The revenue-neutral associate

Last month, while writing an article about professional development in the law, I impulsively posted the following question on LinkedIn:

Quick survey for those of you who began your careers as law firm associates: How many months and/or years did it take before you felt like a reasonably competent and confident lawyer?

Use anytime during your first five years in practice.

The answers came rolling in — more than two dozen in a couple of days. The lowest number of years offered was two, the most was ten, but the frequently cited median was five. Only one person said they never felt unready for law practice; everyone else said, essentially, “It took me years to feel like I knew what I was doing.”

Yes, small sample size and all that, but I think there’s a lot you can take from this. One takeaway is solace: If you felt overmatched and out of place during the opening months and years of your legal career, you were far from alone. Another is insight into the lawyer mindset: For all we try to project confidence in ourselves and our abilities, most of us suffered from impostor syndrome for years after our call to the Bar, and I’m sure many of us still do. A third is confirmation that, yup, law school really does do a terrible job of preparing us to be lawyers.

But what those results also affirmed for me was a strong suspicion I’ve harboured for years now — that expecting new law firm associates to perform billable work is kind of ludicrous.

There’s a widely held assumption in law firms that new associates should be billing hundreds of hours within their first months on the job, and many thousands of hours within their first two or three years. At more than a few firms, an associate’s failure to meet his or her first-year billing targets can permanently dim that lawyer’s prospects in the eyes of management or can even result in early termination. Associates learn this quickly, and drive themselves to generate work that can be added to a client bill regardless of its utility. Because most new associates possess low skill levels, their work product tends to be either (a) utterly rote and low-value, (b) riddled with errors, (c) subject to massive editing and/or discounting by partners, or (d) all of the above.

Clients, of course, figured this out years ago. Some of them indirectly advised firms of the problem when they began refusing to pay the billed hours of first- and second-year associates. Those clients without the confidence or leverage to withhold payment on first-year bills pushed for discounts or just gritted their teeth and signed off. But the message they were sending was the same: “Your least experienced people add very little to your value proposition. We don’t want to pay for their efforts. You should do something about that.”

Firms say they are doing something: investing in professional development, sending their new associates off for business training, and so forth. I’m sure many of these activities pay at least some dividends immediately, and others further down the line. But almost all these efforts share a fundamental drawback: they treat associate professional development as a part-time endeavour. Taking courses and acquiring skills is something associates do in between their “real work” of serving partners and billing hours. They’re expected to generate billable work with 90% of their time while slowly learning how to produce that work in the other 10%. It’s like having to earn a living as a cab driver while still enrolled in driver training school.

This drawback, in turn, is founded on a more serious issue: the common belief throughout law firms of all sizes that inexperienced, low-skilled lawyers should be generating revenue within weeks of their arrival in practice. Law firms that push law schools for better “practice preparation” and train their new associates intensively upon arrival are certainly trying to do right by their associates and their clients — but their good efforts nonetheless stem from an assumption that new lawyers should be “ready to bill” at the earliest opportunity.

I wonder if that’s realistic, and I wonder even more if that’s healthy. I don’t think a person can switch from being a full-time student (even an articling student) to a full-time fee-earner that quickly without experiencing some mental and emotional whiplash. By forcing new lawyers into high-target fee-earning roles this early in their careers, we’re trying to radically accelerate a development process that’s meant to take much longer — maybe as long as five or ten years.

My modest suggestion, therefore — especially modest because I suspect few firms will adopt it — is that law firms consider re-envisioning the role of the new associate, de-emphasizing the importance of billing and emphasizing instead the primacy of training and experience. What I’m suggesting is the revenue-neutral associate.

Maybe not this kind of training day, though.

For at least their first two years in the firm, possibly longer, make the development of skills, knowledge and experience the primary activity and responsibility of new lawyers. Enroll them for months-long training in process improvement, customer service, business management, and new technologies, testing them at regular intervals throughout this period to assess their progress. Send them to client meetings to watch and listen and report back on what they learned, at no cost to the client. Take all the piecemeal, intermittent professional development that law firms provide to associates in between their “real work,” and make that their real work. Take seriously the process of turning raw prospects into polished professionals, because it’s really not a part-time exercise.  (I argued almost ten years ago that we should consider the lawyer development process to be seven years of education and practice, not just three years of education).

Can firms bill their associates’ efforts during this period? Yes, but only work that has legitimate value, and only to the extent necessary to help the firm to recoup some or most of the lawyer’s costs — that is to say, his or her salary, benefits, and associated support costs. That might come to only a few hundred hours in the first year, several hundred in the second, a thousand or more in the third — although smart firms will be pricing their associate-level work on a non-hourly basis anyway, making it even easier to support this kind of role. 

