Ground-breaking in the 1970s and still ahead of its time, Friederike Heine explores Latham & Watkins' approach of drafting in young associates to help run what has become one of the world's top law firms

In early June 1983, a dozen well-known law firm leaders met for a working lunch in New York to discuss governance in the legal industry.

Among the high-profile partners – who convened to discuss topics including law firm strategy, remuneration, billing practice and management structures – were Clinton Stevenson of Los Angeles-based Latham & Watkins and Samuel Butler of storied Wall Street firm Cravath Swaine & Moore, who both took to the floor to explain how they managed their practices.

It was soon clear their views on governance were diametrically opposed. Stevenson advocated the checks and balances of a highly structured and defined management, while Butler endorsed a purist version of the classic partnership model, which stripped administration to the bare minimum.

But the two firms were divided by more than the complexity of their governance model: nearly 30 years ago, Latham was advocating what still seems a radical approach of drafting the firm's younger lawyers into its management.

As reported by The American Lawyer magazine in 1983, Stevenson told attendees at the debate: "We believe firmly in youth in management," before going on to describe the firm's associate committee, which to this day contributes to decisions on strategy, remuneration and recruitment and consists of 25 partners and 25 associates.

"[The associates] know what I make. They know how hard I work and the hours I log and to what categories. They know the plans of the firm in terms of growth. They know the problems of the firm. The budget figures are given to them."

According to Stevenson, the egalitarian structure of the California-bred firm – which in addition to the associate committee gave associates a strong voice on a range of material decisions – was a major factor in its meteoric financial success (which has continued over the past three decades).

He said: "We think this structure leads to lower attrition and the ultimate quality [of our associates]. We don't want anyone of minimal ability, or who is uninformed, joining the partnership. It enables us to recruit and maintain the real cream of the crop."

'A happy cult'

It was an approach that led one prominent US directory to famously dub the firm as "a cult, but a happy cult".

Butler, who took to the podium immediately after Stevenson, could barely hide his disdain at such thinking. "Obviously, we are the antithesis [of Latham]," he responded. "It seems an incredible waste of time and people on those committees – all those associates who could be out there working to make me money."

Nearly 30 years down the line, both law firms run themselves in very similar fashion. Latham – which has grown into one of the world's largest firms employing more than 2,000 lawyers across 31 offices – is still widely known for its committee-driven management structure.

Cravath, meanwhile, remains a largely domestic 500-lawyer player with one of the highest average lawyer revenues and partner profits in the world, as well as a comparatively tiny power base.

And yet, the debate surrounding youth in management is still one that concerns the majority of law firm managers both in the US and the UK. Should associates be involved in management decisions?

Modern-day Latham remains in favour of appointing young lawyers to a variety of committees. Its associate committee – set up in 1970 and initially consisting of three partners and one associate (two years later to be replaced with two partners and two associates) – forms a vital part of the Los Angeles firm's governance structure and sits alongside its nine-partner executive committee.

Today, the 25 partners and 25 associates who sit on the body are proportional to the firm's geographical spread (Latham strives for a 35:1 ratio on the body compared with the size of the firm), with associates and partners in the smaller offices outside the US rotated on and off the body on a biannual basis.

London, the firm's fourth largest office, has four representatives on the committee: corporate partner Graeme Ward and finance partner Jay Sadanandan – who joined the firm in 2010 from Ashurst and White & Case respectively – and associates Benedict Nwaeke (pictured) and Ekin Akar.

Despite many global rivals jumping on the bandwagon since the 1970s by setting up similar bodies (only in certain cases actually including associates), Latham's model is still arguably unique, both in its organisational make-up and in its wider remit.

Where other firms have often created associate bodies that were viewed as talking shops with little influence, Latham handed associates detailed information regarding the firm's direction and performance, and gave them influence over issues such as partner promotions, recruitment and associate compensation – a stance backed by including associates on other management bodies.

Latham argues the model was key to underpinning several facets of the firm's remarkable elevation from solid Los Angeles practice to global leader, delivering (at least until the end of the 1980s) staggeringly low attrition.

Latham argues this was linked to robust quality control and engagement from its young lawyers – who gained a sense of inclusion arguably unrivalled at the time for a non-partner.

The body's main purpose is twofold: 25 lawyers (roughly made up of an equal amount of associates and partners) are charged with career progression for associates, while the other half are putting in recommendations on bonuses.

Aside from these main pillars of responsibility, the associates and partners on the committee also get input in myriad management decisions, including the development of compensation packages for new offices around the world, recommendations for admissions to the partnership and interviewing potential recruits, including lateral joiners.

For associates put forward for the body, the role – which takes up at least one full working day every week – is a significant commitment.

Nwaeke, a six-years' qualified London associate, was put forward for a place on the committee last year and has been frantically busy since.

He admits: "Initially, I was slightly overwhelmed by what the role would entail. Not only because it is time-consuming – at US firms, it is incredibly important to maintain your practice – but also because it involves acting as a sounding board for associates, in many cases more senior associates than you."

