of course, there's nothing random about the selection at all:  They are merely two largest US and UK firms.:

Skadden prominently features "Attorneys" as its second high-level navigation option at the top right, the lead story under "Firm News" has to do with adding "prominent patent litigators," and the entire bottom third of the page is devoted to a profile of an individual partner (it rotates automatically).

As for Linklaters, "Who we are" is one of only three top-level navigation options, and one of only two aimed at clients ("Join us" is obviously not).

You get the point.  At least if websites are thought to be a window into a firm's soul, McKinsey believes clients hire the firm and we are behaving as if clients hire the lawyer.

Well, so what?, you may be thinking. 

I attended a PLI event here in New York last month where the keynote speaker offered one prediction with a high degree of confidence:  That we are moving into a world where law firms' brands will matter as never before.  Now, if your firm is like most, you haven't thought about branding very much, or if you're on the cutting edge you're just beginning to.   But I happen to think the speaker was on to something.

Indeed, for at least a few years now the London-based firm Intangible Business has written about "The UK's most valuable law firm brands."  And David Morley, Allen & Overy's worldwide Senior Partner, writes in his most recent annual firm report that "a clear identity" is one of the four most salient challenges he identifies (the others being strategy, people, and technology):

A clear identity

The other big change that I think we will continue to see is the increasing importance of a strong global brand and identity. Law firms have traditionally shied away from branding and talked more about reputation, but that will change.

In any industry, the biggest players are those that have a clear and truly global brand, and the legal sector is no different. It is particularly important for Allen & Overy to get this right as we face more and more competition.

As our work is mainly business to business, we are obviously not exactly a household name - no law firm is. But it's important that we continue to sharpen our brand so that we are at least a strong name in corporate boardrooms, banks and other financial institutions.

I know David well (and, disclosure, consider him a friend), but that has absolutely nothing to do with why I cite what he has to say on this score.  Rather, in my experience, David is deeply thoughtful, reflective, and far-sighted about our industry--a managing partner who steadfastly resists the lure of being drawn into the quotidian crisis du jour in order to focus on the long-term important and not the short-term urgent. 

Brand.

What's yours?  You have thought about it, haven't you?

Not every day do we get what appears to be good news on the much bruited-about topic of the US's global competitiveness.  But courtesy of today's FT we have just that, in New  York ties with London for finance crown. 

A consultancy with the New Age-y name of Z/Yen, commissioned by the City of London Corporation, prepares a semi-annual "Global Financial Centres Index" and this year's results put the Big Apple and Big Ben in a dead heat at 775 points apiece.  Although the methodology is something of a black box, it " combines a survey of financial professionals with factors such as office rental rates, airport satisfaction and transport."  A total of 75 global centers worldwide are ranked, with Hong Kong and Singapore (3rd and 4th, respectively) making sizable gains on the Atlantic Anglo pair.

New York fared better than London for business environment, availability of people and infrastructure, even though those participating in the survey agreed that New York had taken the bigger hit from the financial crisis.

Meanwhile, London hurt its own cause by raising the top personal income tax rate to 50%, along with a 50% payroll tax on all bonuses over £25,000.  (France and Germany pulled similar stunts; the US, of course, has at least so far not.)  Here are the top 10 cities:

Meanwhile, I was in front of about 100 managing partners, executive directors, and other senior law firm leaders here in New York last month and the sponsor of the event had kindly agreed with my suggestion that we arm attendees with wireless polling devices.

One of the questions I asked was "Five years from now, it will be clear that the greatest growth in demand for corporate/financial legal services is in:"

You can see that New York garnered a handsome 25% of the votes (multiple selections were not allowed).  In order, people voted for:

• China, including Hong Kong:  31%
• New York:  25%
• The rest of Asia, including Japan and India:  22%
• The EU, and Central & South America:  Tied at 8% apiece
• London:  6%
• The rest of the US:  0%

Another way of looking at this is that between them, New York and Asia-writ-large had 78% of total support, while the entire rest of the world had (obviously) only 22%.

If you've been to China lately, you know that as far as the Chinese are concerned, there are only two economies that matter:  Theirs and the US.

There may be life in this little old narrow island yet.

About a week ago, I wrote about the American Lawyer's release of its annual "Diversity Scorecard" and pointed out what I thought were some shortcomings in its analytic technique.

 whether (Theory A) something nefarious and troubling is going on here, or whether (Theory B) the macroeconomic environment was disproportionately harsh on associates in general and junior associates in particular--and whether the posited over-representation of minorities in those ranks simply, but innocently, took its toll.

Since the polls have now been open about a week, I thought it worth returning to report on the results.  And, by about a 90-10 ratio, you think the macroeconomic environment is behind the numbers.

Unfortunately, I've seen, up close and personal, law firms that suffered serious setbacks-or even failed outright-due to what could only be called "failure of succession planning."

What brings this to top-of-mind prominence is of course everyone's obsessive issue namely The Great Reset we're still experiencing, with an environment unlike anything current managing partners and senior leaders have ever seen before. If your firm is soon to be looking towards a new firm chair (by clicking of the term limitation clock or otherwise), you would be extremely well advised to think about succession planning.

