How do you define greatness?
Is it prestige?
I was recently reading an article on the “Most Prestigious Law Firms In America.” Seeing Wachtell, Lipton, Rosen & Katz (“Wachtell”) as #2 on the list, it struck me that the firm seems to frequently be at or very near the top of Vault’s list. I did some digging and found that Wachtell has been either #1 or #2 on the list for each of the last 14 years, and during that stretch has been #1 10 times.
For those not familiar with Vault’s methodology in ranking, they seek input through an on-line survey from lawyers across the country. The only limitation in the process is that survey participants cannot vote for their own firm. This year more than 20,000 lawyers participated in the survey.
Is it profitability?
As I thought about how extraordinary Wachtell’s results have been, it occurred to me that in my book Law Firm Strategy (2005), I addressed Wachtell and their phenomenal economic performance. In the book I note that Wachtell has been in the top 5 “profits per equity partner” in the AMLAW 100 for all years 1986-2003. During that stretch they were #1 or #2 in all but 3 years.
Since then, the firm’s economic performance hasn’t declined. Based on a somewhat cursory review, it appears that the firm has been#1 in profits per partner every year since 1999.
Is it retention of partners?
Being a partner in the world’s most profitable law firm naturally draws the attention of law firms and search firms seeking talent. Quality partners do not tend to stay long in an environment that is not, in every sense of the word, professional. High performing partners are “bought” almost every day.
Meanwhile, a 2018 interview with Daniel Neff, one of Wachtell’s co-chairs, speaks volumes about the Wachtell culture,“It’s not only that no partner has left the firm for a bigger paycheck. Neff, the Wachtell co-chair, maintains he hasn’t even dealt with a partner who has been made an offer and is considering leaving.”
What is the secret sauce that keeps this firm on top of an extraordinarily competitive marketplace?
The firm’s dominance certainly isn’t based on many of the benchmarks we typically use to signal dominance.
- Geographic reach —the firm operates out of one office in New York.
- Leverage —the firm operates with marginally more partners than associates and has one class of partner.
- Compensation system —it is an old-fashioned lock-step system.
- Size —Wachtell has fewer than 300 attorneys, a relatively small firm in today’s world
So, if not based on the measures we typically use, how do we explain this firm’s success?
There are no doubt a number of factors that have yielded such extraordinary and prolonged success; but what I believe is chief among them is focus.
The founding partners decided in the firm’s earliest days that they would do work that passed two tests:
- the work had to be of significant consequence to their clients; and,
- it had to be interesting to the partners
In the 50+ years of the firm’s existence it hasn’t wavered from that focus. Wachtell has not been seduced by opportunities, or distracted by what the marketplace defined as “growth” or “greatness.”
As it relates to Wachtell’s recognition as a “prestigious firm,” I believe their focus on thetype of work has been the key. So frequently when reading about large scale matters of huge consequence, the firmis involved. Wachtell’s focus has, over time, established it in the minds of the marketplace as a go-to firm for the largest, most complex matters.
But, there are other factors that have contributed to their success.
From day one the partners committed to an ethic of hard work. They hired, trained and developed others who shared that commitment. When you combine consistent levels of high productivity with the type of rates that “bet the company” matters support, he result is market leading revenue.
Although earlier I inferred that the firm’s compensation system was likely not central to its success, it may in fact be a leading factor. The firm has never been subjected to the internal competition and division that results from a system based on quantitative performance in any area. Sure, there is an expectation that everyone will work hard; but what trumps everything is the uncompromising standard of excellence.
The real point here isn’t about becoming the most prestigious or the most profitable. The point is that with focus and dedication to that focus all law firms can realize enduring success as they define it. Without a Wachtell-like focus, time and money are diluted.
More on Wachtell Lipton
In our recently published book, Decisions that Matter – Tales of Law Firm Leadership in Moments of Consequence, we dedicate a chapter to the Wachtell Lipton firm, you might find it interesting. The Wachtell story provides so many great lessons for all of us to consider.