V25 hiring director: non-T20 hiring to decline permanently Forum

[T14_Scholly]

I don't know about you guys, but I don't take this one guy's word as gospel. He really can only speak for one firm. Don't you think the economy is affecting OCI trends more than new NALP rules right now? Do big firms really not have the resources to do more OCI in a shorter period of time such that they will alter long-established hiring practices? Are all big firms' hiring practices uniform enough that this guy's opinion applies to all of them? For all we know, the people sitting in his audience disagreed with him.

Just because this guy declared at a recruiting event that big firm hiring outside of the top 20 is going to decline doesn't mean the statistics and trends you already researched in deciding on a school should be thrown out the door.

[Rawlsian]

You're missing what the assumption is. It is not that BigLaw will hire more T20 students that 2006. It is that BigLaw will hire more T20 students than we previously thought. For instance, if BigLaw was going to hire 10% of T20 grads before this article, this may mean they will hire more like 15% of T20 grads (%'s obviously made up). This still improves prospects for midlaw for lower T1 students relative to expectations before this article.

I'm not saying biglaw will go back to 2006 hiring levels, just that relative to the hiring levels of T20 grads we expected 2 days ago, expectations are slightly higher for T20 grads, leading to slightly higher midlaw prospects for lower T1.

I admire your optimism, but there's simply nothing in the article that supports the "assumption" that biglaw hiring from T20 will go up. Just because hiring will drop disproportionately for non-T20 schools does not = hiring will go up for T14/T20. It just means that they won't suffer as much. Two very different things.

I see cardnal's and holydonkey's point. Big law hiring doesn't have to increase in the aggregate to increase the amount of grads hired from t20s. Let's say that big law hiring stays the exact same as it is now, but to save money and time (opportunity cost) on recruiting big law firms recruit and hire from t20's instead of the t20s+ non-t20s they are (were) recruiting from. This leads to the same amount of jobs being concentrated into a smaller area, which in turn leads to a higher % of grads being hired at t20's. Consequently, fewer grads from t20's will search out the jobs that previously served as their fallback; thus non-t20s will have a relatively easier time getting those mid law jobs. So basically, this trend would bifurcate big law and non-big law jobs into t20/t20+ schools.

[T14_Scholly]

People aren't going to quit sueing each other, especially businesses. If BigLaw is only focused on the large bet-the-company type cases then smaller cases will still need to be litigated. These smaller cases can still be profitable just not the type of profitable that BigLaw is interested in.

These smaller cases have to be taken by somebody.

The legal ecnomy doesn't fluctuate based on the number of people "suing each other." I'd venture a guess that about 95% of people on TLS have no interest in doing small claims, ambulance chasing, and the "suits" that you are referring to (often called shitlaw on TLS).

People on here want to do transactional work, litigation, tax law, in-house, etc. The economy is obviously going to have a major impact on these types of work (less mergers, less business, etc. ----> less legal work needed). Midlaw isn't the little firm in Akron helping Bob Smith down the corner sue for compensation in a small claim. It is similar to the work that a lot of big law firms do, only on a smaller scale (and with less attorneys).

And that really doesn't have much to do with what this thread is about anyway. Less recruiting at lower ranked schools does not mean that Biglaw if forfeiting business. It is recruiting more heavily at T20 channels. At least that is the premise.

That makes no sense that firms would do more recruiting at T20 schools. If they don't have enough associates to send out for OCI in the shorter amounts of time mandated by the NALP, most likely we would just see a drop-off at non-20 and it would stay the same in the T20. That's if we accept what this guy is saying.

[soundgardener]

[09042014]

I love how paying junior associates less is never even brought up in these discussions. That one move fixes the entire biglaw model.

The big law business model isn't broken. The failure was that demand of their service shrank, and they let go excess employees. This happens in every business model. These firms are almost as profitable this last year, as they were before. Just with less employees.

[Kobe_Teeth]

Isn't there another link circulating on TLS about how PPP in the biggest firms didn't end up going down or didn't go down nearly as far as what was first thought? And isn't that article based on data and not conjecture from some semi-random woman.

Which doesn't make this irrelevant...it's just another opinion from another lawyer....hardly a worthless article...but it is only one persons prediction...

[Renzo]

Isn't there another link circulating on TLS about how PPP in the biggest firms didn't end up going down or didn't go down nearly as far as what was first thought? And isn't that article based on data and not conjecture from some semi-random woman.

PPP at the big firms stayed flat because they collectively laid off the highest percentage of their workforce in nearly 40 years. All that shows is that when there isn't enough money to go around, the partners are taking theirs and the associates are being shown the door. That's got nothing to do with future hiring practices.