A word about term limits: First, I'm of mixed mind about them. Second, I'm against them. Yes, I see and understand the attraction of wanting an institutionalized way to instill fresh blood, and sclerosis is an organization-killer second to almost no other. I have also seen more than one firm blessed by a gifted leader who had to step down after the allotted eight (or whatever) years, only to be succeeded by a relatively inept compromise-choice who at best oversaw a period of treading water for the firm and who at worst led to its actual implosion (no kidding).

But if the incumbent is doing a great job, knows how to do it, remains fresh and energized and challenged by the job, and finally and most importantly continues to maintain the good will and enthusiastic endorsement of the partnership, why stop a good run short? Ultimately, the cure for a super-annuated leader is for someone to challenge them and win. When the time has come, my prediction is reliably that it won't be that hard.

Back to succession planning.

McKinsey has now stoutly weighed in on this evergreen topic, hanging their story on what journalists like to call a "peg":  Ken Lewis' announcement that he would be stepping down as CEO of Bank of America, with no remote plans for an actual successor in sight. And if you're feeling defensive right around now that your firm has no concrete succession plans in place, McKinsey reports that while 84% of directors believe such planning is more important than ever, only half actually have a plan in place.

Here's the diagnosis and, to some extent, the prescription:

So why doesn't succession planning get the attention it deserves? For CEOs, spotting the talent that will eventually replace them can be an unwelcome intimation of executive mortality. For boards, bringing up the succession can feel awkward when things are going well. When they are not, it can feel like a threat. But these are excuses, and not particularly good ones.

When CEO succession is a regular, structured process that forms part of the board's agenda, it becomes a matter of routine, no more sinister than the annual compensation review. In fact, boards should view CEO succession as a strategic process intimately related to corporate performance. To that end, succession planning should include not only the CEO's job but also all mission-critical positions in the organization.

Now, you don't have a "board," but presumably you have an Executive Committee or the functional equivalent. And de-fanging the process by extending it to include all "C-suite" executives and practice group leaders should also help.

The next question is: What are you looking for?

Let's start with your firm's strategy.

You need someone, to state the obvious, who buys into the espoused strategy. With a vengeance: Lip service won't cut it. And you might even want to think about bringing in an outsider for a dispassionate view:

The board and the CEO must therefore agree on the company's future strategy and the competencies it will require and then agree on how they will be assessed and evaluated in the candidate selection process. If succession planning reveals a fundamental misalignment within the senior leadership team, that discovery can be a blessing in disguise if it happens early on.

One Fortune 500 company, for example, engaged an independent third party to interview each of its directors as part of the succession process. It learned that there were diverse opinions among the directors on whether the company should continue to pursue an aggressive acquisition strategy, which had been the primary vehicle for growth, or focus during the next few years on integrating the most recent acquisitions. This finding resulted in an open discussion between the board and the incumbent CEO. In the end, they jointly agreed that while a near-term focus on integration was critical, the company also needed a measured M&A strategy for future growth, and therefore a CEO with proven competence in M&A.

The McKinsey piece goes on to describe whether it's optimal to only look inside the firm (never!) or to explore another option altogether:

The second component requires looking outside the company to map and benchmark the talent market. How do our people compare? Who might be available? Companies that fail to ask these questions can become myopic, thinking that they have the talent they need when they don't.

The day a law firm does this, of course, will be the day we all know that we have truly grown up as a professionally managed and sophisticated industry. Or else we will have lost our souls. Uncharacteristically, I remain on the fence about that. But those of you following at home can think about it.

Lastly, how about a dose of reality about how this is all really done today? And how would that be? By process of elimination, of course. Our next Managing Partner needs to be:

• Not too young and not too old;
• From a significant practice area in the firm;
• From a major office in the firm, if not historical headquarters itself;
• Exceptionally well regarded as a practitioner;
• With a high record of billable hours, origination credits, and business generation;
• Who has mentored some associates who have become successful;
• And who doesn't have significant cohorts of the firm aligned defiantly against him/her.

Once you eliminate folks not able to slip through all of those gates, you generally find yourself with a very short list indeed. Actually, it often has just one name on it.

Scientific it ain't, but that seems to be how we typically do this.

Could we do it better?

Need we do it better?

The next few years will test firms, I submit, as they have never been tested before in living memory.

Succession planning deserves a bit more respect. Just a thought.

This weekend I received by courier from the UK the just-released report The Next Wave: Globalization After the Crisis, published by Jomati Consultants LLP, the London-based affiliate of Adam Smith, Esq.  If you don't know Jomati, you should:  Based in the City of London, it's headed by Tony Williams, former managing partner of Clifford Chance and then of Andersen Legal.  (You won't be surprised to hear that I count Tony a good friend.)

When is a story not a story? (This is not a trick question.)

Well, when, for example, it reports on a development so small as to be trivial--but inflates its import and meaning greatly out of proportion.

