Shocking Truth of Law Firm Recruitment
Yesterday I was working along in my day and took a quick peek at some of the early tweets coming out of the LMA conference in Denver when this one by @melaniegreen caught my eye. (OK actually it also made me do a double take)
It costs about $300-400K to train each recruit & then we lose 85% of them by their 6th year. No other biz would accept. #LMA10
My immediate reaction, which I also tweeted in reply to her, is doesn’t that show that law schools are failing?
I would think it has to prove that. Seriously, how many professions can get away with hiring people who take years, and that kind of money, before they get up to speed and bring value to their employers? I can’t really think of many, can you? In my own IT world, I can’t see hiring a network engineer and then sending them to training for a couple of years before they get to actually take over the network administration, or hiring a production worker and waiting a few years before putting them on the production line. If their education didn’t train them to step right into the job, within reason, what would be the point of said education? I could hire anyone off the street and teach them to do the job over the course of a couple of years!
OK, so given, law schools are not doing a very good job producing graduates who are actually qualified to be a productive part of a firm right away. Why do firms continue to hire them? Why is the law firm recruitment process still exactly the same as it’s been for the last 50 (?) years? Here’s an idea, and if anyone actually does this, you owe me some royalties. 🙂
Instead of bringing in a new class of associates every year, fresh from law school, I’m not going to hire anyone right out of law school. I’ll wait and hire my new associates from the 85% that left your firm after you’ve already spent some of that time and money training them, and offer them something different than whatever it was that pushed them away from your firm’s structure in the first place.
Maybe it’s time law firms either demanded more from law schools, or moved to eliminate the monopoly on a law degree as a requirement to practice some types of law. (Like that will ever happen!) Again, given a couple of years and a few hundred grand, surely you can teach someone to practice certain types of law, and pay them a whole lot less since they won’t be paying off student loans. Let the market speak!
Of course, I say all of this knowing that I’m not a lawyer. Maybe I’ve got it all wrong. If so, feel free to disagree!
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Part of this is true; it costs a lot to train associates, and many of them leave. But it’s not true that they’re unproductive, or that the net cost was 400k. In the bubble, even a first-year associate was expected to bill three times his or her compensation. In the three years of “training” @$160K, the lawyer would have cost $480k. But they would have been expected to bill 6,000 hours at about $250 — or $1.5mil. (The current “Laffey Matrix” says a reasonable cost for a lawyer with 1-3 years of experience is $285 in Washington, D.C.).
You will still hear some lawyers say their internal accounting showed that these associates weren’t profitable, but that’s largely a management failure. They typically averaged out everyone’s overhead, and charged that against junior associates, making them look like money losers. For example, a partner and an associate would share a secretary, and accounting would charge half of that “overhead” to the associate, even though everyone knows the associate got far less of the secretary than the partner. That makes partners look more profitable, and made a nice graph for the compensation committee. The question is how rational business could take a product with a 2-300% margin before overhead and still lose money on it.
As for lateral hiring, a lot of firms were doing that, and are doing that. That’s why anyone entering the market as an inexperienced attorney right now can’t get hired. Clients aren’t letting you bill 300% margins on young lawyers, which is what the firms think they need. So they only hire lawyers with enough experience to allow them to bill higher rates.
This is not to say your underlying premise is wrong; law school is horrible at teaching actual skills, and the future belongs to lawyers who can get them. But at the time, the law schools were giving firms a valuable commodity: a piece of parchment that let unskilled attorneys bill $250 an hour.
Thanks for the input Jon. I realize that associates aren’t just a $ losing proposition, but I assume when partners refer to it taking years to get them going, it’s in terms of bringing in their own work, as opposed to billing hours for clients the firm already has. As a client, do I want to pay @285/hour for an associate to do work that the partner could do much quicker, or that could really be done by a non-lawyer with the proper oversight at a much cheaper rate? As clients push back on that, the whole system sort of falls apart, don’t you think?