[T14_Scholly]

Isn't there another link circulating on TLS about how PPP in the biggest firms didn't end up going down or didn't go down nearly as far as what was first thought? And isn't that article based on data and not conjecture from some semi-random woman.

Which doesn't make this irrelevant...it's just another opinion from another lawyer....hardly a worthless article...but it is only one persons prediction...

No, I think we should take this seriously enough that a "*KILLS SELF*" response is appropriate.

[miamiman]

Isn't there another link circulating on TLS about how PPP in the biggest firms didn't end up going down or didn't go down nearly as far as what was first thought? And isn't that article based on data and not conjecture from some semi-random woman.

PPP at the big firms stayed flat because they collectively laid off the highest percentage of their workforce in nearly 40 years. All that shows is that when there isn't enough money to go around, the partners are taking theirs and the associates are being shown the door. That's got nothing to do with future hiring practices.

bingo.

as I said before, this article changes nothing.

[DerrickRose]

I love how paying junior associates less is never even brought up in these discussions. That one move fixes the entire biglaw model.

1) paying less means losing talent to firms that don't pay less, or to professions such as banking
2) it is significantly cheaper for a firm to hire 1 lawyer @160k for 80 hours a week then it is to hire 2 lawyers @80k for 40 hours a week
3) instead they will simply cut hiring and outsource lower level doc review work more

1. Oh yeah, I hear banking is doing great these days.
2. How about 10 lawyers @160k for 80 hours per week vs. 12 lawyers @90k for 50 hours per week? Similar structural staff costs, better per-hour productivity, more hours billed for less money.
3. If clients are complaining about paying for Yalies to work on their cases, imagine what they'll think about a bunch of non-native english speakers without law degrees doing the same stuff.

The outsourcing stuff is a red herring. The problem is that these firms are having trouble finding a cost effective way to turn a big crop of new talent into a smaller crop of future rainmakers.

It's never good business to pay significantly more than an asset is worth. That's what's happening with law school graduates. The caliber of talent coming out of America's law schools is exactly the same as it ever was. The only variable that has changed is the exorbitant starting salaries.

[Renzo]

1. Oh yeah, I hear banking is doing great these days.
2. How about 10 lawyers @160k for 80 hours per week vs. 12 lawyers @90k for 50 hours per week? Similar structural staff costs, better per-hour productivity, more hours billed for less money.
3. If clients are complaining about paying for Yalies to work on their cases, imagine what they'll think about a bunch of non-native english speakers without law degrees doing the same stuff.

The outsourcing stuff is a red herring. The problem is that these firms are having trouble finding a cost effective way to turn a big crop of new talent into a smaller crop of future rainmakers.

It's never good business to pay significantly more than an asset is worth. That's what's happening with law school graduates. The caliber of talent coming out of America's law schools is exactly the same as it ever was. The only variable that has changed is the exorbitant starting salaries.

There is no problem with the biglaw model from the perspective of the firms. If they could get attorneys to work for $90k, why would they let them work less than they do for $160k? From the point of view of a firm, an associate is a commodity. Once you bill out the cost of that associate to the firm ($160k plus bennies & bonus), every additional dollar of revenue goes into the pocket of a partner. What possible incentive is there for that partner to allow the associate to work less if the associate costs less? That would only mean the associate becomes a profitable commodity earlier in the billing cycle.

[Renzo]

I should clarify the above a little. There are firms that are experimenting with a pay-less, bill less model. But they have done that by creating two classes of associates, one in a "development" track and one in a non-partner track., and this is done day one. This means the Yalies get more training and development, less billable requirements for a short period, and better partnership prospects. But those T20 kids who are now getting biglaw jobs are going to be getting non-partner track jobs that pay way, way less and have zero possibility of advancement. It's not better for everyone involved, there are clear winners and losers.

[T14_Scholly]

I should clarify the above a little. There are firms that are experimenting with a pay-less, bill less model. But they have done that by creating two classes of associates, one in a "development" track and one in a non-partner track., and this is done day one. This means the Yalies get more training and development, less billable requirements for a short period, and better partnership prospects. But those T20 kids who are now getting biglaw jobs are going to be getting non-partner track jobs that pay way, way less and have zero possibility of advancement. It's not better for everyone involved, there are clear winners and losers.

So firms are deciding that certain associates will be barred from the partnership irrespective of performance based on their resume and interview?

[Renzo]

I should clarify the above a little. There are firms that are experimenting with a pay-less, bill less model. But they have done that by creating two classes of associates, one in a "development" track and one in a non-partner track., and this is done day one. This means the Yalies get more training and development, less billable requirements for a short period, and better partnership prospects. But those T20 kids who are now getting biglaw jobs are going to be getting non-partner track jobs that pay way, way less and have zero possibility of advancement. It's not better for everyone involved, there are clear winners and losers.

