What is Your Law School Ranked? Go-To vs. ROI

The National Law Journal’s annual “Go-To” Rankings were released at the end of February, and the new list has Columbia Law School ranked as the top school, regaining its ranking from 2007-2008. The University of Pennsylvania fell from the top spot to #5, after holding the top spot for both 2011 and 2012. The full listings of the Top 20 are below, along with other regional schools of note listed below:

The rankings are based purely off of the percentage of last year’s graduates who were hired by an NLJ250 firm. This does make some sense, as this is the goal of many who enter highly-ranked law schools. However, it should also be noted that this is not always a student’s motivation when choosing to attend law school. Moreover, many law school graduates find great success in smaller law firms and other law-related jobs.

One factor which the rankings miss are how to account for differences in tuition. For example, does it make more financial sense for a student considering Vanderbilt (#16) at $47,000 per year with an NLJ placement rate of 32%, or UNC (#29) at $22,000 per year with half the NLJ placement rate at 16%. In calculating the expected value or ROI over 3 years’ time post-graduation, we find that choosing Vanderbilt yields an (approximate) expected gain of $69,000 whereas UNC yields an expected gain of $47,000, holding anticipated salary at an NLJ firm constant at an average of $120,000 per year. This helps to simplify the choice in that Vanderbilt on average will earn more bang for the buck. However, for some students it is possible that the latter option may be more appealing given the significantly lower initial outlay of tuition dollars (approximately $66,000 over 3 years at UNC versus $141,000 at Vanderbilt). In another example, take the decision process of choosing between Washington University in St. Louis (#25) at the same tuition of Vanderbilt at $47,000 per year, but with an NLJ placement rate of 18%. Again, let’s look at the comparison relative to UNC (#29). Using the same formula as above, we find that Wash. U. yields an expected 3-year ROI of $40,000 versus UNC at $47,000, in addition to the fact that Wash. U requires a 3-year outlay of $141,000 versus UNC’s $66,000.

The decision-making process of course differs for each student. However, factoring in tuition costs and expected NLJ placement rate (again, if NLJ firm placement is a student’s ultimate goal), this can be a helpful additional bit of analysis. Particularly so when law school requires such a large amount of tuition/debt in an uncertain economy. To assist in that process, we have calculated our own form of Go-To Rankings based on the below 3-Year expected ROI chart:

Go-To graph 1There are a few different ways to interpret the chart. One is it allows us to weigh the tradeoff for specific schools between tuition costs and expected ROI. It also allows us to see if a school is generally a “good” investment at that tuition level by judging whether the school is above or below the black trendline you see above. If a school is above the trendline, that indicates (as best we can guess) that you would be getting a better than average bang for your buck over a 3-year time period. On the other hand, if the school is below the line, you would be getting a lower than average bang for your buck. In that case, it may be advisable to consider other schools with a better expected ROI at or near the same tuition level.

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Bonuses For Associates? Smaller Firms Saying Yes

In important news for young lawyers at small to midsized law firms, more associates are in line for bonuses. Christine Simmons of New York Law Journal wrote in a February 19 article highlighting how bonuses are more becoming more common for associates at smaller and midsize law firms. Typically, this has only been the case for the large top-tier firms, many of which follow, to some degree, the bonus structure set each year by Cravath Swaine & Moore. Currently, Cravath’s associate bonuses range from $10,000 for 2012 class-years to upwards of $60,000 for 2005 class-years (and above). In some cases, bonuses for top performing associates at smaller firms may align with the Cravath scale, but generally they are lower as Simmons says, to reflect “lower billing rates to more mid-market clients”.

The good news for associates in New York and elsewhere is that smaller firms seem to be catching on to the why. Smaller firms are starting to see the benefits of offering merit-based pay and compensation incentives in order to retain and motivate their young talent.

To confirm this view, in a recent interview Simmons had with Eric Wagner, head of the corporate group at Klienberg, Kaplan, Wolff & Cohen, Wagner gave this reason for the firm’s decision to now offer associate bonuses: “We’re smaller and we have to be in some ways more bottom line thoughtful and more creative.” To do so, Kleinberg offers their associates profit-sharing plans that fully vest in 5 years, “similar to an extra 401K.” They also incentivize associates by rewarding those who bring clients to the firm, and stand by the idea that most of the firm’s equity partners should come from their own associate classes.

Yet Klienberg isn’t the only smaller firm being more thoughtful and creative. Below is a sample list of 6 other firms now offering bonuses, and a look at their packages. One thing you notice…every firm has their own take:

  • BuckleySandler (AmLaw #194, 152 attorneys): Bonuses are not guaranteed. Based on the firm’s financial performance and associate performance, work ethic, teamwork, and an associate’s overall commitment to the firm.
  • Otterbourg (55 attorney NY firm): Bonuses are not guaranteed, but likely. Based on quality of work, responsiveness to client needs, billable hours and an associate’s class level/seniority.
  • Wolf Haldenstein (74 attorneys in 3 offices): Moved from a seniority system to a merit-based system based on quality of work, performance, billable hours, as well as client and partner feedback.
  • Hiscock & Barclay (NLJ #209, 194 attorneys): Bonuses are not tied to a firm’s financial performance, but based on quality of work, client service, teamwork, client feedback, billable hours, and fees collected.
  • Morrison Cohen (90 attorney NY firm): Based on associate and firm performance, with a target of 1,900-2, 2,100 hours (with no more than 2,100-200 to avoid burnout). Associates are also incentivized by receiving 20% of business they originate.
  • Phillips Nizer (74 attorney NY firm): Based on annual associate evaluations, billable hours, and nonbillable performance with a billable hour threshold of 1,850 hours.