Do We Need an Associate Bailout for Gen Y Lawyers?


Gail E. Cutter
New York Law Journal
December 22, 2008
This holiday season is looking less than merry and bright. The global credit crisis has spawned a domino effect of gloom at law firms everywhere. Lucky associates may find a half-bonus under the tree this year; others, a pink slip.

With billable hours and associate productivity plummeting, law firms are left with two unenviable options: layoffs and terminations. Some firms have undergone such dramatic contractions in specialized practice areas (structured finance and securitization, M&A, real estate) that massive layoffs were inevitable.

Others opt for "stealth" layoffs, essentially performance-based terminations, raising the bar on associate expectations in the face of the economic crisis. Of course, associates are cut every year for failing to make the grade; a bad year just ups the ante. When a lawyer doesn't see it coming, or is not given a chance to address the weakness, that's when concerns arise -- but that's an issue for another column.

Whether associates are displaced on a "no fault" basis or for cause, this recession is derailing the professional progress of a startling number of highly credentialed Gen Y lawyers. And it's just getting started. Is there any way to launch an Associate Bailout? One that, like its financial counterpart, will benefit the system -- the clients and firms -- as much as it helps the associates?

Necessity is the mother of invention, and this economic crisis has inspired some creative and controversial moves by law firm leaders. In a law firm first, DLA Piper, the world's largest law firm, asked income partners to contribute capital to the firm. Those partners will now have "skin in the game" and a greater stake, literally and figuratively, in the firm's future. Bryan Cave has postponed raises and bonuses to attorneys and staff for three months, staying off the dreaded layoff list for now.

SECONDMENTS AT PRO BONO AGENCIES OR WITH CLIENTS

President-elect Barack Obama has promised sweeping change in the coming years, and a greater dedication to public service. Perhaps our august and hide-bound profession can dare to be more inspired and innovative in devising ways to meets its community duties and occupy its valued associates. Highly valued associates who are now in under-utilized practice areas could be offered pro bono secondments. The firm thus fulfills its commitment to the public good, professional development and the associate in one fell swoop.

Working with the firm's pro bono director, associates with low hours but otherwise in excellent standing could be matched with the firm's long-standing pro bono clients for a one-year fellowship. Unlike the three- or six-month public interest stints some firms already have in place, where associate are kept at law firm salaries, the salary would be commensurate with an attorney at the public interest organization. For an associate toying with a career in the public sector, this would serve as an ideal trial.

Ongoing meetings with firm mentors would maintain connections with the firm. Evaluations by their supervisors in the public interest organization would provide a paper trail on the associate's performance upon return to the firm. While it does require ongoing management, it beats the loss of human capital and good will caused by layoffs. When work picks up, the associates, well-trained and loyal, are ready to return to the fold. Even if only half of them return, the savings in training and recruitment is significant. The benefit to public interest groups hard hit by budget cuts? Priceless.

Firms looking for additional cost savings could slash budgets for on-campus recruiting. Forget the fancy parties and expensive brochures. In this time of cost-cutting, a generous gift (tax-deductible!) to a nonprofit or the school's scholarship fund would be much more meaningful than more logoed coffee mugs or water bottles.

While it doesn't offer the same tax-deductible warm feelings, secondments to corporate clients are also a possibility. Such an option can enhance client relationships during their hard times. A mid-level associate placed in a year-long secondment, brokered at a flat annual rate rather than hourly fees will create a huge cost savings to the client and generate loyalty to the firm.

Associates are typically thrilled with the opportunity to experience in-house work -- particularly if they have the security of returning to the firm. The associate will gain greater substantive knowledge of her field, as well as improved skills in negotiation, drafting, client relations and time management. She is apt to have a better understanding of business decisions and the pressures that inure to both counsel and business executives on the client side, particularly during a downturn, a lesson every associate can appreciate.

LOSE THE LOCK STEP

The legal profession has long been criticized for its antiquated system of billing by the 1/6 of an hour and paying associates in lockstep. Much of that criticism has come from lawyers themselves, and the system, albeit slowly, is starting to change. Most firms have eliminated the "up or out" practice, which jettisons every senior associate passed over for partnership.

An associate may be at the peak of knowledge, skill and productivity, but if it is an off year for his practice, he's out of luck. So is the client, who loses a valued worker with extensive historic knowledge of her company and its needs, someone she has come to know and trust. The client must start at square one, investing in training another associate who may similarly be pushed from the firm's ranks. This scenario is particularly common in less profitable practice areas, where partnership is harder to attain.

In almost two decades of counseling lawyers, my discovery has been that the vast majority of associates do not covet partnership, and the vast majority of partners do not believe it. First, of course, there are the Herculean sacrifices in making the three-year push, and the lotto-winning, lightning-strike difficulty of making it. Most associates are reticent to make a run for it, when the downsides of large-firm partnership are so readily apparent to them: longer hours, no work-life balance, rainmaking responsibilities, committee work, extraordinary pressure, little likelihood of making equity partner, and ultimately, the possibility of being pushed out. The prize for the pie-eating contest: more pie.

Many smart, high-achieving associates would welcome other options, if only they were available. In-house legal departments are not the right opportunity for everyone leaving law firms, whether due to personality, practice area or sheer numbers. Legal departments are shedding overhead in this economy as readily as law firms are.

Creative law firms will clean up: They will see this talent pool as the bonanza of human capital for what it is. These associates are not slackers, but capable, intelligent lawyers seeking work-life balance -- professionals who can and do give 100 percent when they are on the job, but who don't want to be on the job 100 percent of the time.

The titles of senior associate, counsel and all the rest need to be re-thought with an eye toward offering options, and respect, to professionals who seek practice opportunities but not partnerships.

Perhaps the economic conditions are grave enough, and the stakes are high enough, to finally find a solution to this issue of generational differences.

Gail E. Cutter, the senior managing director of SJL Attorney Search, can be reached at gail@sjlsearch.com.