The decline of the associate and the rise of the law firm employee

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Earlier this month, Greenberg Traurig became the latest large US firm to take a new approach to its legal talent. Rather than firing secretaries or de-equitizing partners, however, as is all the rage elsewhere, Greenberg proposed something different and potentially groundbreaking: the introduction of a “residency” program for new associates. Here’s how the Am Law Daily describes it:

Join the firm as an associate, but only if you’re willing to spend a third of your time training rather than churning out billable work. The catch? Those who sign on will be paid considerably less than the typical starting associate, will bill at a much lower hourly rate—and may wind up only sticking with the firm for a year.

The offer is the basis of what Greenberg is billing as a new residency program that is being rolled out across its 29 U.S. offices. Firm leaders envision the program as a way of recruiting talented associates it wouldn’t have hired during the traditional on-campus interview process for one reason or another. It will also allow the firm to assign junior lawyers to client matters without billing their work at the usual cringe-inducing hourly rates.

Greenberg is simultaneously creating a new non-shareholder-track position, practice group attorney, that is akin to similar jobs created by Kilpatrick Townsend & Stockton; Orrick, Herrington & Sutcliffe; and others that have moved beyond the up-or-out structure typically employed by large law firms. …

[C]lients have been eager to use the junior lawyers, who cost less than a typical associate, and have allowed them to sit in on meetings and calls—at no cost to the client—as part of their training. The rest of the training, MacCullough says, comes via online courses with the Practising Law Institute, the professional development courses the firm offers all associates, and extra “hands-on learning” with partners without concern about billing for the time.

This initiative emerged from Greenberg Traurig’s Fort Lauderdale office, where new graduates are offered the chance to be “fellows” who resemble associates, but are paid less, bill less, and spend more time training. This innovation has now spread firm-wide. “Once the initial one-year period ends,” the Am Law Daily reports, “residents will either become a regular-track associate, take on the new practice group attorney title, or leave the firm.” (This reminds me of the old college football coach’s admonition against the passing game: “Only three things can happen when you throw the football, and two of them are bad.”) 

Evolutionary Road

Response to Greenberg’s program has been generally positive, and I can understand why. Anything that offers even partial employment opportunities to new law graduates these days has to be considered a good thing. The “residency” approach contains echoes of the “apprenticeship” programs that firms like Drinker Biddle, Strasburger, Ford & Harrison, Frost Brown Todd, and Howrey pioneered about 3-4 years ago and that I thought might herald a whole new approach to associate training. (They haven’t.) And Greenberg’s residents bear a close resemblance to Canada’s articling students, whose one-year apprenticeship in a law firm is a widely admired (although increasingly flawed) way to introduce new lawyers to practice.

Yet something still seems off. By crafting the position of “practice group attorney,” Greenberg has joined many firms in creating a class of associates who aren’t going to be partners; by introducing “residents,” Greenberg appears to be creating a class of lawyers who, most likely, aren’t even going to be associates. What’s not clear is why either of these new groups of lawyers are inside the firm at all. If what you’re looking for are low-cost, non-essential generators of legal work, why not talk to Axiom or The Posse List or any LPO with offices in Mumbai, Manila, or Minneapolis? Why introduce and maintain yet another costly group of lawyers who aren’t here for the long term?

One possible reason is that the whole point of the residents is to eventually replace the associates altogether. Lower salaries? Essential for continued partner profitability, and more reflective of actual associate value. Lower billing rates? Clients aren’t paying the higher rates anyway, so you might as well find a rate that they will pay. Lower billing targets? There isn’t enough work available for partners to make their targets, let alone new lawyers. As the article makes clear, these are really the only differences between a “resident” and an “associate.” Which of these two classes do you think the firm will want to sustain?

The law firm associate market is way overdue for a serious compensation correction: $160,000 starting salaries were and are ridiculous, relative to both the availability and value of new associates. New lawyers can’t and shouldn’t be expected to bill 1,900 legitimate hours a year, and a system that required them to do so was impractical and unwise at best, improper and unethical at worst. Something had to replace that system, and this may be the replacement.

Greenberg’s model is obviously still in its formative stages, and there’s not much point in exploring it further with such limited data. But it’s possible that it might be part of the next stage, maybe the final stage, in the decline of the law firm associate and the rise of the lawyer employee.

Go back several decades to the emergence of the Cravath model, which originally viewed a small class of salaried associates as future partners who could nonetheless generate profits through leveraged work along the way. The distortion of that model, over time, led to much larger and more profitable associate classes, of which only a few members would make partner — but all the same, the firm and its clients still treated those associates as professionals with potential long-term value. We’re now on the verge of entire associate classes whose only purpose and value is to generate leveraged work. They are not meant to be future partners: they are temporary employees meant to sustain the practices of current partners for as long as those partners need them. 

