TMG's Take...on The New Associate Paradigm
A perspective on legal management issues from The McCormick Group.

Recently, McGuire Woods became the first AmLaw 100 firm to announce a rollback of starting salaries of 10 percent to $144,000. That announcement was followed by a number of other firms who, in some form or another, did the same thing. At around the same time, Skadden Arps announced that it would pay new law graduates $80,000 to delay their start date for up to a year. Again, a number of other firms, in some form or another, quickly followed suit.

Those events presage some important changes in the way that law firms are handling talent management---some fairly obvious, others somewhat more subtle. Following are some observations on what may happen in the upcoming months and perhaps years:

• The Association of Corporate Counsel’s Value Challenge is beginning to take hold. It’s interesting how a difficult economy can accomplish more, from a client perspective, than years of jawboning about the lack of value produced by first-year associates.
  After past recessions, observers bemoaned “the lost generation” of certain types of lawyers and the mad scramble that ensues after the economy picks up (For example, real estate lawyers graduating law school in the early1990s). This lost generation will be real, not just a fanciful exaggeration. So when you start calling recruiters looking for third-years in 2012, remember that virtually no one started working in a law firm in 2009.
• Expect much smaller first-year classes, even when we get back to a regular schedule. At the very top end, there still will be competition for the so-called “best and the brightest.” But more and more firms will follow the lead of some market players who for the last number of years have been concentrating more on the lateral market, and less on their vaunted summer programs.
• Apprenticeship programs will begin to take hold in firms. Again, given the inability to bill out first-year associates at standard rates, there will be more firms who will pay recent law graduates a fraction of what they have been historically paying first-year associates, and put them through a real “boot camp” to expose them to what goes on in the practice of law. (Just this week, Drinker Biddle announced a program of this sort.) Those that perform at a high-level can get on the partnership track right at the point they become valuable to both the law firms and their clients.
• Finally, and this is perhaps an unanticipated consequence of the recent economic crisis, the stratification of firms is likely to increase, not decrease. Despite some recent speculation from the American Lawyer, the big Wall Street firms, are unlikely to follow suit in terms of reducing associate salaries on a permanent basis. Those firms will continue to pay what it takes to get the best and the brightest. So, in an ironic twist of fate, many of the firms hit hardest by the recent economic wave will end up separating themselves from the rest of the pack, at least with regard to bet-the-company work. At the other end of the spectrum, firms like McGuire Woods and Nixon Peabody have decided to stop competing on the basis of quality at any price, but are instead emphasizing overall value.

TMG's Take is a regular e-mail advisory produced by The McCormick Group. The company's Law & Government Affairs and Law Firm Services groups combine the expertise of more than 15 Consultants to help law firms fulfill all of their lawyer and administrative recruiting needs. TMG's Take covers topics across the spectrum of law firm management, including associate and partner compensation, growth strategies, marketing and business development, operations and facilities management, finance and accounting, professional development, and technology. Please direct all inquiries to Steve Nelson, Managing Principal at (703) 841-1700 or snelson@tmg-dc.com.