Most large law firms are hiring fewer first-year associates than they did a few years ago. But at one of the world's largest in-house legal departments, just the opposite is happening.
This fall, Hewlett-Packard is going where few corporate law departments have gone before: hiring fresh graduates for full-time in-house positions.
Four first-year associates will join HP in Palo Alto, Calif., in September -- one from Harvard, two from Northwestern and one from UC-Berkeley. The associates will earn $115,000 per year plus a $15,000 signing bonus and undergo a training program similar to the type installed recently at firms like Howrey and Orrick, Herrington & Sutcliffe.
The new lawyers will learn substantive law, litigation skills and business acumen, HP leaders say. But most important, they'll learn those things from the client's point of view.
"We saw an opportunity when the recession hit," said Deputy General Counsel Gabriel Buigas, who helped develop the program. "We could actually go and recruit people on an equal footing with a law firm and we could probably do a better job internally in training them."
The move is another step in the transformation of HP's legal department under General Counsel Michael Holston, who's been cutting costs and bringing more legal work in house. Holston has been shaking up the department's senior and midlevel attorney ranks since taking over from Ann Baskins in 2007. Now he's addressing the junior levels.
From the new hires' point of view, meanwhile, $115,000 at a blue-chip Silicon Valley company looks pretty good, especially when compared to being deferred at a big law firm. Or just unemployed.
A MORE STABLE ALTERNATIVE
Corporate law departments have long run summer programs to give students a taste of the in-house environment. But most don't actually recruit a class of first-years. Terry Galligan, UC-Berkeley's assistant dean of career development, said he hasn't seen a corporate law department recruit on campus since he joined the law school in 2002.
Students were very interested in HP's proposition, he said. "Given all the uncertainty in the large law firm market, it's seen as a good alternative and perhaps one that might be more stable," Galligan said.
He likens HP's training program to the apprenticeships recently created by big firms like Howrey, Orrick, Drinker Biddle & Reath and others. "It's a good place to learn the skills of a practicing lawyer without the client having to pay retail for it," Galligan said. "As a legal profession, we still like the concept of first-years and second-years learning gradually how to do things right, and this is a way to work this out."
The idea grew out of discussions Holston had with his staff last year about the tectonic shifts the recession has caused in Big Law recruiting, hiring and training. Buigas was tasked with traveling to eight campuses last fall for interviews.
Like many corporations, HP has been bringing more work in house in recent years. One example is patent preparation and prosecution, and one of the new hires will be assigned to that practice group.
Under its old model, HP would recruit fifth- to seventh-year law firm associates to its legal department. "You spend a fair bit of time getting them to transition from risk avoidance to risk management," said Buigas, who manages HP's Personal Systems Group legal team. "Mike fundamentally believes that we can better develop lawyers in house right now than we can hiring from a law firm at the more junior level."
At least one other Valley company has tried something similar. Sun Microsystems Inc. ran an informal training program for both entry-level and seasoned attorneys with no in-house experience before the company's takeover by Oracle Corp. Damien Eastwood, a former Sun in-house lawyer, said the company launched the program when the dot-com bubble had forced salaries sky-high, making it tougher to compete for experienced talent. "We found the in-house training to be more effective because they could actually apply what they learned to the business, while the law firm training was more academic," Eastwood said.
SHORTENING THE CAREER PATH
For Cesar Alvarez, the launch of HP's program couldn't have come at a better time.
Alvarez, who earned his J.D. from UC-Berkeley this spring, said his goal was to end up working at a tech company, but thought he would have to get his training at a law firm first. He was considering firms of all sizes.
As a former technology journalist in Silicon Valley, he was familiar with HP's business. The pay, which includes the opportunity for merit-based bonuses, was a pleasant surprise, he said. "I was really happy with it, and given the way the economy was and the shortage of available positions, I thought it was actually really generous." Alvarez said he knows people who are scrambling for unpaid jobs.
One reason in-house departments don't normally get into entry-level hiring is their teams tend to be small. The vast majority of companies still prefer to hire lawyers with some experience at a law firm or in government, said James Carroll, president of the San Francisco Bay Area chapter of the Association of Corporate Counsel. "The most obvious reason for this is that in-house law departments are often very busy and there is not adequate time to train new lawyers."
Size is not an issue for HP, which employs 400 lawyers around the world. Although the Holston-initiated shakeup meant some layoffs and departures, the company's legal department is actually not smaller since Holston's arrival, Buigas said. Palo Alto, where the first-year program is launching, is the company's biggest legal hub.
HP is working with some of its outside counsel to help develop the first-year "curriculum," which is divided by practice area, including IP, litigation, corporate M&A and employment law. The new hires will also learn practical skills, such as researching and writing memos, negotiating contracts, presentation skills, handling depositions and spending time in court. A special focus will be placed on developing business acumen. Each hire will have a mentor, he said.
DOUBTERS AND BELIEVERS
HP may be excited about the idea, but it's unclear whether bringing in and training first-years will catch on at other legal departments.
Silicon Valley recruiter Susan Tien, who focuses in part on in-house placements, said the quality of the training and supervision will be crucial, so that -- for example -- a junior lawyer doesn't overlook an antitrust issue. "If they're understaffed or have stretched resources, then it'll be harder to have these associates be immediately effective," Tien said.
The ACC's Carroll is more skeptical. "Corporate legal departments do not have the staff available for training young attorneys, and as every law school graduate knows, you really don't know anything of practical usefulness when you first arrive on the scene," he said. "In my view, an attorney really needs a minimum of three to four years of experience to hit the ground running when he/she joins an in-house department."
Eastwood, though, remains a believer. In-house work is growing in popularity with young lawyers, he says, who want to avoid the "burn 'em and churn 'em" world of Big Law, and for companies it makes economic sense. "I don't see how you can not do it," he said. "To make sure you get those top-quality candidates you have no choice but to develop a training program."