Cravath System

The Cravath System is a hiring practice developed at Cravath, Swaine & Moore in the 19th Century. It has been partially adapted by most large law firms[1][2] and consulting agencies.

Contents

System

Swaine lays out the fundamentals of the Cravath System in the beginning of Volume 2 of the history of the Cravath Firm.[3]

Recruiting staff
Paul Drennan Cravath preferred to hire the "best of the best" and looked to the better law schools for candidates. Graduates were expected to be members of Phi Beta Kappa/Beta Gamma Sigma and have served as editors for the school law reviews. A graduate from a university outside the top 5 was expected to be at least the equivalent of a "B" student at Harvard. Only new graduates were to be hired, except in extenuating circumstances. The belief was that someone who had worked anywhere else had learned bad habits already.
Training staff
Associates would be assigned to a partner for a period of time (usually 18 months or less) where they would learn to break down large tasks into manageable pieces.
Compensation
Early law firm hiring practices paid the associates nothing, except what they could bring in for themselves. By 1910, the Cravath firm was one of the first to hire incoming lawyers on a salary. Since they preferred to hire the best, this led to wide disparities in starting salaries. Collusion among law firms and law schools led to uniform starting salaries across law firms from the end of World War I to World War II.[4]
Tenure
Generally, only partners may have permanent employment at the firm, and as long as an associate is promotable, they may stay. Those who were not suitable for promotion were dismissed in the "up or out" policy.
Choosing partners
Unless there is some need for expertise unavailable within the firm, partners should only be chosen from within the office.
Interests outside the firm
Partners and associates may not have business interests outside the firm. Charitable, educational and artistic interests are permitted. There are no part time associates and partners, and all business in the office is company business.
Relationships of the partners
Partners are expected to work with each other. Silos and cliques are to be avoided.
Scope of the practice
Cravath handled predominantly civil matters in the early years, and the majority of firms adopting this system are likewise civil law firms[5].
Influence
The firm would avoid lobbying or currying favors with politicians. The firm would stick with skill and diligence in applying the law.
As to the firm's management
Cravath believed that a firm must have strong executive direction.

Up or out

Up or out is a system in which employees should either be promoted in 3 years or leave the company. Incoming associates were expected to achieve partner within 7 to 8 years and no later than 10 years after the initial hire.

The U.S. military has a similar version to the "up or out" situation. The Defense Officer Personnel Management Act was passed in 1980 (PL 96-513) mandating that officers passed over twice for promotion were required to be discharged from the military.[6]

See also

References

  1. ^ William Henderson (2008) (PDF). Are We Selling Results or Résumés?: The Underexplored Linkage Between Human Resource Strategies and Firm-Specific Capital. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1121238. Retrieved 2009-06-21. 
  2. ^ Henderson, Bill. "How most law firms misapply the "Cravath system"". http://lawprofessors.typepad.com/legal_profession/2008/07/part-ii-how-mos.html. Retrieved 2009-06-21. 
  3. ^ Swaine, Robert (1948). The Cravath Firm. New York: Ad Press. pp. 1–12. ISBN 1581310730. 
  4. ^ page 6 of Swaine
  5. ^ Greenfield, Scott. "There's No Cravath System For Criminal Defense". http://blog.simplejustice.us/2009/06/13/theres-no-cravath-system-for-criminal-defense.aspx. Retrieved 2009-06-21. 
  6. ^ Bernard Rostker, et. al. (1992) (PDF). The Defense Officer Personnel Management Act of 1980 - A Retrospective Assessment. ISBN 0833012878. http://www.rand.org/pubs/reports/2006/R4246.pdf.