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Most managing partners are bullish about their litigation practices next year. They’re also fairly optimistic about corporate work picking up. But when it comes to hiring and associate salaries, it’s mostly a conservative bunch. Firms are also taking cautious steps in hiring. In a survey by The American Lawyer, a Recorder affiliate, 61 percent of respondents said they expect their firms’ 2005 associate classes to be either the same size or less than 5 percent larger than in 2004. (Thirty-four percent said they expect to expand by more than 5 percent.) After living through a glut of associates in the early ’90s, followed by scarcity just a few years later, firm leaders are now aware that mistakes can be made in either direction. The best approach? “Be steady and take the long view,” says Kenneth Doran, managing partner and chairman of the executive committee at Gibson, Dunn & Crutcher. His firm plans to hire about 80 new associates in 2005, roughly the same number of associates it hired for 2004. For Doran and other firm leaders, says Altman Weil Inc. consultant Ward Bower, “The question is: Do you staff for peak loads or do you staff at a minimum” and look for other ways to supplement your internal resources, such as through use of contract attorneys? Bower says he counsels most of his clients to hire a baseline number of first-year associates each year and increase that number only after the firm has recorded two consecutive years of increased workloads. So what does a firm that adheres to a minimalist hiring philosophy do when a complex litigation or large deal unexpectedly comes through the door? One strategy is to redeploy resources. When bankruptcy work began to heat up a few years ago, Weil, Gotshal & Manges’ bankruptcy practice, which makes up about 10 percent of the firm, borrowed from Weil’s larger corporate and litigation departments to staff cases. Now that bankruptcy work has leveled off, lawyers in the practice group are still busy because they’re no longer borrowing from other areas. “In general the hiring strategy is to supplement the bankruptcy practice as little as possible,” says Rod Miller, who chairs Weil’s hiring committee. Other firms are hiring more aggressively. Latham & Watkins, for instance, didn’t cut back hiring dramatically after the recession of 2001, says Tracy Edmonson, the firm’s global chair of recruiting. To support growth in the firm’s partner ranks, the firm’s 2005 associate class in the United States will be 40 percent larger than 2004′s, Edmonson says. After accounting for attrition, Latham also wants to make sure it has enough experienced associates in four to six years from now. “I don’t think we aim or desire to underhire and hope we can supplement [with external resources],” Edmonson says. “It takes a lot of man hours to monitor and administer that. We’d rather shoot for where we think the economic model is going. And we see things trending up.” Edmonson admits that in some markets a lack of corporate work in recent years has created excess capacity. That caused morale problems among associates, and the firm suffered some attrition as a result, she says. But Latham believes that turning away work can be more costly than absorbing a few too many associates. “In my view, if you find yourself overstaffed in a weak economy, the damage is less than if you find yourself understaffed in a good economy,” says David Gordon, managing partner of Latham’s New York office. In contrast, some firm leaders eschew projections based on historic cycles altogether. Thomas Cole, chairman of the executive committee at Sidley Austin Brown & Wood, says he doesn’t pay attention to macroeconomic forces. “You’ll have some who’ll say, ‘We look at what the Fed says.’ I say, ‘Be my guest,’” quips Cole. “That’s not what we do.” Cole says that Sidley uses a “ground-up” analysis, which is based on what practice heads predict their needs will be. It’s not perfect, he admits, but the firm can always make adjustments to move people into different areas. No matter what approach managing partners take, litigators may have the most job security next year. Nearly half of our survey respondents say that litigation will be their biggest source of revenue growth next year, and 56 percent say that’s where they expect the biggest growth in head count. Even though litigation has been strong for the past few years, there’s no reason to anticipate a slowdown, says Jenner & Block Managing Partner Robert Graham. Major cases can last for years, and regulators haven’t shown any sign of letting up. “We think the [Securities and Exchange Commission] stuff is going to grow � both in the short term and long term,” Graham says. Despite the anticipated uptick in workload next year, firm leaders are taking a wait-and-see approach to increases in associate compensation. As the associate hiring season got under way this fall, no great national salary war raged. Given the large jumps in associate compensation in the late ’90s, followed in short order by the economic downturn, there hasn’t been much demand for a rise in pay. In October Sullivan & Cromwell broke from the pack when it announced it would pay associates interim bonuses ranging between $10,000 and $20,000. Sullivan chairman H. Rodgin Cohen says the firm’s associates “have had to work really hard” in 2004, and the bonuses were a “way to show our appreciation.” R. Bruce McLean, chairman of Akin Gump Strauss Hauer & Feld, says he has not heard of any talk of associate salary increases. He acknowledges that the situation is “ripe” for one, given the robust business of firms, the five years that have passed since the last big increase and the continuing competition for talent. But that doesn’t necessarily mean it will happen, he says: Fear of an adverse client reaction may constrain firms. For that reason, McLean says, “All of us � are very careful talking about what’s going to happen.” Like we said: Firm leaders are bullish — but conservatively so. Andrew Longstreth is a reporter with The American Lawyer, a Recorder affiliate based in New York City.

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