Reinventing the associate

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Last week’s post, “The decline of the associate and the rise of the law firm employee,” wasn’t just my longest Law21 title on record. It also triggered a detailed response from Toby Brown of 3 Geeks, to which I left a lengthy comment and which in turn inspired a further comment from Susan Hackett of Legal Executive Leadership. Toby converted both of these comments to posts, and I’d invite you to read all three consecutively to get the full exchange of views.

My plan this week is to follow up my original post with two more: one (today’s) that will explore more deeply the past and future role of the “law firm associate,” and the other that will study the whole issue of “lawyer training.”

I don’t really have strong feelings one way or another about Greenberg Traurig’s new “residency” program, largely because (as I noted in my original post) we don’t have nearly enough data about what the program actually involves. If it manages to strike a healthy balance among the needs of the firm, the interests of clients, and the well-being of lawyer employees, then I’m all for it. We’ll have to wait to see how it unfolds in practice. For the moment, I’m  more interested in the implications of introducing another new employment category (“residents”) for novice lawyers in law firms. It raises the whole question of what we mean by “associates,” and why they exist.

For most of law firm history, lawyers who were not equity-owning partners had only one title (“associate”). Associate status represented two things: full-time salaried employment and potential future admission to equity partnership. In theory, associates are lawyers who are learning their craft and honing their skills for the chance someday to become partners — and that does still accurately describe a small percentage of each firm’s associate class. In practice, however, most associates are short-term, leveraged assets whose purpose is to bill hours that fuel the firm’s profits, and who will leave the firm (voluntarily or otherwise) well before the brass ring of partnership comes into view. 

Evolutionary Road

Many firms have begun to explicitly acknowledge this reality and to call this larger group of associates “staff lawyers” or something similar to indicate their status. Greenberg introduced the title of “practice group attorney” at the same time as it announced its “residency” program. Other firms refer to such lawyers with the unwieldy term “non-partner-track associates.” More senior members of this group, over the past several years, have been classified as “non-equity partners,” highly experienced associates whose time for partnership consideration has come, but about whom there are doubts (on one side or the other) that admission to partnership is a good idea. And now we have the “resident,” a short-term position for newly admitted lawyers that pays less, bills less, and gets “trained” more than a normal associate role.

So, for those keeping score at home, here are some of the ways in which law firms are now describing lawyers who aren’t partners:

  • Associate
  • Resident
  • Staff Lawyer
  • Practice Group Attorney
  • Non-Partner-Track Associate
  • Non-Equity Partner

That’s a whole lot of terms meant to express one basic idea: “You’re not an equity partner.” And for every title on that list other than the first one, there’s an additional component: ”…and you’re not going to become one, either.”

Toby argues that this is no bad thing: all of a law firm’s associates should not presumptively be considered its future partners, not least because few lawyers are truly cut out for the demands and responsibilities of ownership. I think that is certainly correct. But as I mentioned above, the title of “associate” has always carried with it the potential of ascendancy to partnership. Not every associate will become a partner someday; but any associate could become one. That’s the promise and the allure that gives “associate” an extra shine. And it’s exactly this shine, I think, that law firms are trying to remove these days.

Law firms are developing an allergy to equity partners. “Under-performing” partners are being removed from firm mastheads in every jurisdiction, while partner tracks grow longer and “non-equity partner” holding pens become more crowded. Altman Weil’s “Law Firms in Transition” survey explicitly advises law firms: “Make equity partnership very difficult to achieve.” The reason is simple: the revenue pie is shrinking, and the slices are becoming thinner than many partners want. The easiest short-term solution is to remove as many place settings as possible, adding new seats only for lateral recruits who can bring more pie of their own.

So it’s very much in law firms’ interests to lower the expectations of their associate lawyers about their chances of partnership. What many firms would prefer now is new classes of lawyer employees who don’t have all the baggage of “associateship.” These firms want salaried lawyers who work competently and bill profitably, but who neither desire nor expect equity partnership offers. All the rejigging and reclassifying of lawyers who used to be called “associates,” but who increasingly are called anything but that, is in service of this outcome.

The timing for this effort is excellent, because the traditional law firm associate model no longer works very well anyway.

  • New associates cannot be paid handsomely to be trained on clients’ dime as they once were, but firms don’t want to absorb the costs of training on top of the salaries they’re paying, and they’re afraid of cutting salaries because of the potential hit to their reputations in the market.
  • Experienced associates do good work and can still be billed at high rates, but the work they would normally be doing has been grabbed by partners desperate for billings, and the opportunities to gain experience early in an associate’s career are drying up anyway.
  • Senior associates have successfully run the gauntlet and “won the tournament”, but even these few winners increasingly outnumber the available internal routes to equity ownership, leaving them in a restless state of non-equity limbo.