So firms are deciding that certain associates will be barred from the partnership irrespective of performance based on their resume and interview?

Yes, essentially. Firms already use contract attorneys for basically the same purpose, they are just now creating a standing pool of attorneys who are competent enough to do the shit work/doc review that 1st year associates generally can be trusted with, and giving them slightly better pay/working conditions than contract attorneys.

Except the probably aren't called "associates." You know when you get hired which caste you belong to.

[sumus romani]

You're missing what the assumption is. It is not that BigLaw will hire more T20 students that 2006. It is that BigLaw will hire more T20 students than we previously thought. For instance, if BigLaw was going to hire 10% of T20 grads before this article, this may mean they will hire more like 15% of T20 grads (%'s obviously made up). This still improves prospects for midlaw for lower T1 students relative to expectations before this article.

I'm not saying biglaw will go back to 2006 hiring levels, just that relative to the hiring levels of T20 grads we expected 2 days ago, expectations are slightly higher for T20 grads, leading to slightly higher midlaw prospects for lower T1.

I admire your optimism, but there's simply nothing in the article that supports the "assumption" that biglaw hiring from T20 will go up. Just because hiring will drop disproportionately for non-T20 schools does not = hiring will go up for T14/T20. It just means that they won't suffer as much. Two very different things.

I don't understand what the debate is over once AA clarified this line of thinking (with the exception of admiring optimism bit, since blind optimism should not be admired). The entire legal market can shrink and yet the percentage of biglaw hires come from the T20 range can still increase. Given that an increasing concentration of talent is found within the T20 as compared to years past, why is this even controversial?

[missvik218]

Obviously firms will change their hiring patterns yearly on account of USNEWS rearrangement of the T20.

^ sarcasm

Hehehe. Although .. really? Maybe I should have turned down my T20s for $$$ at a strong regional??

[swc65]

Whenever I read or hear long term predictions that are stark and dramatic, I always try to remember what the previous predictions were a few years ago. What were people saying about the economy/BigLaw five years ago? I was not around to know so I am truly curious.

Often people tend to make projections that are very biased because of the current state of things (people think everything will always be great when things are great and theat everything will always be horrible when things go wrong).

The article doesn't detail the specifics of this person's projections, but I would like to know what kind of data she is basing them on. Also, as other posters have stated, this seems to be the opinion of one person so I would not /killself as many people have written.

However, this is really shitty news! I am seriously debating taking the GMATs and going to Bschool instead.

[Kochel]

The statement about hiring outside the T20 comes from Ropes & Gray. Back in my day (late 1990's), R&G hired mostly from the T14, with a good number of BC/BU folks as well. In the last 10 years, though R&G has expanded greatly, both in headcount and geographically, and its hiring patterns similarly broadened. It's telling that a firm like R&G, with its recent history, is now signaling a smaller recruiting dragnet. And probably not good news for folks interested in comparable Biglaw firms.

[DerrickRose]

There is no problem with the biglaw model from the perspective of the firms. If they could get attorneys to work for $90k, why would they let them work less than they do for $160k? From the point of view of a firm, an associate is a commodity. Once you bill out the cost of that associate to the firm ($160k plus bennies & bonus), every additional dollar of revenue goes into the pocket of a partner. What possible incentive is there for that partner to allow the associate to work less if the associate costs less? That would only mean the associate becomes a profitable commodity earlier in the billing cycle.

You're missing the forest for the trees.

An incoming class of first year associates is an asset. An investment made by the firm. The cost of the investment is money, not just the first year salary, but bonuses, overhead costs, salary on down the line, and so on. The hoped for return on investment is twofold: first, lots and lots of billable hours of a certain level of quality, and future money-making senior associates and partners, which again requires a certain talent level.

That with a different model the firms could get more billed hours for less money is beyond doubt. I don't care what you're overhead costs are, more attorneys working 2/3 the hours for 1/2 the money is a winner. The question the firms have is whether that model will allow them to attract the talent to keep the quality of the associate work product and the future partner potential up.

But what they aren't seeing is that during the Biglaw boom they were bumping up against the law of diminishing returns. They kept trying to add more to the billable hours requirements and go further into the talent pool to hire people, and they only way they could do it was to increase first year salaries. Except for every extra hour of work you add, productiveness goes down, and for every extra person you go down in the talent pool, productiveness goes down. So you're throwing good money after bad by raising salaries in order to attract more lawyers to work longer.