Law Firm Publishing

You might object that that’s not a good long-term stratagem. But a lot of law firms these days aren’t being managed for the long term, and there’s nothing more long-term than associate development: the investment of serious time and money in hopes of producing future partners. Many firms are employing fewer new lawyers than ever, and they have little incentive to invest heavily in the long-term development of the ones they do. They don’t need more equity partners — many firms are busily culling their own ranks — and if they do, they’ll get experienced, plug-and-play veterans with books of business via lateral acquisitions in the free-agent market. (Where laterally trained partners will come from in future, if firms no longer commit to investing in new classes of associates today, is not firms’ leading concern at the moment.)

It’s therefore possible that the era of the “law firm associate” — the partner in training — is now coming to an end, as I suggested back in 2009. Replacing it might be the era of the “lawyer employee” — here today, gone tomorrow, with a completely different set of expectations on each side about the nature of the relationship. It’s true that at several firms, the transition I mentioned above has long since taken place: most associates are essentially revenue generators. But the title of “associate” has a lengthy history and carries powerful expectations: “associateship” has been the precursor to “partnership,” just as adolescence has been the precursor to adulthood. Take away the title of “associate” and replace it with something smaller and poorer — “intern,” “resident,” “employee” — and the impact is profound.

This must surely be an attractive route for many law firms eager to reduce salary costs, minimize training expenses, and boost partner profits. But there’s a risk to the law firm that trades associates for employees straight-up, that diverts resources from internal development to external acquisition: it might permanently lose its capacity to develop any lawyers at all.

The ability to onboard a new lawyer, bring her into the firm’s cultural and structural orbit, develop her capacity to produce higher value over the course of time — this is an organizational skill, no different than any other a firm might possess. A firm that ceases to take internal development seriously will see that skill atrophy: it will become a muscle rarely exercised, with predictable results. PD professionals may leave the firm for better environments elsewhere; partners may lose whatever remaining interest they might have had in bringing along new lawyers; potential recruits may regard the firm as a dead end. These outcomes might not matter to the firm today. I guarantee that they’ll matter down the road.

Once a law firm switches off its lawyer development engine, it’s not easy to rev it back up again — and if you intend for your firm to be operating more than five years from now, it’s an engine you will desperately need to work at some point. That’s the tradeoff, whether they realize it or not, that some law firms now seem poised to make.

There’s another risk to this development, by the way — a threat to the continuing development of the legal profession itself. But that’s for another post.

[Here’s the next instalment in this series: “Reinventing the associate.”]

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.  

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9 Responses to “The decline of the associate and the rise of the law firm employee”

  1. The Last Honest Lawyer

    Let me see if I get this. Hire a first year “resident” who wouldn’t have been hired otherwise (what happened to “our rates are high b/c we are the best of the best). Pay them less so you can bill them out for less (but still above market for commodity work) and actually give them significant training. At the end of the year, those that worked out now become “real associates,” who are presumably trained. Which leaves us with all the other “real” associates who were never trained, but have been churning away as faceless cogs in the leveraged pyramid billing machine.

    The BigLaw Circus drunkenly marches on thanks to the wonderful generosity of naive clients. How about just passing on Greenberg’s new serf program and instead using a 21st Century firm that offers upfront value-based pricing, who by-the-way, will be using well-trained and right-priced providers for the majority of grunt work.

  2. Daniel van Binsbergen

    I can see that this new type of association could form a useful layer from a client’s perspective. Currently clients often pay top dollar associate rates for essentially running logistics (e.g. passing on a foreign law governed question to a ‘befriended’ local counsel). This is odd, although most clients seem to not yet realise this.

    In the future I expect clients will more and more demand that the traditionally high associate rates are reserved for legal work that requires serious expertise, with logistics and simple legal work to be picked up by lower billed lawyers (e.g. paralegals). I also wouldn’t be surprised if third party (non law firms) will start offering e.g. local counsel matching services for very low fixed fees. This could also be attractive from a client’s point of view, as they are more likely to get the best value firms abroad (law firms will likely only refer to ‘ best friends’, not necessarily best value).

