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Congratulations! You’ve landed a job as a summer associate at a law firm that pays its entry-level lawyers a salary that would have been beyond the wildest dreams of any law student a couple of years ago. That’s the good news — and the bad news. If current trends continue, by the end of 2004 some of the members of the law school class of 2002 can expect to be earning over $200,000. Many others, however, will find themselves fired or laid off, and forced to compete for jobs that pay no more than about one-third of their large firm salaries. If you find that statement shocking, I’m not surprised. After all, just last fall these firms were wining and dining you, sending you baskets of goodies at exam time, and inundating you with phone calls in an effort to lure you into their summer programs. And this author does not expect that you will find your summer associate experience this year any less enjoyable than that of summer associates during the high-flying years of the late ’90s. There may be a slightly greater risk of not receiving a permanent offer; and the number of “soft offers” ( i.e., “You can tell other potential employers that we gave you an offer, but we strongly recommend that you find another place to begin work after you graduate”) and offers with “strings attached” (i.e., not a general offer, but rather, valid only for a particular practice group) will almost certainly increase. But, generally speaking, the face of the typical large New York law firm that will be presented to summer associates this year will be a smiling one. Beneath the surface, however, trouble is brewing. Never has this author seen the attitude of so many large firm partners shift so dramatically as it has during the past six months, from a focus on retention to a focus on outplacement. As one hiring partner at a major New York firm recently said, “I hope our summer associates have a good experience, but not TOO good. It really wouldn’t make many of the partners lose much sleep if a whole bunch of the summer folks decided not to come back after graduation.” What has happened to trigger this change in attitude? And what can you do this summer to enhance your chances of being among the “survivors” of the class of 2002? UNDERSTAND THE ECONOMICS First, it is important to understand the economic background of the recent salary increases. Beginning in the mid-’90s, business boomed at the large law firms and, at the same time, lucrative opportunities for midlevel associates, particularly those with corporate transactional experience, resulted in record-breaking levels of voluntary attrition from many of those firms. This phenomenon was further exacerbated by the dot-com “gold rush” of the late ’90s. As increasingly large numbers of associates left their firms for what they perceived to be greener pastures elsewhere, those firms began hiring larger and larger classes of entry-level associates. Last year, in a desperate attempt to hold onto their well-trained associates, virtually all of the large law firms announced enormous salary increases, just in time for the tech market crash and, with it, the disappearance of most of the high-paying job opportunities in e-commerce and investment banks that had previously attracted so many large-firm lawyers. Because the gap in compensation between jobs in large law firms and jobs for lawyers in almost any other practice setting has now widened dramatically, it is reasonable to expect that the mass exodus of associates from the large firms will slow to a trickle. If voluntary attrition declines dramatically, firms will be forced to choose between accepting a decline in profits per partner or laying off associates who are underutilized because of the steep decline in activity in highly leveraged — and highly lucrative — practice areas, such as initial public offerings and mergers and acquisitions (more about leverage later on.) Given that the market is very efficient with respect to rainmaking partners, firms cannot risk paying these partners less money than they could make if they took their practices elsewhere. For many firms, therefore, associate layoffs may soon be viewed as a necessary measure to insure economic survival. THE CLIENTS MUST BE HAPPY Second, never lose sight of the fact that, in order to earn money, a law firm must keep its clients happy, or else the clients will seek representation elsewhere. Large-firm clients typically are very savvy consumers of legal services — many of them have legal departments largely comprised of former large-firm lawyers — and they have exceedingly high expectations with respect to timeliness, accuracy and cost-effectiveness of work performed by their outside counsel (i.e., you). It is an understatement to say that many of them are not particularly amused by the latest round of junior associate salary increases, and the commensurate rise in hourly billing rates charged by the large firms. Indeed, the “terms of engagement” that many corporate clients require their outside counsel to adhere to specifically state that the company will not pay for the training of junior associates. The increasing reluctance of clients to pay for inefficient work, coupled with the high salaries and training costs that the firms must pay, means that many first- and second-year associates are not profitable to their firms. Consequently, there is a very real risk that your firm will ask you to leave if it perceives that you either cannot or will not become a money maker for them in the future. EVERYTHING IS NOT EQUAL Third, do not assume, as many junior lawyers naively do, that all practice areas and all clients are on an equal economic footing at any given law firm. Those practice areas that are highly “leverageable” (e.g., large corporate transactions and huge, discovery-intensive litigations) will always have the economic advantage. They are the backbone of large firm work, and the reason why those firms can afford to pay their associates so much more than most small law firms can. Leverage is an economic concept, the fundamental premise of which is mass production, characterized by a team effort. The junior members of the team (i.e., you) add value if they are able to focus on a specific task and do it as efficiently as possible. The benefit to the junior associate comes from observing the entire process, while slaving away at his or her assigned tasks. The work is often not particularly glamorous or creative, and there is very little tolerance for error, but it is the price the junior associate must pay in order to learn how the “product” is produced. After a few years you will have the skills necessary to begin to play more of a management role