They didn't get killed for this because although clients complained, they kept jacking up per hour billing rates anyway. Well now we're ITE. New paradigm.

The two features of this new legal economy that anyone in the business side of a law firm should be looking at are:
1. Clients skittish about legal costs and looking to save money.
2. An unheard-of surplus of talent, caused both by the shrinking of the market, and the ever-increasing pull of law school for talented college graduates.

You hear people talk about "We're only going to hire at T20 now", or "We're going to separate our associate classes into partner track and non-partner track", and all these things, when all they are really saying is "We have to spend less money on our junior associates, but we have no idea how to keep the talent level in the pool that we want"

They take it as an article of faith that lowering that first year salary number would scare the talent away. They know hiring better than I do, I'm just some message board punk, but I think they're insane. Throw a poll up asking whether TLS'ers would rather bill 2100 hours a year for $160k or 1500 for $90k. It won't even be close.

Now, there will come a time when you start hitting the wall in the other direction. In order to keep expanding and keep that PPP up, you'll have to hire so many people that the talent level starts dropping. At that point, the solutions will be different, but we are years away from that. Right now, Biglaw firms need to just take what they say at face value: Their junior associates aren't worth what they're being paid.

[AngryAvocado]

There is no problem with the biglaw model from the perspective of the firms. If they could get attorneys to work for $90k, why would they let them work less than they do for $160k? From the point of view of a firm, an associate is a commodity. Once you bill out the cost of that associate to the firm ($160k plus bennies & bonus), every additional dollar of revenue goes into the pocket of a partner. What possible incentive is there for that partner to allow the associate to work less if the associate costs less? That would only mean the associate becomes a profitable commodity earlier in the billing cycle.

You're missing the forest for the trees.

An incoming class of first year associates is an asset. An investment made by the firm. The cost of the investment is money, not just the first year salary, but bonuses, overhead costs, salary on down the line, and so on. The hoped for return on investment is twofold: first, lots and lots of billable hours of a certain level of quality, and future money-making senior associates and partners, which again requires a certain talent level.

That with a different model the firms could get more billed hours for less money is beyond doubt. I don't care what you're overhead costs are, more attorneys working 2/3 the hours for 1/2 the money is a winner. The question the firms have is whether that model will allow them to attract the talent to keep the quality of the associate work product and the future partner potential up.

But what they aren't seeing is that during the Biglaw boom they were bumping up against the law of diminishing returns. They kept trying to add more to the billable hours requirements and go further into the talent pool to hire people, and they only way they could do it was to increase first year salaries. Except for every extra hour of work you add, productiveness goes down, and for every extra person you go down in the talent pool, productiveness goes down. So you're throwing good money after bad by raising salaries in order to attract more lawyers to work longer.

They didn't get killed for this because although clients complained, they kept jacking up per hour billing rates anyway. Well now we're ITE. New paradigm.

The two features of this new legal economy that anyone in the business side of a law firm should be looking at are:
1. Clients skittish about legal costs and looking to save money.
2. An unheard-of surplus of talent, caused both by the shrinking of the market, and the ever-increasing pull of law school for talented college graduates.

You hear people talk about "We're only going to hire at T20 now", or "We're going to separate our associate classes into partner track and non-partner track", and all these things, when all they are really saying is "We have to spend less money on our junior associates, but we have no idea how to keep the talent level in the pool that we want"

They take it as an article of faith that lowering that first year salary number would scare the talent away. They know hiring better than I do, I'm just some message board punk, but I think they're insane. Throw a poll up asking whether TLS'ers would rather bill 2100 hours a year for $160k or 1500 for $90k. It won't even be close.

Now, there will come a time when you start hitting the wall in the other direction. In order to keep expanding and keep that PPP up, you'll have to hire so many people that the talent level starts dropping. At that point, the solutions will be different, but we are years away from that. Right now, Biglaw firms need to just take what they say at face value: Their junior associates aren't worth what they're being paid.

I think the "less money, more Associates" has some fundamental problems:

1) The "get paid less but work fewer hours" crap is a myth. It's usually just a subtle way of saying "We're going to pay you less, and we won't require you to bill as many hours, but you can bet your sweet ass many of the other Associates are still going to be putting in double/triple the required hours so you better do the same if you'd like to stick around long enough to make a dent in those loans." You think it's competitive now? Just wait until there's the same amount of work, but 50-100% more Associates to do it.

2) I think you underestimate the costs of benefits/managing/training/handling more Associates. I assure you that it's quite significant, especially when you factor in productivity lost due to partners/senior Associates having to babysit that many more rookies.

