Drinker Biddle & Reath's decision to reduce first-year associate starting salaries for the first six months of the year to $105,000, in favor of creating a training program, has been greeted with open arms by the law schools graduating these attorneys.
As first reported in The Legal Intelligencer Monday, in place of a larger paycheck with an instant requirement of billable hours, Drinker Biddle associates this September will be part of a training program for those six months without that pressure. The new associates can then expect their salaries to rise to "market rate" at the end of the six months. The current starting salary in Philadelphia is $145,000.
During the training period, associates will have formal training but will mainly be expected to shadow partners in more of an apprenticeship model.
While the associates may end up billing some hours, they will be billed at "significantly reduced rates or, where appropriate, written off entirely," the firm leadership said in a letter to the incoming associates.
"In some ways, we intend for your experience in your first six months to be a bit of a throwback to how lawyers 'grew up' in their firms literally only a few decades ago, before the rise of the billable hour," the letter continued.
Elaine Petrossian, assistant dean of the Office of Career Strategy and Advancement at Villanova University School of Law, said Drinker Biddle is taking ownership of its recruits from day one and setting a very "novel" and "positive" standard.
"I think it sounds like an incredibly thoughtful and reasonable approach to this very difficult conundrum of large law firms and the price structure they have established for new attorneys," she said. "I think it looks as though Drinker has taken a courageous step toward the core values of training and mentoring the firm's own attorneys."
When asked about some people's suggestions that law schools needed to have more practical training, Petrossian said schools have been focusing more on clinical programs, hands-on pro bono work and other experiential learning. There is no substitute, however, for on-the-job training, she said.
Heather Frattone, associate dean for career planning and placement at the University of Pennsylvania Law School, said Drinker Biddle's program is definitely creative. She said it is one of many options on the menu of solutions firms are trying to come up with to combat the decrease in demand for legal services while still looking for innovative ways to train young attorneys.
"All of these things will be tested in the market for the next few years," Frattone said, adding that hopefully some will rise to the perfect solution.
Drinker Biddle Chairman Alfred Putnam Jr. said in an interview last week that he thought about deferring the 34 associates who would be affected, but at the end of the day they would still be first-years, just a year later. Putnam said clients are particularly averse to paying for first-year associates, and this was a way to make them "saleable." He said he didn't think clients would automatically change their minds at the end of a deferral year.
"As a result, even for very robust firms that continue to have profitable work flowing in the door, there is a marked shortage of work for newly made lawyers," Putnam said in the letter to incoming associates. "In addition, the days of large law firms assigning (and clients paying for) 'armies' of very junior lawyers to large-scale litigation or transactions are over -- likely never to return."
The move is part of a series of program evaluations the firm underwent in response to the current economic environment.
According to a memo sent to the firm, Drinker Biddle will be reviewing its associate compensation package for 2010, will move bonus models more toward a merit-based system rather than based solely on billable hour targets, and will continue to hire lawyers out of law school, although possibly in smaller numbers.
Drinker Biddle honored its bonus program in 2008 and did not implement an across-the-board salary freeze, according to the memo. The firm had moved away from a lockstep compensation model a few years ago and, according to the memo, it has served it well during both good and bad economies.
"That being said, economic change has required us to review a number of our policies and practices to make sure that the services we provide are perceived as valuable when measured against the bills we send for those services," the memo said.
Drinker Biddle has been working with the Association of Corporate Counsel, and in conjunction with ACC's "Value Challenge," on these issues.
In his letter to incoming associates, Putnam said clients had begun to question the value of junior associates well before the current financial crisis, and some had started requesting that no first-year associates work on their matters.
Ward Bower of consulting firm Altman Weil said last week, before Drinker Biddle announced its plan, that with a push back from clients against the use and cost of first-year associates, firms are going to start changing the ways they hire and use those young attorneys.
They will start to bring in smaller class sizes and will look to bill a smaller proportion of associates' time, focusing instead on training, he said.
That means firms will have to eat those costs at the front end, but, in turn, pay the younger associates less to help "ease the pain," Bower said. When they do charge for work, the associates will most likely do so at a lower rate and they also won't be expected to bill until the second or third year, he said.
What will make the difference is the quality of the training program provided by firms. Eating the cost of first-year associates means attrition would pack a greater sting. Firms will have to start at lower salaries and then increase "pretty quickly" for those they want to keep, Bower said.
The days of many associates working on one matter are mostly over. So when large matters come up, firms will increasingly turn to outsourcing through contract attorneys and might even look to off-shore work, he said.