Professor William Henderson, who teaches at the University of Indiana Faculty of Law and blogs at Empirical Legal Studies, has written a watershed treatise on how large law firms recruit and use associates. The ELS blog summarizes it, the ABA Journal reports on it, and Bruce MacEwen and Gerry Riskin have already flagged it as an extremely significant contribution to the ongoing evolution of the traditional law firm business model. With apologies for a brevity that glosses over some important points, here’s a summary of Are We Selling Results or Résumés?: The Underexplored Linkage between Human Resource Strategies and Firm-Specific Capital, and some ideas that flow from it.
Large US law firms are deeply tied to the “Cravath system” of hiring new lawyers, generally defined as recruiting the most outstanding law students from the top law schools and giving them the best training. This was a great idea when Cravath Swaine & Moore first developed it early last century, because it was a branding strategy: Cravath deserves your business because we hire only the best of the best. But because the firm became so successful — for a variety of reasons — other firms copied its hiring strategy, and the Cravath method, once an innovation, became narrow-minded standard operating procedure.
Today, demand for corporate legal work has skyrocketed, exhausting the talent pool to which firms — because of their adherence to the Cravath method — have restricted themselves when recruiting the associates who do this work. Accordingly, with rising demand overwhelming a fixed talent supply, the cost of new lawyers has risen as high as $160,000 a year, well above the value of the services they provide.
This has numerous negative effects. Firms either pass on these cost increases to increasingly incensed clients, or absorb them in lower partnership profits, leading elite partners to decamp for more lucrative firms. Worse, top clients order firms not to place these overpaid associates on their files, meaning young lawyers are trapped in the most dead-end work from the least interesting clients, hurting morale, exacerbating attrition and damaging the firm’s future leadership development.
The most obvious solution for the firms — increase supply by hiring outside the “elite” group — is verboten, because these firms fear a loss of prestige associated with hiring “second-rate” graduates from “second-rate” schools. (Firms have already conceded ground by digging deeper into the graduating classes of elite schools for new recruits). A recruit’s “pedigree” now holds entirely disproportionate importance in law firms’ hiring decisions, and no major firm seems prepared to risk breaking ranks to try something different.
Henderson proposes something different, a new approach premised on a groundbreaking productivity study at Bell Laboratories in the early 1990s. In a nutshell, the study found that knowledge workers’ productivity was not tied to traditional measures of excellence such as IQ and self-confidence, but to a series of work strategies such as taking initiative, sharing knowledge, and managing work commitments, most of which are trainable. Continue Reading