3) Just like there's diminishing marginal utility, there's also diminishing marginal talent. Top firms hire top students from top schools for a reason, and there's no reason to think that the quality of the work will be similar if firms pay significantly less but become significantly less selective.

Those are just a few off the top of my head, but suffice to say that I don't see the model changing any time soon--and probably for good reason.

Edit: Forgot to mention, I disagree with the bolded. Sure, plenty of people would say they'd rather have the 90k job now because they know they'd probably have a much better shot of landing one if that were the case, but if you ask a kid who's got a 160k gig lined up if he'd take a 40ish% salary cut to work 70% of the hours, I doubt he'd be on board. Personally, I'd much rather slave for a few years and get my loans paid off than pseudo-slave (see: point 1) for twice as many and end up in pretty much the same spot.

[Renzo]

An incoming class of first year associates is an asset. An investment made by the firm. The cost of the investment is money, not just the first year salary, but bonuses, overhead costs, salary on down the line, and so on. The hoped for return on investment is twofold: first, lots and lots of billable hours of a certain level of quality, and future money-making senior associates and partners, which again requires a certain talent level.

I disagree with a few of the things you've said, but this is the point I most strongly disagree with. Firms are generally not treating new associates as an investment. The whole business model depends on bringing in associates, depleting them of billable hours, and then showing them the door (either voluntarily or not).

But even if you are right, and associates are an investment, then presumably there are development and training costs that go into each associate. Since training isn't free, the more you train your associates, the less it makes economic sense to hire more of them and work them less. Just the opposite, in fact--if you are going to invest in your juniors, it makes far more economic sense to higher fewer, higher the best you can get (by paying a high wage), and working them as hard as you can to offset the cost of investing in their training.

[miamiman]

Lol. Associates as "investments". What is this 2006?

[DerrickRose]

1) The "get paid less but work fewer hours" crap is a myth. It's usually just a subtle way of saying "We're going to pay you less, and we won't require you to bill as many hours, but you can bet your sweet ass many of the other Associates are still going to be putting in double/triple the required hours so you better do the same if you'd like to stick around long enough to make a dent in those loans." You think it's competitive now? Just wait until there's the same amount of work, but 50-100% more Associates to do it.

Why is competition bad from the firm's perspective? Gotta cull the herd somehow.

2) I think you underestimate the costs of benefits/managing/training/handling more Associates. I assure you that it's quite significant, especially when you factor in productivity lost due to partners/senior Associates having to babysit that many more rookies.

A little bit of a strawman there. I'm not saying a firm should take on a class of 200 first-years. But firms that used to be just fine with taking 50 are all the sudden taking 10. There is room to maneuver there.

3) Just like there's diminishing marginal utility, there's also diminishing marginal talent. Top firms hire top students from top schools for a reason, and there's no reason to think that the quality of the work will be similar if firms pay significantly less but become significantly less selective.

Very true, and if you take my idea out to the nth degree, over the course of several years, you start running into problems. But ITE the talent surplus is ridiculous.

Personally, I'd much rather slave for a few years and get my loans paid off than pseudo-slave for twice as many.

Put up a poll. It won't be close.

[rando]

I dont know how you can argue that hiring is not an investment. Sure, there is the stereotype of placing associates in a dungeon to do doc review and then cannning them, but that is being increasingly outsourced and before the recession the enormous atrophy rate of biglaw associate classes was largely self selection rather than the pure consumption model that you posited.

The system is built to leverage huge amounts of able man power into partner profits all the while systematically figuring out who will take the future partner reins. Ignoring training and nurturing your workforce would not be a good business model.

Associate hiring is definitely an investment, while contract attorneys and outsourcing doc review projects is more in line with the commodity theory.

[swester]

Lol. Associates as "investments". What is this 2006?

I think "peons" was the term he was looking for.

Let's face it: law firms learned a valuable lesson coming out of the downturn - that they don't need to pay nearly as much when the field is so over-saturated with perfectly able and willing attorneys to do associate labor. A lot of the exorbitant starting salary culture was largely a result of inertia and game theory conflict between firms (i.e. afraid to let "good" associates go to another firm to make $5k or $10k more at the same amount of hours). Now that they've ALL been able to trim their ranks and cut salaries, it will take far longer for hiring numbers or starting salaries to go up, since it simply isn't necessary for the business model to work.

As long as schools are pumping out J.D.s left and right, and the transactional costs of running of firm steadily decrease due to outsourcing and technology, law firms are going to coast along quite nicely. So why would any firm, in its right mind, start hiring candidates at lower-ranked schools? Or hire anyone at all, for that matter, other than the minimum to replace those who leave from attrition?