By Franklyn Kimball • May 13, 2010•Writers in Residence
As the economy moves from the depths of an extraordinary recession to a recovery of uncertain dimensions, many questions confront law students and lawyers in the early years in their careers. This month’s post addresses three areas of interest - changing hiring patterns in litigation, the ‘training’ model for new associates, and associate compensation.
Litigation - For thirty-five years litigation has been a key driving force in the growth of the profession. That era is over. Large, mid-size and boutique firms accustomed to working at 110% or more of budget year-in and year-out are experiencing a significant slow down in litigation. High rates combined with the explosion in e-discovery have caused sticker shock among clients who are no longer as enthusiastic about taking matters to trial. Lateral hiring for associates in litigation has fallen 80-90% nationally in the last decade and shows little signs of recovery. To be sure, there will be exceptions — certain mega firms and litigation boutiques remain extremely busy.
Over the next ten years many leading firms may reduce partner track entry-level hiring in litigation by 50% more and increase the number of staff attorneys to handle routine discovery matters.
- This will have a substantial impact on opportunities for law students - including those at the nation’s leading schools.
- The road to equity partnership will be longer and steeper.
- In a slow growth environment, it will be more challenging for mid-level litigation associates to get the experience they need - taking and defending depositions, arguing motions, and examining witnesses in court.
The “Training” Model - In 2009, several firms announced that they would devote the bulk of their new associates’ time to training and development (at a considerably lower starting salary). The goal is admirable: to develop lawyers who can provide value to clients and reduce complaints about high hourly rates. Several challenges exist.
- First, it remains to be seen whether partners - already burdened by administrative duties and business development will spend 5o-100 additional hours per year (or more) mentoring or training.
- Second, presuming the training effort is successful - it’s possible that a firm may have trained a generation of lawyers who are ripe targets to be recruited away as a recovery blossoms.
- Third, new lawyers have always said that they want the best training possible. But when that comes at a cost of $10-50,000 per year, many will depart for greener pastures as soon as opportunities become available.
- Finally, if the recovery accelerates, firms’ enthusiasm for the training model may diminish as the need for associates increases.
Associate Compensation — During the depths of the recession, many firms in major markets reduced associate starting salaries - something which had not occurred in the past forty years. Other firms reduced or eliminated bonuses. The once neat grids of associate salaries and bonuses have been replaced by myriad systems which are, at best, works-in-progress. The new systems include:
- reduced gaps between classes
- hold backs of 10-20% of base compensation until chargeable hour thresholds are met
- and replacing “classes” with a smaller number of salary “levels.”
What they have in common is giving firms more flexibility and less upside exposure. The effectiveness of these new systems will be impossible to decipher until they have been in place for 2-3 years. The transparency that has been fueled by legal media and the blogosphere won’t result in simplicity. New systems that are purportedly ‘merit-based’ are not inherently more fair than lock step or hours-based systems. Lawyers have always been successful at gaming systems. And, skeptical by nature, lawyers will view any change in their firm’s compensation system as an effort to reduce overall compensation.
All of this is a painful, predictable aftermath of the salary explosion of 2007 which took place only months before the recession began. An equally troubling question is whether firms learned lasting lessons from the painful experiences of 2007-2010 or whether another spate of irrational compensation increases will occur during the next boom. In 2015, will a firm decide they “must” raise the starting salary to $190,000 in order to compete in the next boom? Will other firms simply succumb to another round of follow-the-leader as they did in 1982, 1990, 2000, and 2007? Stay tuned.