Why does it take so long for firms to recoup investment in juniors? Forum

[Anonymous User]

I’m a junior associate who is considering leaving biglaw for a non-legal opportunity. Not that it will affect my decision, but I’ve heard it can take 3-4 years for a firm to recouperate its investment in a junior, but how is this true? I’ve had a realization rate of over 90% this year, and, even at only $500/hr and 1800 hours this would equate to $900,000. I understand there are overhead costs, summer program investment, and that partners get a share, but I don’t see how it would take 3 years of roughly $1 million per year to hit break even.

[ruski]

I’m a junior associate who is considering leaving biglaw for a non-legal opportunity. Not that it will affect my decision, but I’ve heard it can take 3-4 years for a firm to recouperate its investment in a junior, but how is this true? I’ve had a realization rate of over 90% this year, and, even at only $500/hr and 1800 hours this would equate to $900,000. I understand there are overhead costs, summer program investment, and that partners get a share, but I don’t see how it would take 3 years of roughly $1 million per year to hit break even.

I think this refers to the point you are able to add value to the firm because of your skillset. as a junior you add no value, not in the sense of economics, but the fact that you are totally replaceable. as a midlevel or senior you began to run with workstreams and can take wholesale assignments away from higher ups with little to no supervision. this is when they recoup their training in you.

[Anonymous User]

I’m a junior associate who is considering leaving biglaw for a non-legal opportunity. Not that it will affect my decision, but I’ve heard it can take 3-4 years for a firm to recouperate its investment in a junior, but how is this true? I’ve had a realization rate of over 90% this year, and, even at only $500/hr and 1800 hours this would equate to $900,000. I understand there are overhead costs, summer program investment, and that partners get a share, but I don’t see how it would take 3 years of roughly $1 million per year to hit break even.

If you are profitable, the firm has recouped its investment in you. I have typically only heard this in the context of firms that have to write off significant amounts of junior associate time (most likely due to specific client pressures) and as a result juniors are a mixed bag in terms of profitability. In that circumstance it may be years 3-4 before the firm realizes a profit (where profit = salary/benefits + some fraction of office and infrastructure costs) on any one junior or even the junior class as a whole.

[PMan99]

With the possible exception of some first years, I’ve always thought this line, assuming it isn’t an outright lie, is just a result of biased accounting designed in part to boost the value/esteem of partners and depress that of associates.

[Anonymous User]

I’m a junior associate who is considering leaving biglaw for a non-legal opportunity. Not that it will affect my decision, but I’ve heard it can take 3-4 years for a firm to recouperate its investment in a junior, but how is this true? I’ve had a realization rate of over 90% this year, and, even at only $500/hr and 1800 hours this would equate to $900,000. I understand there are overhead costs, summer program investment, and that partners get a share, but I don’t see how it would take 3 years of roughly $1 million per year to hit break even.

What does your contemplation of leaving have to do with any of this? Are you feeling bad about it or something? The firm has made money off of you, you don’t owe it anything. Do what will make you happy.