Month: May 2018

How To Hire And Retain Lawyers: It Does Not Need To Be So Expensive

A chief complaint from mid-size to large law firms is there aren’t enough good lawyers to hire. This comes at a time when law school applications continue to rise, and there are around a million lawyers working. It’s difficult to believe they’re aren’t enough good lawyers, given the oversupply of attorneys. Perhaps the traditional law firm hiring structure and career path does not accommodate the abundant supply of lawyers. This article will analyze traditional law firm staffing, the supply issues it raises, and offer some alternative strategies to finding more good lawyers.

The Issue

A balanced law firm requires a blend of lawyers who are workers, “cerebral” technicians and rainmakers for sustained success. Too many or too few of any category can be a disaster for a law firm and clients. How can firms recruit all three types of lawyers?

The Traditional Law Firm Hiring Model No Longer Works

Currently, law firms hire attorneys with the view that they should become owners in order to build a career with the firm. The process starts with hiring lawyers out of law school at often loss generating starting salaries caused by the high salaries. 1 Over the years, this starting class of lawyers will earn similar raises and after three years, when the attorneys become profitable, half of them have left. 2 The remaining trained lawyers work increasingly long hours for eight to eleven years when they are considered for partnership often based on their ability to generate revenue for the firm. Talented lawyers who are not rainmakers will be passed over for partnership. Some lawyers are pressured to find new employment in agonizing decisions for a firm that values their ability, but needs a revenue generator. The traditional hiring model excludes many good workers from successful careers and puts incredible training costs on an organization that constantly must locate “cream of the crop” talent.

Another characteristic of the traditional law firm hiring model is the class system. Lawyers are hired and evaluated based on a graduation date from law school. This class year system results in underpaying the best of the class to afford overpaying the middle of the class and bottom of the class. It also sets the profile for how firms often hire their lateral attorneys. Does any other organization in corporate America hire with the understanding that the year you graduate from school determines what role you will fill in that organization? A better solution might be to examine the role the associate will fill when making hiring decisions.

The Players

Many entry level and younger associates are viewed as workers on manual intensive projects and trained to be Technical Lawyers. Technical Lawyers staff document productions, document reviews, and due diligence projects. They prepare pleadings, present motions, and perform basic research and other functions. They are the “Worker Lawyers”. More experienced Worker Lawyers handle files, manage discovery and due diligence projects, draft agreements, and evaluate cases. Law firms lose money on Workers until their third to fourth year. 3

Despite the fact that newer associates are not profitable, they receive salary increases. Last year salaries increased anywhere from 20 – 40% at the largest law firms in reaction to dot.coms on the West Coast. 4 Partners at virtually every single firm in the city have expressed concern with the salaries they have to pay. 5 “It isn’t the rising star who graduated at the top of the class that hurts. It’s the B+ student who needs much more polishing.” commented one partner. That associate is grossly overpaid and as a result, most in this situation are not given a fair chance to become Technical Lawyers.

The Solution

What is the answer? One answer is to have two types of entry-level associates. One group is the top of the class and is hired at premium salaries based on law school credentials. These attorneys have a strong pedigree. Given the appropriate training, a good work ethic, and some luck, they will become lawyers who look great in Martindale Hubbell as Technicians. If they can become Rainmakers, they can be superstars in the firm. Every firm needs a supply of these attorneys.

The second group of the associates filling Worker Lawyer roles could be hired at a lower salary and offered the chance to be trained and develop at the law firm. This type of lawyer had a B or B+ average in law school, attended a second tier law school, and/or is looking for a change in career direction. These attorneys should be hired under the understanding they must work hard, be team players, and show on the job that they can learn the practical responsibilities of law in order to advance.

A lower cost group of Worker Lawyers can be hired when actual need merits additional attorneys. Contract attorneys can control firm overhead by eliminating the need to maintain a staff of Worker Lawyers and add attorneys as needed. More importantly, Worker Lawyers can be profitable immediately because of the lower salary. Firms can now afford to train and mentor lawyers based on work ethic and personality. There is also no requirement that these lawyers be entry level, only that they are willing to trade hard work and toll in the trenches, for a paycheck and possibly an opportunity to advance. In fact, this broader approach to hiring opens up larger law firms to many more candidates, suitable to become Worker Lawyers who might also be able to develop into Technical Lawyers and Rainmakers.

Some skeptical partners have reacted to portions of this strategy by pointing to the morale risk of creating a firm with different classes of lawyers. 6 Why build barriers? Law school does not create great lawyers. Law firms do. If a lawyer shows over time that they can perform, have a great attitude, and a desire to improve as an attorney, why would any firm wish to hold that attorney back as a Worker Lawyer?