The goal of a revenue-neutral associate program should be that at the end of the designated period — two to four years — the new lawyer has been rigorously and professionally educated, mentored, trained, and skilled to such an extent that he or she can deliver real (if not extraordinary) value to the firm and its clients — and that in doing so, the lawyer has undertaken enough billable work to help cover his or her training costs for that period. A lawyer developed in this fashion will be equipped to provide much more valuable and expensive services than a typical third- or fourth-year associate who has had to figure things out on the job under tremendous billing pressures — if the associate has even stuck around that long.

Would this approach be workable for a $180,000 first-year associate? No — but then again, the $180,000 associate is a market abnormality based solely on big law firms’ desire to draw the attention of the most attractive law school graduates. The reality is that no $180,000 associate, no matter how smart or hard-working, is worth his or her salary — and the billing pressure firms place on these young people to justify their inflated salary damages these assets in their formative years. A revenue-neutral associate would be paid in line with greatly reduced billing expectations — and the promise of much higher-earning potential after a few years of high-calibre development. 

There is precedent for this idea. Back in the late 2000s, firms such as Frost Brown Todd, Ford & Harrison, Drinker Biddle & Reath, Strasberger & Price and the late Howrey LLP all experimented with “apprenticeship models” by which new associates were paid less but received extensive training and mentoring. It was a good idea that unhappily arrived ahead of its time — these programs were launched during the post-crisis recession, when it was hard to persuade new graduates to turn down high starting salaries in favour of lower-paying “training opportunities.” It’s a different world now: Graduating lawyers understand that they need marketable skills and know-how in order to have sustainable legal careers. Law firms that can offer a path to that future will have a competitive recruitment advantage.

This would, obviously, be a major change in how law firms view and use their associate lawyers. But I also think it’s a necessary, and in fact an inevitable one. For decades, law firms have been getting their clients to pay the training costs of their newest and lowest-skilled workers. No other business has the gall to do this — to send customers bills for all the low-value puttering around by the firm’s least useful employees and justify it as “training.” It’s not training — it’s years of immersion in the law firm’s least valuable and interesting activities, subsidized by the client.  

But now that train is coming to a halt. You know all about the myriad game-changing substitutes that have entered the legal market over the past decade — technology that can carry out basic legal tasks, outsourced platforms of flex-time lawyers and managed legal services providers, insourcing of work by corporate law departments themselves. These alternatives have arisen precisely because the market is tired of paying law firms inflated rates for low-value work by low-skilled associates.

Clients want a less costly and more effective replacement for the labour of unskilled yet expensive junior associates, and the market has been more than happy to oblige — it is offering equal or better options for “associate work” at a superior price. These options are not going away; if anything, they’re gathering momentum and increasing sophistication. The hard truth is that the day of the billable young associate is drawing to a close anyway. 

So think about the possibilities of a “revenue-neutral” approach to associate hiring and training, and how it could change the nature of professional development in law firms for the better. Law firms will have to find a solution to their associate-lawyer challenges before too much longer. The sooner this option is considered, the sooner solutions can be tried and a new approach to law firm associate development can be found. 

=================

From now until the end of September, or while supplies last, Law Is A Buyer’s Market: Building a Client-First Law Firm is available at a 10% discountVisit the sales page for Law Is A Buyer’s Market, proceed to the checkout, and in the “Discount Code” slot, enter “SEPT”. The discount does not apply to bulk orders of 10 or more copies, for which reduced prices are already available.



6 Comments

  1. Gary Luftspring

    Although like most things there is truth in the generality the specifics are more difficult. Although I have been an outspoken critic of law school education as not preparing students for the jobs that now exist (the same might be said of our entire education system; also a generality), I think that there are numerous things that associates can productively do while they learn for which their efforts can be billed. The problem is that the value may well not be based on the hours spent. There is a difference between someone with a law school degree reviewing a document in a litigation context and someone who does not. The key is what value is placed on the task.

  2. Norm Letalik

    As you point out, the issue is what value does the associate provide? I agree that law students should be better prepared for practice when they graduate and that professional development within law firms can accelerate the learning curve of a new lawyer. What is tougher for young lawyers today is gaining legal judgment, which is best obtained by working closely with very experienced practitioners. Unfortunately, the leverage model militates against this. There are fewer opportunities today for young lawyers to work closely with experienced partners than there was 25 years ago. New assignments for young lawyers may be delivered by email or at more sophisticated firms by work allocation platforms rather than through face to face contact. Unfortunately, shadowing an experienced partner is a rare experience for new lawyers at large firms.
    Even if the apprenticeship for less pay model was made available to associates, most would likely prefer more mundane work for higher pay, simply because they are dealing with huge education debt loads and high living costs in the major legal practice centers.
    I suspect that more hands-on experience and exposure to partners can be gained at smaller shops, but the lower salaries cause many to default to larger, better paying firms.
    The high tuition charged by law schools today is just as responsible for driving an unfortunate business model as the billable hour.
    When I attended law school in Canada the late ’70s, the cost of tuition was no more than any other program. Yes, my education was massively subsidized by taxpayers, but I and the vast majority of my classmates have paid that subsidy back in multiples in the higher taxes that we have paid because our educations prepared us for higher paying jobs. Why is it no longer in the best interest of governments to provide inexpensive education so that its citizens can be trained for their best and highest use?