  3. Dustin Cole

    Jordan, what you are positing is simply the end of the “guild” model, where the chosen few get to elect others into the mysteries of the guild. Your new model is a standard business model where employees who are valued can move up into “management,” and the most valuable are then offered shares in the business. Look at senior management in any company – all have stocks and stock options. Doesn’t that equate to “partner” in the corporate sense?
    The profession is still saddled with the guild mentality. Few firms are courageous enough to think out of the box – and by that I mean to think like most other businesses.

  4. Virginia Raymond

    Analogous to academia….universities are hiring more lecturers and adjuncts who are not, and never will be, on the “tenure track.”

  5. Andrew

    One nit, pretty sure Axiom does not take on assignments from law firms.

  6. Jordan Furlong

    This post has galvanized a lot of commentary in a few short days. If you’re interested in this topic, you should also check out:

    – Toby Brown’s response at 3 Geeks and a Law Blog: http://www.geeklawblog.com/2013/10/sounds-of-echo-chamber.html .

    – I left a lengthy comment on that post, which I’ll turn into a separate Law21 post next week; but in the interim, Toby has converted it into a post at 3 Geeks: http://www.geeklawblog.com/2013/10/jordan-responds-to-tobys-challenge.html

    – Susan Hackett of Legal Executive Leadership has left a very interesting comment on that previous post that’s definitely worth reading.

    – Adam Ziegler of Mootus has just chimed in with a post written from the associate’s perspective: http://blog.mootus.com/residency-program-for-new-lawyers-one-and-done/

    I’ll have two more posts on this subject here at Law21 next week. Thanks for reading!

  7. John Grimley

    It can be argued that BigLaw revenue decreases are the cause of the decline in firms ability to retain a large pool of associates. It can also be argued that the decline in BigLaw revenue is a result of lack of nimble revenue generation. Hence, it appears the BigLaw business model, assuming the facts as they are laid out here – has failed. Not just failed to maintain employment levels in the associate ranks – but also secretarial – and Of Counsel and Partner – and IT ranks as well.

    In reading your essay, I would suggest the following: Replace ‘switches off its lawyer development engine” with “Ceases to adopt an adequate business development engine” – and continue with your logic: “and if you intend for your firm to be operating more than five years from now, it’s an engine you will desperately need to work at some point.”

    This essay represents another exemplary exposition of the continued unraveling of a model that could work. Sophisticated legal advisors in large law firms providing sophisticated services to a client base that needs the assistance – and in the process hires a large staff associates, support personel, et al, Well, since adequate business development never really sees the light of day in BigLaw (the argument for what is good BD is too long to make here – but it would involve something no firm I am aware of is doing, including becoming economic actors by creating transaction from internal market research and then efficient and effective BD follow up and follow through to close new representative matters around those newly created transactions (to name one of many examples)) – the unraveling you describe is going to continue. Swiss Vereins could by their sheer weight become global referral machines (I emphasize the pural). But then internal efficiencies come into play – and the BigLaw efforts to create them (as in the instant example) – fall short of what may likely be their real competitors: globally connected virtual solopreneurs – brought together on deals where global legal brokers put those teams together. And for rarefied advisory work like sovereign representation? Hyper-mini boutiques also in some cases brought into work by global legal brokers (akin to sports agents – and not in existence at present to my knowledge) – where the BigLaw business generation model was always just a Sopwith Camel at best – technology and business practices of top revenue generating companies continue their march of capturing more and more of BigLaw’s market share – to the point where it’s whittled down to a team of forensic accountants performing audits in cavernous and expensive urban office buildings to divest shell partnerships of the last remaining assets of a once dominant and might have still been dominant business model that refused to change in time/or ever – which may in the end be a philosophical question we’re left with in the end.

  8. Josef Weinberg

    Seems like US firms are finally coming around to the idea of a residency period for Lawyers which has been used elsewhere for a long time. In the UK the two year training contract period after the Bar Exams is seen as a compulsory component before being granted a practicing license.

  9. Talent

    Quit hiring so many lawyers — there that’s the answer. Not some half ass work program that will absolutely not draw in any talent. No one (worth a damn) is going to law school to take a half ass job “training” at a lower rate. This is yet another tactic by big firm partners that hold all the marbles to cut cost. If you want half ass candidates coming in and taking your half ass pay for your half ass training because you cant find the time to train lawyers, which is part of the code and your job, then maybe just stop hiring for a while. Wait for the market to kick back, and don’t hire so many associates, only hire highly capable candidates that will get it within about the end of their first year. Also, here is a novel idea. Maybe hire those candidates when they are in law school and train them then. Guess what, when they come out they will be useful instead of doc review monkeys, which my nephew in 3rd grade could handle. Why does the legal industry feel so special. Everyone else trains their employees and pays them at the same time?

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