Successful law firms utilize paralegals to reduce costs. In the 1970’s, the idea of bringing in non-lawyers at reduced costs was far more controversial than this idea of hiring attorneys at different salary levels. Few lawyers would question what a success the introduction of paralegals has been. In addition, what client has ever asked for a lawyer’s GPA, LSAT score or what they published on Law Review? General Counsel for local corporations overwhelmingly responded on a recent survey that they would prefer contract attorneys staff projects as Worker Lawyers to higher priced young associates. 7

In fact, some corporations are now taking a hard look at how firms staff their Worker Lawyers. Recently, a Pittsburgh based Fortune 500 company put out an RFP requesting that law firms consider contract attorneys to reduce the cost of the project. Although the RFP was sent to very reputable law firms; this unusual step of suggesting how the law firm staffed a project indicates this client did not feel traditional law firms were staffed to offer Worker Lawyers at fair hourly wages.

The successful law firms needs both Workers and Rainmakers. The current hiring model locates only the pure technician who now get a disproportionate amount of attention during the hiring process at large law firms.

Up and Out Revisited

Technical Lawyers are needed to research, draft and polish briefs, learn and evaluate complex regulatory rules, set legal strategy and solve complex problems. These lawyers become Technical Lawyers after working hard to learn complex material. But they do not always generate new business. Some law firms are now offering severance packages or terminating technically strong lawyers because they aren’t generating new business to offset starting salaries for new recruits, technology investments and opening new offices.

The “up an out” mentality is flawed. Given the prohibitively high starting salaries, it is cheaper to find or retain a trained lawyer who can fill a role, than hire a newly minted lawyer and train them. Hiring skilled lawyers with 15-20 years or more experience to fill a technical role is recognized at national firms such as Akin Gump. 8 This structure has become known as the “Diamond Structure.” These attorneys are hired laterally or tested on a contract basis to ensure their work product and fit within a firm’s culture. They can also be brought in on special projects as contract attorneys when peak periods occur to round out a firm’s practice. Law firms recognizing the value and need for this technical skill can avoid the dilution of firm profits from carrying too many technical equity partners by categorizing technical skills into several levels of competence as opposed to class years. Each level of technical competence results in higher salaries based on the enhanced value the attorney’s billable hours generate for the firm. This is fair to both the owners of the firm and the technical lawyers.

One innovative firm, Washington, DC based Dickstein, Shapiro, Morin & Oshinsky, has three levels of attorneys after the first two years and no class years. 9 There is no need to advance further than any particular technical level. Clients are told that the lawyers placed on the engagement have a certain skill set that justifies the billing rate. This approach is more efficient than an “up and out” mentality. This approach also allows for retention of technical lawyers and makes it easier to justify billing rates to clients.

Rainmakers

The last group of lawyers are the Rainmakers who bring in the business. Law does not offer much training for generating business. Law firms can help in this regard by attempting to hire more rounded lawyers instead of focusing largely on law school grades. Before salaries spiraled out of control, law firms could afford to hire and train lawyers with people skills. Look at the partnership roster of any large firm. A large proportion of the partners have good academic records that may not meet the minimum hiring requirements that law firm places on new hires. This illustrates the weak correlation between grades and partnership ability. Law firms are missing a huge number of the potential partners by betting huge salaries only on top law students.

A second element to growing Rainmakers is to make the law firm competitive from a cost standpoint. By controlling overhead and salary structures, and staffing up with interim staffing, law firms become more profitable without asking anyone to bill an additional hour. As a result, young lawyers working in these efficient firms can generate work that does not seem insignificant to an overhead laden firm. They also can compete for clients with lower billing rates if overhead is reduced.

There are some problems in overemphasizing hiring for Rainmakers throughout the organization especially when the local region is only growing 4%. 10 It is well known that more business can be created by internal cross selling than from pulling lateral partners from other firms.

Conclusion

Today law is extremely competitive. Firms which fight for talent purely on hiring the best and brightest at the highest salaries are creating very expensive firm structures which do not fulfill all the work needs of a firm. Creative approaches lend a better result and a more efficient law firm. The present slow down in the market may be a great time re-examine how to do a better job in staffing a law firm’s operation.

By Karl Schieneman, Esq. (MBA) & Jill Bertani Horner, Esq. of Legal Network. Legal Network is a full service legal placement firm headquartered in Pittsburgh, PA.