  3. Carina Umali

    Working in a small firm, I couldn’t agree more that investment in associates with realistic expectations on their billed work for the first few years is important. Our firm uses the apprenticeship model for associates and yes, some have left for bigger $ versus better work, better supportive environment, great value to clients. Attraction and retention is what we balance.

  4. Michael Roster

    I strongly agree with what Jordan has said, and I also strongly disagree. With a proper legal education and mentoring, junior lawyers are perfectly capable of being on the front lines, and clients can readily see their value. I say this as someone who has “been there, done that.”

    As a general counsel for several major entities, I quickly found that law firms that operated with a one-to-one ratio of partners to associates (and yes, such firm exist including in the top as well as other tiers), associates were highly productive even in their first and second years. They were handling very difficult workplace litigation, doing key drafts of securities filings, etc. for us.

    I also had the situation where a fourth year associate was overseeing our intellectual property work, a major portfolio at Stanford. The head of technology licensing called and asked how long X had been a partner at his firm and was shocked to hear that X was a fourth year associate. “He’s better than most of the partners we work with here in Silicon Valley,” she said. And by the way, he was.

    When I started practicing law in 1973, we first and second year associates were in court handling major motions in class action and other litigation, forming finance companies for some of our major clients and doing other front line work. We had obvious oversight from a partner but with the expectation that the task or matter was largely for us to handle.

    I also remember an incident when my law firm had a number of clients that were receiving negative examination reports from the regulators and our task was to prepare fact-based rebuttals. We put a group of junior associates through “cram school” so these associates could then go on site and be highly effective in their reviews of loan files. I will always remember the call I got from one of the client CEOs, similar to the call I had from our head of technology licensing at Stanford: “How long as Y been a partner at your law firm?” I was asked, and the CEO was quite surprised when I told him that Y was a second-year associate. “You know, my bankers tell me they love working with Y. And because we provide banking services to lots of lawyers, my people know that lawyers make way more than they do even as 20-year seasoned bankers. So it’s quite remarkable that you’re telling me Y is only a second-year associate. My bankers will be delighted to hear that. He’s really adding value to the project.”

    I met with a group of law firm chairs and managing partners a few years ago, told them some of these stories and then asked, “How many of you were in court or doing deals your first or second year?” They all smiled as they realized where I was headed. Their answer, as I expected, was that every one of them had been doing this type of work on the front lines.

    So then I told them, the gene pool of lawyers hasn’t changed from the time all of you started versus now. Rather, you’ve adopted a business model that is holding back your talent, and once we clients start paying for value and outcomes instead of hours, you’re going to have to go back to hiring people you think can likely make partner, go back to an associate-partner ratio of one-to-one and eventually even reduce the time to partnership.
    Finally, I teach a contracts course at the University of Southern California for second and third year law students. When I started teaching the course several years ago, I made up an audacious goal, which was to see if I could get the students to a six-month real associate level by the end of the course. To my surprise, by the end of the course most if not all were functioning at a true first- or second year lawyer level or above based on several competencies charts I had obtained from various law firms. Every year I get a call or email from one or more former students telling me that other lawyers at their firms can’t understand how they are so far ahead.

    The answer: It’s not hard at all. We just need to teach the profession of law at law schools (just as, by the way, we very effectively teach the profession of medicine in our medical schools). And then we need to treat junior associates as the real lawyers they actually are. Done right, clients will welcome the change as well. My companies certainly did.

  5. Bob Tarantino

    While strongly in favour of the general tenor of the suggestions made in this post, I just wanted to emphasize that the nature of the problem, to the extent it exists, flows from the billable hour model – modify that, and you largely eliminate the client-derived concerns about being billed for “non-productive” time. For any product or service where the cost is fixed and the quality of the deliverable controlled, the consumer presumably doesn’t much care about the level of experience or “hourly rate” of the people providing the service. If I order a meal at a restaurant, I really don’t care to know how long the sous chef has been working, or what her hourly wage is – all I need to know is how much I’m expected to pay and have reasonable confidence that the product will be satisfactory. Now, legal services aren’t widgets (or meals), so the analogy isn’t exact, but other professions (and some lawyers, though fewer) have been able to carry on business with pricing models that don’t require hourly billing and thus have the flexibility to staff mandates and train their personnel as they see fit “behind the scenes”, so to speak. I’m entirely sensitive to the fact that young lawyers need to gain experience and training, but, to state the obvious, that shouldn’t be a burden borne by the client – a result whose realization is hampered by the billable hour model.


Leave a reply