Or when it is premised on statistical analysis but doesn't pursue where the data might lead in any analytically sophisticated or helpful way.

Or when the environment at large is changing in such profound and unprecedented ways that one would be craven or naive not to suspect that the "key finding" under discussion might not merely be an innocent and entirely unintended piece of collateral damage.

We now have a trifecta, in The American Lawyer's annual Diveristy Scorecard 2010

which counts attorneys of color in the U.S. offices of some 200 big firms. In each of the previous nine years that we've compiled the Scorecard, the percentage of minority attorneys at all participating firms increased, rising from less than 10 percent in 2000 to 13.9 percent in 2008. In 2009, for the first time, that proportion dipped, to 13.4 percent.

The drop in law firm diversity may be small, but it's important.

How significant can this be? If you compare 13.9% to 13.4%, the change is less than a 5% proportionate decrease. Yet according to the very same story, "overall, big firms shed 6% of their attorneys [and] 9% of their minority lawyers." This kind of statistical "what's going on here?" cries out for deeper analysis.

Unfortunately, we don't really get that.

We do, however, learn that there are other reasons for concern:

Diversity advocates call the drop a warning sign that shouldn't be ignored. "I think [that] when you're looking at any numbers of a population you're trying to increase, and you see a decrease, that's significant," says Venu Gupta, executive director of the Chicago Committee on Minorities in Large Law Firms. "I guess I hoped we wouldn't be going backward," echoes Fred Alvarez, chair of the American Bar Association Commission on Racial and Ethnic Diversity in the Profession and a Wilson Sonsini Goodrich & Rosati partner.

The decrease in minority head count confirms a concern voiced by many in the legal industry: that the massive law firm layoffs of 2008 and 2009 would hit minority lawyers especially hard. "There were fears when the recession began that these folks would be disproportionately impacted, and it appears to be the case," says Thomas Sager, general counsel of E.I. du Pont de Nemours and Company and a longtime diversity champion. Sager and other observers fear that this year's falloff could be the start of a new downward trend, given a climate of slower law firm hiring, fewer African American law school students, and so-called stealth layoffs. [...]

Consultant Arin Reeves of The Athens Group says minority associates suffer when work dries up: "Your ability to meet hours is reflective of whether or not you've been invested in."

Now, not to gainsay what's being reported here, or its potential import if the cited trend continues for the next several years. The biggest news (which is in the lead paragraph, as it should be) is that for the first time in the 10 years that TAL has been conducting the Diversity Scorecard, there's an overall drop in percentage of minority attorneys. When a trend goes on for as long as it's been measured and then reverses, that is indeed news.

My reservation is less with the headline and more with the rather alarmist tones of concern excerpted above,which give the story its punch and its juice.

The problem is that the deeper you dig, the less there there is there.

How so? In trying to analyze what might be behind the numbers, I found that that last remark (above) from Arin Reeves provided the beginning of a clue. The clue lies in the focus on associates. Here's another bit of evidence:

For a long time, the way that law firms beefed up their diversity numbers was really to have a lot of diverse associates in the first-and second-year classes," says Gupta from the Chicago Committee on Minorities. If a firm didn't hold on to its minority associates--and many didn't--it was relatively easy, Gupta says, to hire more in the next recruiting season.

But that was in a so-called normal economy. These days, firms can't quickly replace the minority attorneys they lose through voluntary or involuntary attrition. Reduced recruiting is another factor that is likely contributing to the decline in minority attorneys.

In other words, firms' diversity scores disproportionately rely on their associate ranks.

So let's take a look.

Here's the data:

	Change in Non-Partners	Change in Partners
Overall Total	-10%	+1%
Black	-16%	not reported
Asian	-11%	+6%
Hispanic	-13%	+3%
White	not reported	not reported

As I look at this, I see a much more nuanced--and optimistic--story.

Overall, to state the obvious, serious cuts came in the ranks of associates and non-equity partners. (Caveat: The story doesn't specify whether "partners" as used by the author means equity or both equity and non-equity, but since industry-wide we've seen no meaningful growth in the ranks of non-equities in the past year, I'll assume it refers to equity only.)

But (second big caveat--given the data we are provided) minorities did better than average in growing their representation among the partnerships. How, pray tell, is this bad news on the diversity front? It's possible--not that it makes for an alarming story, of course, but it's possible--to interpret this data as implying that the long hoped-for ascension of minorities into the partnership ranks is actually taking place.

Finally, the missing statistical analysis: The only way to really tell whether the disproportionate layoffs of non-partners among minorities (see table above) has resulted from firms' using the economic downdraft to try to conceal what in their dark and secretive hearts is prejudice pure and simple--highly implausible, in my book--is to separately break out the demographics of lawyers laid off for economic reasons, which the article says is "a project beyond the scope of this survey."

More's the pity.

Because that's the only way to tell whether (Theory A) something nefarious and troubling is going on here, or whether (Theory B) the macroeconomic environment was disproportionately harsh on associates in general and junior associates in particular--and whether the posited over-representation of minorities in those ranks simply, but innocently, took its toll.

Care to vote?