Funny, isn’t it, that you don’t hear many people using the phrase “$160,000 first-year associate salaries” these days? Along with its close relative, “$140 per barrel oil,” it’s a numeric mantra that enjoyed its heyday way back in that comparatively sunny era we call six months ago. Nowadays, though, no one seems to be talking much about what the next big lawyer salary bump will be. If you were decrying the mad escalation of compensation for rookie lawyers back then, you’re probably finding first-year salary deflation to be a small silver lining in the otherwise very dark clouds hanging over our heads.
Most of the talk thus far about the impact of the recession on lawyers and law firms has centered on clients: cutting back on legal work, clamping down hard on costs, and generally passing on their own fear and uncertainty to the lawyers who serve them. We’ve seen the first impact wave strike: associate layoffs at many large US and UK firms and the collapse of two California law firm stalwarts. Now comes what might just be the start of the second wave, news that global giant Eversheds has taken the remarkable step of suspending partner payouts for six months. All of it arises from the economy’s sudden jarring halt in the face of the credit market landslide and associated global recession.
But you know, the sun came up again this morning, and lawyers and law firms still need to think not just about today, but also about next year. Before the meltdown, the talent war was a hot topic in the profession, and the importance of matching the right lawyers to the right legal employers hasn’t disappeared. Things obviously have changed for both the buyers and sellers of legal talent; how much they change, and for better or for worse, depends on how much courage everyone brings to the table.
If you’re an employer, chief among the changes is that you’ve temporarily regained the upper hand in the supply vs. demand tug-of-war. Associates are sufficiently worried about job security that they’re not complaining so much about billable targets and “work-life balance.” Partners are sufficiently spooked by clients not returning their calls or paying their bills late that they’re somewhat less likely to foment trouble at the partnership committee or to find a more lucrative position at a rival firm. If layoffs continue, firms will have a deeper pool of talent to sift through, further improving their hand (though keep in mind that even in a downturn, other firms aren’t throwing their best and brightest overboard; the initial free-agent pool of lawyers is going to bear a certain resemblance to the waiver wire).
Here’s how the unwise firms are going to respond: they’ll seize this opportunity by the neck and twist it. They’ll follow the herd and slash associate ranks in order to preserve partnership profits, repeating the same mistakes they make every downturn — culling associates of a certain year of call, bemoaning it years later when times improve and they have to overpay for talent. They’ll delay start dates and force a hard line on salaries, benefits and flexibility, taking maximum advantage of their position to reassert control over those upstart associates. The results will be predictable: short-term stability, but long-term damage in terms of employee morale, recruitment reputation, and missed opportunities to make a real investment in future talent.
Here’s what the smarter firms will do: take this opportunity to have that conversation about meaningful talent development, the one they couldn’t have when the market was overheated and erratic. They’ll refine their criteria for assessing the most promising future lawyers, moving away from school reputation and class rank and towards qualities like leadership, innovation, communication and teamwork. They’ll identify the lawyers they really want to keep and impress them by making long-term commitments at the exact moment the market allows them to exploit those lawyers. They’ll set up or improve training and mentoring programs for all their lawyers. And they’ll look at ways to reformulate associate billing and compensation methods that benefit their hard-pressed clients.
How about the lawyers themselves? They’re on the shorter end of the stick, especially the recent graduates with heavy debt loads and narrowing options. The unwise ones will forsake all thought of their medium- and long-term career interests in a flight to safety; i.e., taking whatever opportunities with the most prestigious available name that seems to deliver the sturdiest shelter from the storm. They’ll sacrifice training and networking opportunities in less remunerative or seemingly less secure entities in order to perform grunt work for as long as they need to. I don’t mean to minimize the challenges faced by debtors at a time when banks are in a no-nonsense mood, but if there’s any way lawyers can avoid this approach while also staying one step ahead of the Repo Depot, they should try.
Here’s what the braver souls will do: view this turn of events as an opportunity to fashion a more appropriate career path. They’ll take work to pay their bills, of course; but they’ll also make a commitment to figuring out just what kind of career attracts them and best fits their skills and interests. They’ll investigate more flexible employment options along the lines of Axiom LLC or Virtual Law Partners. In short, they’ll resist the urge to start each day panic-stricken, but will instead view the job market with cool determination to do what’s right for them — not just today, but also in 2010, and in 2018.
When big law firms were paying lawyers ridiculous amounts of money to work in exotic locales, it was the legal marketplace equivalent of the offer you couldn’t refuse. Many new lawyers privately acknowledged that they only took these uninspiring jobs because they couldn’t turn down money like that, and fair enough. But now that the $160,000 pressure is gone, it may be helpful to recognize it for what it was: negative pressure. Lawyers’ job options are narrowing; but I think, in the long run, the result will be that their career options are actually broadening.
The funny thing about boom times is that they reduce the incentive to innovate and think differently; when your boat is a luxury yacht, why rock it? But when the economy goes badly, ironically enough, that’s exactly the right time to shake loose from old habits and try something different. The exact time when you most desire security might just be the exact time to forsake it.
Neither law firms nor lawyers (to say nothing of clients) really benefitted from the salary wars, because the lure of more and more money was like a drug they couldn’t abandon, imposing rigid thinking and discouraging talk of innovation. Now, though, both employers and employees can come back to reality. And in the long run, if they approach it right, both will be better off.