Cravath System

The Cravath System is a set of business management principles first developed at Cravath, Swaine & Moore in the early 20th century. John Oller, author of White Shoe, credits Paul Drennan Cravath with creating the model adopted by virtually all white-shoe law firms, 50 years before the term came into popular use.[1] The Cravath System has been adopted by many leading law firms[2][3] and consulting agencies in the United States.

Cravath System components

Paul Cravath built a reputation handling complex lawsuits for the new electrical industry. Devising the Cravath System, he enlarged the law office, and also professionalised it by establishing full-time librarians, a recruiting system focused on only the best law schools, and partners who specialized in specific fields of law.[4] Robert Swaine describes the fundamentals of the Cravath System in the beginning of Volume 2 of the history of the Cravath firm.[5] These include:

Recruiting staff

Paul Cravath sought to hire only the "best of the best", and primarily looked to Harvard, Yale, and Columbia law schools for candidates. Graduates were expected to be members of the Phi Beta Kappa/Beta Gamma Sigma system, and to have served as editors of their respective school's law review. A graduate from a university outside of the top five was expected to be, minimally, the equivalent of a "B" student at Harvard or Columbia over time. Distinctly, only new law graduates or those who had served as clerks after law school were to be hired, except in rare circumstances, to avoid previously developed habits, outside the Cravath System, coming to the firm's culture.

Training staff

Associates would be assigned to a partner for typically 18 months, or less, where they would learn to break down large tasks into manageable pieces to lead. The view was that they would serve as apprentices of the partner's practice, and train on the job under close supervision and guidance.

Compensation

The system practices lockstep compensation. Early law firm hiring practices paid the associates nothing, except what they could bring in for themselves. By 1910, the Cravath was one of the first to hire incoming lawyers on a salary. Since Cravath preferred to hire the best and remunerate them very well, this led to wide disparities in starting salaries in the legal industry. Collusion among law firms and schools led to uniform starting salaries across law firms from the end of World War I until World War II, but this stopped once the top law firms salaries reached parity soon after.[6]

Tenure

Generally, only partners may have permanent employment at the firm, and as long as an associate was deemed worthy of promotion, they may stay; those who were not suitable for promotion were dismissed in a strictly enforced "up or out" staffing policy.

Choosing partners

Unless there is some exceptional need for expertise unavailable within the firm, partners should be chosen and promoted only 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 with permission from the senior partner. There are no part time associates and partners, and all business in the office is company business and not individual.

Relationships of the partners

Partners are expected to work with each other; silos and cliques are to be strictly avoided so as to foster trust and a firmwide esprit de corps.

Scope of the practice

Cravath handled predominantly civil law matters in the early years; the majority of firms adopting this system are also civil law firms.[7]

Influence

The firm would avoid lobbying, or currying favors with politicians in the state or national capital. The firm would stick with skill and diligence in applying the law.

Management

Cravath believed that a firm must have strong executive direction, led by the senior partner who was elected by the partnership for a limited term.

References

1. Levinson, Marc (March 20, 2019). "White Shoe Review: Lawyering Up the 20th Century (book review)". Wall Street Journal. Retrieved March 22, 2019.
2. William Henderson (2008). "Are We Selling Results or Résumés?: The Underexplored Linkage Between Human Resource Strategies and Firm-Specific Capital" (PDF). SSRN 1121238. Cite journal requires |journal= (help)
3. Henderson, Bill. "How most law firms misapply the "Cravath system"". Retrieved 2009-06-21.
4. John Oller, White Shoe: How a New Breed of Wall Street Lawyers Changed Big Business and the American Century Penguin Random House, 2019, Chapter 1. ISBN 978-1524743253
5. Swaine, Robert (1948). The Cravath Firm. New York: Ad Press. pp. 1–12. ISBN 1-58131-073-0.
6. page 6 of Swaine
7. Greenfield, Scott. "There's No Cravath System For Criminal Defense". Archived from the original on 2009-06-17. Retrieved 2009-06-21.