in large cases or transactions. As a general rule, the most powerful and highly paid partners in large New York City firms are those who have “risen through the ranks” in highly leveraged practice areas. Conversely, practice areas that are highly sensitive to billing rate increases or nonleverageable (e.g., trusts and estates, labor and employment, counseling work for start-up companies) are susceptible to being cut back or eliminated altogether by the large firms. Similarly, “deep pocket” clients — whose primary concern tends to be absolute accuracy and responsiveness (i.e., they expect their outside lawyers to be “always available”) — are much bigger moneymakers for firms than are clients whose primary concern is low cost. Associates who do work for the former are much less likely to have their billed hours scrutinized for efficiency, and are therefore less likely to be laid off than are associates in lower-revenue practice areas. SO WHAT CAN YOU DO? In light of the foregoing, what can you do this summer to get your legal career off to a good start? Know what your billing rate is, and get in the habit of asking the senior associate or partner who is assigning you work how long he or she believes it should take you to complete the assignment. When you have completed a piece of work, calculate how much the client would be billed for that work (billing rate multiplied by hours recorded on your time sheets for that matter). Although this won’t have much practical significance to you this summer, since most of the firms really do not expect to make money from the efforts of their summer associates, it will get you in the habit of looking at your work in terms of its value to the client. Most important, it will help you to understand that work hours are not really “billable” unless they are actually chargeable to a client. You will also find that it is often easier to generate a large number of truly billable hours if you are working on a large case or transaction than it is if you are doing research for a memo. Do not assume that you will be able to get away with “doing the minimum” amount and quality of work if you only intend to stay with a large firm for a couple of years. In the first place, unmotivated summer associates and junior associates tend to underestimate what the “minimum” really is. Ironically, those junior lawyers who have the least intention of staying with their large firms are the most likely to get fired very early on, and summer associates who display too much “attitude” definitely run the risk of not receiving permanent offers this year. This is because, as noted earlier, law firms are unlikely to pay the high salary and training costs necessary to keep you on for a couple of years if they do not believe that you can and will eventually be profitable to them. Second, you may very well change your mind about leaving the large-firm world so soon, once you get a sense of the enormous pay gap between salaries at large firms and salaries in most small firms, companies, and government agencies. Use the summer to educate yourself about practice trends both within your firm and within the legal profession as a whole. One of the best ways to do this is to seize any opportunity you can to have lunch with a senior associate or a partner. A prominent partner at a major firm told me that, to his amazement, on five separate occasions last summer, a summer associate turned down his invitation to lunch because he or she had previous plans for a fancy lunch with a junior associate. Not only was that incredibly short-sighted (for reasons that should be perfectly obvious), but it also cost those summer associates a very valuable opportunity to “pick the brain” of someone who really has his finger on the pulse of what is going on at that firm. Questions to ask partners in your firm might include the following: � How long have you been with the firm? What factors were important to you in making your decision to join this firm? � What changes have you seen take place in the firm and the profession since you were a junior associate? How did your experience as a summer associate differ from the experience of a summer associate this year? What has been the general attitude of the firm’s partners and clients with respect to the escalation of associate salaries? � Is the amount and type of work at the firm this summer representative of the firm’s historic practice mix? What is the impact of current economic conditions on the firm’s clients? � Where do you see the firm going in terms of size and practice focus over the next few years? If the firm intends to grow, does it prefer to do that organically, or through merger or acquisition of practice groups? � What qualities does it take to succeed at this firm? Are there certain practice areas that you believe will offer greater opportunities for advancement than others? � When attorneys have left the firm, where have they gone? � What general advice would you offer to someone who will be entering the legal profession in 2002? Begin to gather information about alternatives to large-firm practice, so that you can make rational decisions about your career as you move forward. Most firms and virtually all law schools have alumni directories; now is the time to reach out to more senior lawyers for advice that can guide your decision-making regarding initial choice of firm and practice area. You will find, for example, that corporate experience is required for most in-house counsel jobs, and that most general commercial litigators eventually land in small law firms. Certain law firms are “feeder firms” to the U.S. Attorneys’ offices, while others may open doors to investment banks. Equally important, gathering information about jobs in other practice settings can help you avoid the economic trap of living in such a way that you will have difficulty leaving your large-firm salary behind if you should want — or need — to make a job move during the next few years. You will have much more flexibility to make choices that will be right for you down the road if you start to live beneath your means right now. So enjoy your summer, but keep your eyes open. You are entering the legal profession at a time when both law firms and their clients are under tremendous economic pressure. The more you educate yourself about the factors that affect profitability, and the better you understand the role of a junior lawyer in the economic equation, the more likely you will be to survive and thrive during your early years as an attorney. Carol M. Kanarek, a former large-firm corporate lawyer, has provided career management assistance to lawyers and law firms since 1984.

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