Why Associates Leave II, or “Pay to Play”
November 22, 2006 | Filed Under Law Firm Trends
Day two of associates held hostage. And today we hit the hot-button issue of associate pay. Sort of.
The National Law Journal reported yesterday that many associates are leaving law firms. The NALP reports that 78% leave by the fifth year. To be clear on this, however, not all associates leave law firms to go in-house. Some go to other firms, or to government work. A handful may even become investment bankers.
And it’s not like one feels too sympathetic about newly minted (read: totally inexperienced) lawyers who make $150,000; but that’s another story.
Any way you slice it, there is a significant level of attrition at many large law firms. Are the “greener pastures” of in-house life (itself somewhat of a stereotype) mostly to blame? I don’t think so.
I think the single biggest factor in these departures is the law firm itself. I said yesterday these attrition stats are symptoms of a flawed business model. I still think that’s accurate, but not the whole story.
What they are really a warning sign of is a bad people model. And if you value people, then it’s an issue. If not, then focus on profits-per-partner or something.
To examine the “people model” issues at play, consider the main plot points of the kabuki drama that is life at some large law firms, seen from the perspective of a fictional partner on the hiring and comp committees:
– There is a war for talent. We must overpay. (It’s free advertising, too.)
– These ungrateful associates must work for their supper. (in my day…)
– Billing 2,150 plus hours per year is a good start. (Good time for clients who pay, to boot…)
– They want a work-life balance? (I’ll show ‘em balance this Friday at 5 pm…)
– What’s this about Fifth year associates griping that their base is only $1,000 more than the new starting salary? (I’ll put them on the professional development committee…)
– Business is flat, we can only grow revenues by jacking up our rates and yearly targets. (I guess we can’t promote as many to partner this year…)
– Why the hell are all these associates leaving? (Don’t these clients know we need workers!)
Harshly drawn to be sure. But seen through these opera glasses, making news out of the annual rite of raising starting pay is like warming up the dance band on the Titanic. Sounds good, but you don’t want to be around for the fifth encore…
But if it makes you feel better, go ahead, blame your friendly GC (who likes buying by the year rather than the hour…). She is not just hiring your associates, by the way. She’s also looking at new service alternatives, outsourcing and technological tools.
And maybe other law firms…
Why Associates Leave, or “The Grass is Always Greener”
November 21, 2006 | Filed Under Law Firm Trends
News flash from the National Law Journal: Associates are leaving law firms.
Ho-hum, another article about highly-paid, unsatisfied people.
Or so I thought until I read the great work from writer Leigh Jones. Consider these stats included from the National Association of Law Placement (which caused my jaw to hit the mousepad):
Law firm attrition has reached an all-time high, according to NALP. A staggering 78 percent of associates leave their firms by the time they are in their fifth year of practice, a 2005 NALP study showed. Some 19 percent of associates leave firms after their first year, and 40 percent leave by the time they are in their third year of practice.
In these numbers alone, there is enough material to keep a wired (only caffeine, thank you) GC going for weeks.
I won’t go on for weeks, but I will explore this issue a bit in coming days. I’ll also revist the related matter of associate pay, which I raised months ago before going on a summer walkabout.
Until then, Reporter Jones gets great comments from legal headhhunter Jon Lindsey of the New York office of Major, Lindsey & Africa. Mr. Lindsey says he has not seen this issue addressed by non-poaching agreements between law firms and clients:
“The firm might want to have a conversation that says, ‘I know you’d rather pay by the year than by the hour, but we need good workers, too,’” he said.
But Lindsey also cautions firms to tread carefully: “You don’t want to anger a client.”
What?
First, restrictions on “poaching” are typically used to protect endangered species. Just what is Mr. Lindsey inferring about law firm associates?
Second, any law firm that would whine to a client “we need good workers, too” might find themselves with one less client. Hello: Law firms hire associates laterally! And it’s interesting that Mr. Lindsey uses the term workers to refer to associates; some are charged out at $300 plus per hour, after all. (Associates of the world, unite if this label sticks, however.)
Finally, there’s the welcome caveat about “not angering a client.” Well, most GCs I know don’t get angry over a conversation. They get angry about runaway budgets, poor communications or bad results (without warning). Mundane things like that.
Until next time, ponder the future of any business model that loses over 75% of its new blood within five years.
In This Corner (Office)
November 20, 2006 | Filed Under Law Firm Trends, In the News
Enough of those pesky “The Urge to Merge” postings. It was starting to look like “Rocky” or something. Even Sly knows when to call it quits.
Anyhow…
UK’s “The Independent” has an interesting profile today of global law firm Clifford Chance and its managing partner, David Childs.
The interview is remarkable for the plain talk of Mr. Childs about the business realities of running a large international business that happens to deliver legal services.
When asked about the thorny issue of people leaving (with a push…), Mr. Childs tells it like it is:
He makes no apologies for the redundancies: “It is clearly important we keep our costs under control. We can’t simply expect to pass our costs down to clients. They are commercial in their businesses, and there is mounting pressure on us to move more mundane tasks to lower-cost locations.”
That crash you heard is the sound of GCs and CFOs falling off their chairs. Why? Many clients suspect that law firms are not just staffed for client needs. They fear they may be staffed in part for partner wants.
Two cheers for David Childs and Clifford Chance. Law firms that talk about costs and not just profits may find clients paying attention.
Now let’s turn up the volume, click here, and get back to work…
All Hail Buckeyes!
November 19, 2006 | Filed Under General
Homage must be paid. They beat the Wolverines fair and square.
Part of the reason is that they have the best fans.
Just wait until next year! (The Wired GC does not believe in rematches…)
Hello Ann Arbor, Goodbye Columbus?
November 17, 2006 | Filed Under In the News
We close out college football week at The Wired GC with what is affectionately known here in the Midwest as “The Game.” Heck, it’s apparently big enough to merit coverage by the WSJ Law Blog.
Let the best team win, and in the interest of objectivity, here’s equal time for both schools:
Update #1 11am EST: Press reports indicate former Michigan coach Bo Schembechler is in critical condition at a Detroit area hospital. Prayers go out to Coach Schembechler and his family.
Update #2 Noon EST: Glenn Edward “Bo” Schembechler (1929-2006). Our thoughts are with his family; this is how I remember him, he was an original and he will be missed:
I hope the Michigan Marching Band plays this tomorrow in the Coach’s memory.
Update #3 (18 Nov 06): Mitch Albom, who worked with Coach Bo on his autobiography, writes in today’s Free Press.
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