In short, both a driving need and an unprecedented opportunity to replace or reinvent the law firm associate have arisen — and as it happens, they’ve arisen right in the middle of an historic surplus of unemployed lawyers.

In the result, for the next several years (and maybe longer), law firms figure to employ or engage the services of lawyers on much more advantageous terms than in the past. Whether located within the four walls of the law firm or in an outsourced capacity, most lawyers who work for law firms will do so at lower rates, with less job security, on shorter time frames, with less expectation of long-term equity rewards. The idea of “graduating” from associate to partner, from employee to owner, as part of a natural process of law firm development and advancement will lose its traction in many firms. If you no longer want to develop many partners, then you don’t really need many associates.  

Law Firm Publishing

Is this good, bad, or indifferent? Insofar as firms are recognizing the growing obsolescence of the traditional associate model and are taking steps to rework it or replace it, I think it’s good: that model worked very well in the 20th century but seems a poor fit for the 21st. Agile, flexible workforces are coming to every industry, and the law will not be an exception. But describing this as a strategic shift may be giving law firms too much credit: in most cases, the driving force behind these moves is to reduce personnel costs and compress the ownership pool in order to increase partner profits on a short-term basis.

And it’s the short-termism that worries me. Law firms are meant to be multi-generational entities that grow through a natural cycle of development. You invest in new lawyers at a cost today because you confidently expect your investment to pay off years down the road; you accept short-term losses in exchange for long-term profits as part of a big-picture view of the firm. Law firms everywhere are currently gripped by a fever that drives the opposite behaviour: you accept long-term losses in exchange for short-term profits, because you won’t be around for the long term and you don’t really care what happens when it arrives. This, unfortunately, describes more senior lawyers in more law firms than I care to count, and it’s positioning these firms for a very dangerous future.

The traditional associate model needs to be replaced by something better. But it can’t be better just for law firm partners, or even just for partners and clients, and just for this year’s financial results. It has to be better for everyone, on a sustainable, sensible, long-term basis. If the associate model is replaced by a system that simply strip-mines our legal talent resources for maximum profit for the balance of this decade, leaving the cleanup and rebuild to the next generation, then as both a business and as a profession, we’re going to be in a lot of trouble. More on that in my next post.

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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3 Responses to “Reinventing the associate”

  1. David Graham

    I like this quote:
    “law firms figure to employ or engage the services of lawyers on much more advantageous terms than in the past.” In other words, supply has outstripped demand.
    I like this quote because–with a little license–I read:
    “[clients] figure to employ or engage the services of [legal service providers] on much more advantageous terms than in the past.” In other words, cost has outstripped benefit.

    With my client-side bias, I see the parallels all too clearly: First, and rightly so, the clients pressure the legal service providers (really the partners at the providers) to deliver more value (i.e. greater benefit at lower cost). Then, the partners in turn exert the same pressure on their legal service providers (the labor pool). After all, didn’t each of us learn during our firm years that senior associates and partners were really just internal clients?

    What is crystal-clear to me–and everyone else–is that BigLaw’s revenue structure is being right-sized, restructured, downsized, pick-your-favorite-euphemism. The cost architecture must then also be altered–if continued financial health (or mere survival) is a goal. Snipping secretaries and drumming out deadwood are easy actions–but with no material financial change. The biggest cost segment is salaries–so reinventing your labor supply and repricing is the biggest, best move. Perhaps, the only move. Give GT credit—they are going big in an industry where precious few have such courage.

    I am no disinterested outsider. Before I left the firms to go in-house I thought long and hard: am I ready to leave the relative safety of being part of the revenue structure to become part of the cost structure? Now, I know better. Such distinctions are without a difference. If you/your team/your firm/your department are not certain that you are delivering value to your client (the executive team, the company, the partner), then change is coming.

    -David

  2. Bob Jessup

    Like David says, we may not know whether the GT program will be a good idea in the long run, but my “strong feeling” about it is that we should give credit to folks who are trying things – isn’t that a Law21 precept, to give credit for trying?

    Also – take into account that folks entering the young lawyer pool these days also have different ideas about their work life; for many reasons, they don’t have the same expectation that they’ll work at the same place, doing the same thing for 50 years – and they really don’t have a desire to do that, either.

  3. Owen Hogarth

    I’d also have to agree with David about the future of the GT Program. But, unlike Bob I don’t think that we should be trying things just for the sake of trying.

    This often leads to situations where something is being propagated just because it’s something that’s being tested. This is something that we should watch and see how things turn out down the road.

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