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Three years ago, Phillips Lytle took a step back from its recruiting strategy and crossed off some big-name schools from its on-campus recruiting list. Good-bye Harvard. So long Yale. Farewell Georgetown. “We found that, looking at ourselves honestly, we simply were not competitive,” said Edward Bloomberg, hiring partner at the 173-attorney firm in Buffalo, N.Y. The soul searching-or the law-firm equivalent-was part of a larger effort at Phillips Lytle that has required its leaders to deal with the reality of a job market where first-year associates are making double the starting pay just a day’s drive away in New York City. Although Phillips Lytle’s challenge may be particularly acute because of its proximity to the biggest law firms in the world, it is facing a problem that many midsized law firms across the country are experiencing. Big law firms are snatching up qualified graduates as quickly as law schools can churn them out. And with those schools graduating about the same number of students each year, some observers say the tightest squeeze is on midsized firms, those with 150 to 350 attorneys that also want a steady, though smaller supply of associates each year. In Phillips Lytle’s case, it hires about five second-year summer associates every fall with the expectation that they will become first-year associates after graduation. Although the law firm is not “abandoning hope” that it can snag some students from national schools, Bloomberg said, it has redirected its recruiting budget to regional schools. Among the firm’s biggest associate feeder schools are State University of New York at Buffalo Law School, Syracuse University College of Law andAlbany Law School. The firm has “centralized” its recruiting efforts, so that Bloomberg makes the hiring decisions. He joined Phillips Lytle as a first-year associate in 1972. The firm currently pays first-year associates an $80,000 annual salary. But in light of recent increases, especially at large New York firms that have upped their first-year associate salaries to $160,000, in addition to bonuses that last year started at $30,000, Phillips Lytle is re-evaluating its pay scale to stay competitive in the midsize law firm market. “With the large money-centered firms, we can’t compete,” he said. A “supply deficiency” is forcing top law firms to dig deeper into class ranks at the top schools and to spread their recruiting reach to regional schools that they previously passed over, said Ward Bower, a consultant with Altman Weil. Consequently, those bigger shops are treading into territory formerly held by midsized and smaller firms. He estimates that law firms in the “AmLaw 200″_a list of the nation’s highest-grossing law firms compiled by The American Lawyer, a National Law Journal affiliate_now require about 10,000 new associates each year out of about 40,000 graduates coming from all of the _nation’s approximately 200 law schools combined. At that rate, the AmLaw 200 firms hire about 50% of the graduates coming from the top 100 law schools. In addition, an increase in law school tuition by some 267% since 1990, according to information compiled by the American Bar Association, has far surpassed first-year associate raises at even the highest-paying firm. The result means that a student’s option of earning a big salary at big firm to pay off debt often trumps the quality-of-life benefits that smaller firms tout. But there is good news. Although midsized firms may be outmatched by larger firms when it comes to recruiting first-year associates, they seem to be holding there own in recruiting and keeping experienced associates. In short, big law firms are training associates and smaller law firms are getting the benefit of that training. “They’re not coming here for a few years and leaving to do something else,” said John Gamble, the head of recruiting at Allen Matkins Leck Gamble Mallory & Latsis, based in Los Angeles. With 227 attorneys, Allen Matkins hires about 10 second-year summer associates each year. It also is re-evaluating its first-year salary, which is $135,000, Gamble said. The attrition factor Losing associates after training is a giant financial hit to midsized firms that often operate with smaller recruiting budgets and at lower associate-partner ratios than bigger firms, Gamble said. Bringing associates aboard once they have earned their stripes elsewhere can reduce attrition. And apparently, the market is full of candidates. Although the departure of a single associate may have a greater impact on smaller firms, associate attrition at large law firms is a huge problem. Some 78% of new attorneys leave large firms by the time they are in their fifth year of practice, according to a study by NALP, formerly the National Association for Law Placement. But enormous salaries and student loan debt continue to initially lure top graduates, many of whom do not particularly want to work at large firms, at least not for long. “If they can make $160,000 versus $90,000, it’s a lot of money to leave on the table,” said David Montoya, assistant dean for career services at University of Texas School of Law. However, once associates have some experience and have paid off a good portion of debt, they are in a better position to be “philosophical” about their careers, said Peter Johnson, principal of Law Practice Consultants in Boston. “They can make a better comparison at that point,” he said, adding that a higher probability of making partner and lower expectations of billable hours then spur a jump to smaller firms. Clausen Miller hiring partner Robert Reifenberg said his 179-attorney Chicago-based firm has “no difficulty” attracting lateral associates. He said that his firm’s practice, which has a heavy emphasis on litigation, is an attractive option for associates wanting to get into a courtroom. But even if midsized law firms are better positioned to compete for talent as an associate’s second employer, it remains important to these shops to recruit a certain number of graduates who are fresh out of school, Johnson said. In large part, it is a matter of appearance. “They want those bragging rights,” he said.

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