Jennifer Engelhardt (pictured), a seven-year qualified associate in London, spent two years on the committee in 2008 and 2009. It was an interesting period for her, partly because the firm found itself in the depths of recession at the time.

"It was a tough time," she says. "Lawyers had to be assessed against the backdrop of very low activity levels."

However, Engelhardt said that sitting on the committee gave her a sense of the rigour in the firm's approach to assessing candidates for promotion and evaluating partners and associates.

She comments: "The progression process puts seventh and eighth year associates through a rigorous diligence process, with all progression sub-committee members (partners and associates) having a vote, which creates a very egalitarian environment."

Sharpened career focus

For some associates, being on the body has also sharpened their career focus. Engelhardt says that working on the committee reinforced her desire to press for partnership at a time when some of her peers were considering alternative routes such as in-house and of counsel roles.

She comments: "My time on the associate committee helped me realise that partnership and management roles were something I could really aspire to."

One of the notable policy overhauls the committee was involved in in recent years was the parental leave policy changes for associates in 2007 that significantly increased the amount of leave biological and adoptive parents could take while receiving their full base salary.

The committee put forward proposals to scrap the policy that provided 12 weeks for primary carer birth mothers and four weeks for new fathers and adoptive parents.

It suggested replacing it with 18 weeks for birth mothers who are primary carers and adoptive parents who are primary carers, and to increase to 10 weeks the time other primary carers – such as a biological father – can take off.

"Parental benefits are obviously important to that particular age group," comments Mike Bond, a partner in the London corporate department.

"This is an initiative that went down very well within the firm, especially because we started to see ripple effects."

Indeed, shortly after the policy was finalised, New York law firm Simpson Thacher & Bartlett followed suit with similar changes.

Pivotal role

Decisions relating to the firm's annual salary increase for associates is also something that junior lawyers have the opportunity to weigh in on.

One associate who prefers not to be named comments: "Obviously, there is significant self-interest at play, but especially in this market you have no choice but to look at the firm's overall financial performance to make a fair – but not always popular – decision."

Indeed, the firm froze associate salary bands on several occasions throughout the recession. Aside from policy decisions, the associates committee also has a role in deciding which associates and of counsel will be promoted to the partnership in any given financial year.

"Making such a ground-breaking decision on an individual's career can be daunting," comments Nwaeke. "On the other hand, it is a process that changes the way you think about running a law firm – assessing each individual's business case in his or her particular practice area is a very educational exercise."

The decisions made by the associate committee can be vetoed by the executive committee. But according to a spokesperson, that has happened on less than a handful of occasions.

Aside from the associate committee, young lawyers at Latham have the option to become members in many other committees within the firm. There are currently associates on the diversity, ethics, pro bono, recruiting, technology and training & career enhancement committees.

Despite the criticism leveled by many other law firm managers against this so-called 'committee culture', it has delivered for Latham, which has continued to grow through the recession and maintains comparatively low levels of attrition across its global network.

Succession planning, an undoubtedly thorny issue within law firms, where in many cases partners cling on to clients until the eve of retirement, has been shaped by Latham's approach to place junior lawyers in management.

Several of the firm's senior managers and a handful of executive committee members have completed a two-year stint on the associate committee when they were junior lawyers.

"The associate committee is undoubtedly the path to governance at Latham," says London partner Bill Voge (pictured).

"The associates put forward for places on the body are always fantastic lawyers and popular within the firm – after completing two years in the role, the only way for them is up."

Reputational pounding

Nevertheless, Latham's much-envied reputation for associate engagement has faced challenges since Stevenson's era.

The firm took a pounding in the early 1990s after it made 41 US associates redundant in response to the collapse in its core leverage finance market and the turmoil at one of its largest clients – the now defunct junk bond leader Drexel Burnham Lambert (Drexel and its driving force Michael Milken were clear inspirations for corporate raiders depicted in the film Wall Street).

At a time when US law firms rarely made staff redundant, the expansionary firm was to be dogged by that decision for years.

Having recovered from this period to expand hugely in New York and Europe through the long credit boom, Latham in recessionary 2009 attracted controversy again when it announced 440 job cuts, one of the heaviest programme of cuts ever seen at a global law firm – although the firm's transparency and relative generosity to redundant staff did much to stem the criticism.

It also seems doubtful that associates have quite the level of input in the firm's governance as they did in Stevenson's day – inevitable given that Latham has grown to a 2,000-lawyer firm with revenues of more than $2bn (£1.24bn).

Yet despite facing challenges, Latham has rebounded from wounds inflicted by the banking crisis more quickly than many of its peers, with revenues rising 11.6% to $2.15bn (£1.33bn) in 2011.

Judged on its finances at least, Stevenson's concluding rationale for Latham's approach back in 1983 certainly remains justified: "We think [involving associates] enables us to recruit and maintain the real cream of the crop and to motivate them to give the kind of commitments that are expected."

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