Cravath System

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

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 minimum 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.

See also

• Lockstep compensation
• Up or out

References