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Less Than Happy Holidays For Associates

The outlook gets grimmer for associates, as several sources highlight their rough road.

As we previously discussed, The National Law Journal last month reported a 1.5 percent drop in the total number of associates at the country's 250 larges law firms.

Last week, the AmLaw Daily reported on the latest Robert Half Legal Hiring Index, in which seven percent more respondents said their firms intend to add jobs in the first quarter of 2011 over the the fourth quarter of 2010.

That would appear to be good news, except for this caveat:

"Fifty-two percent of respondents reported difficulty in finding skilled legal professionals. According to Volkert at Robert Half, this suggests that while law firms and legal corporate departments may have openings, they are mostly interested in candidates who are currently employed."

To dampen the outlook even further, simply being an employed associate doesn't seem to mean what it used to. The ABA Journal recently wrote:

"Some associates who managed to avoid layoffs now lack the exposure and experience of their peers from three to five years ago."

According to that article, the unexpected consequence of the recession is that many associates who retained their jobs spent the last two years doing "pro bono work and marketing", resulting in an unprecedented lack of real experience.

"Across the board at leading law firms in Chicago, Los Angeles and New York City, there are associates who haven’t gained the experience compared to years past, says Sheri Michaels, a partner at legal recruiter Major, Lindsey & Africa in New York City."

Which leads legal recruiter Amy McCormack to observe yet another potential change to the business of law:

"The dearth of experienced associates is even more reason for firms to abandon traditional class distinctions and evaluate junior lawyers on actual experience and legal skills."

Deeper into the Citi Private Bank Law Watch Survey

The AmLaw Daily last week featured some continuing coverage of the Citi Private Bank Law Watch Third Quarter 2010 results.

Citi Private Bank's Law Firm Group chairman Dan DiPietro and senior client adviser Gretta Rusanow expanded upon some of the findings of the recent comprehensive survey, emphasizing:

"... an increasing willingness on the part of general counsel to branch out beyond their traditional law firms are forcing many law firms to compete on price, and others to innovate in order to be profitable and sustainable in this changed market."

DiPeitro and Rusanow write that they've spent "the past three months, having traveled throughout the U.S. and London conducting roundtables with managing partners of over 150 firms, meeting with individual law firms, and learning how firms are responding to this flat market..."

One of the prominent themes they're hearing is "the constant pricing pressures firms face, and how they are responding to these pressures."

They report that two shifts in the traditional business model are leading the altered landscape:

New Low Cost Competitors

• DiPeitro and Rusanow report that the general counsel they've spoken to are facing unrelenting pressure to internally reduce outside legal costs and are now more open than ever to "other options given the availability of off-shore legal service providers, and Am Law Second Hundred firms prepared to offer services at a lower cost than the traditional law firms."

• DiPeitro and Rusanow also note that "Am Law 100 firms have commented to us about the increased competition from these alternative providers, as well as from smaller firms who are able to provide legal services at significantly lower rates because of lower cost structures."

Alternative Fee Arrangements -- Pricing and Project Management

According to DiPeitro and Rusanow, "In addition to simply discounting fees, we see an increased focus on alternative fee arrangements (AFAs)."

While AFA's are becoming more standard, the task now is to work the kinks out. To that, DiPeitro and Rusanow broke it down even further:

• The first challenge is "how to accurately price services at the outset. Firms have started to consider how they might mine data in their practice management systems and knowledge management systems to create accurate cost predictions for matters. Some firms have formed committees composed of IT, finance, knowledge management, and practice group representatives working together to identify the common characteristics of various matters, and in so doing, improving the predictability of matter costs. In other words, these firms are moving from a reactive stance to a more strategic, scientific approach to pricing of legal services."

• "The second challenge firms confront is, once they have agreed to an AFA, how can they ensure that the work will be completed within the agreed scope and to budget. To do so, some law firms are retaining professional project managers. Other firms are placing that responsibility on lawyers by conducting project management training sessions for partners and attorneys in the firm."

Interesting the trends we started looking at 18 to 24 months ago are now becoming firmly rooted in the new normal.

The Law School Disconnect

A couple interesting posts this past week highlight conflicting trends on a collision course.

The Law School Admissions Council reported that the number of people taking the Law School Admissions Test last October was the second highest ever.

A closer look at the LSAC's chart shows this is part of a greater trend.

• The highest number of October test takers in the history of the exam occurred last year.

• The highest number of June test takers ever was this year.

• The second and third highest number of June test takers was last year and the year before.

• The highest number of December test takers was last year, with the second highest number of December test takers being the year prior.

• The highest and second highest number of February test takers also took place in the last two years.

However, as The American Lawyer summarizes their 2010 Survey of the Am Law 200 they conclude:

• The survey "suggests that many of the changes implemented during the recession--smaller associate classes, postponed start dates for new hires, reductions in the equity pool, and scaled-back profit expectations--are here to stay, at least for a while."

While at Above The Law, a debate over whether a 1L with "only" $21,000 of debt invested in law school should read the writing on the wall and drop out now.

80% of the responders concurred that the fiscally wise move would be to drop out now.

So we have a record number of potential law school students facing a record squeeze on entry to the profession. Something has to give.

Moneyball for Lawyers?

The November issue of National Jurist featured an article by University of Indiana law professor William Henderson advocating big changes in the way law firms assess which candidates to hire and train, and that article has prompted quite a bit of discussion.

The Wall Street Journal says that Mr. Henderson "pokes a variety of holes in the way big law firms have gone about their hiring for decades and decades — essentially luring the folks with the highest GPAs at the top 15 or so law schools."

The ABA Journal reports that Henderson's company, Lawyer Metrics, will apply a "Moneyball" approach to help quantify what qualities partners seek in an associate (referencing the best selling book about Oakland A's General Manager Billy Beane, who introduced a revolutionary statistical-based method of evaluating baseball prospects).

Henderson himself writes as an example that, "In 2007 and 2008, 46 percent of all entry-level associates at an AmLaw 100 firm were graduates of a Top 14 law school . . . Yet, during this same period, 39 percent of lawyers promoted to partner were from Top 14 schools. Further, as of 2009, only 35 percent of general counsels for a Fortune 500 company had graduated from a Top 14 school. This suggests that the advantage of higher test scores and academic pedigree diminishes rather than compounds over time — at least for partnership or general counsel positions."

Steven Harper at AmLaw Daly voices concern that Henderson's data-driven approach won't account for "politics and luck."


The Moneyball analogy is apt if Henderson is taking a bottom-up approach -- since Billy Beane first looked solely at unbiased statistical data and then taught managers and scouts a new way of assessing talent based on the data.

However, if as AmLaw Daly reports, Henderson's approach includes asking partners "about what values and traits they want in their lawyers", then his method is a top-down approach that is the exact opposite of Moneyball.

The goal should not be to assess the data in light of what partners already think they want.

If Henderson really wants to act as Billy Beane would, he needs to assess the data and then tell partners what they should want, even if what they should want is very different than what they think they want.