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It’s not a pretty picture. The first-year associate classes at Texas’ largest firms are smaller than they were a year ago. There are 14.5 percent fewer new associates reporting for work, according to information gathered from 23 of the 25 largest firms on Texas Lawyer’s “The 100 Largest Firms in Texas” poster, published on June 28, 2004. Salaries are relatively flat with the previous year while offer rates have improved to second-year law students who clerked at the firms this past summer. The 366 associates are 62 fewer than the 428 who were hired by the same firms in 2003. The totals include first-year associates who graduated in 2004 and prior-year graduates who served judicial clerkships but exclude lateral hires. It appears that some of the larger firms are recovering from the slow economy of recent years. There are a couple of underlying issues driving the smaller numbers of new associates at the larger firms, says William C. Cobb, a firm consultant in Houston. First, the larger firms employed fewer clerks during the summer of 2003, so the firms were selecting their 2004 fall associates from a smaller pool, he says. Second, some firms are still trying to come back from a weakened economy. “The last three or four years have been a bummer for the transaction folks,” Cobb says. “So a lot of people are still not as busy as they want to be and therefore they’ve cut back on the number of people they are hiring.” Cobb predicts the larger firms will begin consistently expanding again when business growth forecasts are healthier. Offer rates for the 2Ls who clerked at the firms this past summer are up at 12 of the firms, down at eight and held steady at one. (The 2003 offer rates for Brown McCarroll and Cantey & Hanger were not available for comparison.) The 2004 rates ranged from 93.3 percent at Akin Gump Strauss Hauer & Feld to 33.3 percent at Cantey & Hanger. The overall average is 86.9 percent, meaning that better than four out of five clerks received permanent offers. In 2003, the average offer rate was 76 percent or about three out of four clerks. The offer rate can be a predictor of a firm’s health and its growth expectations. Of the 683 clerks at the 23 firms during the summer of 2004, 547 received offers for the fall of 2005. There were 709 clerks at 22 of Texas’ largest firms in 2003. So although the offer rate is higher, the number of clerks at the offices is down slightly More than a quarter of the new associates graduated from the University of Texas School of Law, according to information provided by the 23 firms. The University of Houston Law Center and Southern Methodist University Dedman School of Law are the next two most popular schools. All nine of the Texas law schools are represented among the new associates, according to the firms. EBB AND FLOW With 53 new associates, Houston-based Baker Botts has the largest first-year class of the 23 firms. The firm also hired 53 new associates in 2003, again the highest number among the 22 firms completing Texas Lawyer’s survey. “It would be a disappointing year for us to have a smaller incoming class than prior years,” says David Sterling, the hiring partner for Baker Botts in Houston. The firm also has consistent offer rates to summer clerks for 2003 and 2004. Baker Botts made offers to 78 of its 88 summer clerks from this past summer for a rate of 88.6 percent, which is similar to its 86.6 percent offer rate in 2003. “We give offers at the end of the summer to all of the people in the program who we think will succeed here,” he says. “It’s not a math game of X students for Y slots.” He says the firm hires people with good skills rather than hiring people to fill specific positions. “Who knows what the particular demands will be in any particular department two to four years down the road?” he asks. “We just want to hire as many good lawyers as we can.” Other firms with large incoming classes include Houston-based Vinson & Elkins with 42 new associates and Fulbright & Jaworski with 27 new associates. Locke Liddell & Sapp, based in Dallas and Houston, hired 17 new associates for Texas locations this year, compared to 29 hires last year. The firm made offers to 32 of its 2003 summer clerks. “Fifty percent is a pretty good yield rate,” says Stephanie Donaho, a Houston partner in charge of recruiting for the firm. “When we go into our permanent offers, we really hope in a perfect world to beat 50 percent. Each clerk has two to three offers to choose from, and so 50 percent is better than the statistical chances.” Donaho says that during the summer of 2003 New York City and Washington, D.C., firms began recovering from the impact of the Sept. 11, 2001, terrorist attacks on America, so Locke Liddell found itself at the law schools competing with those firms again. Houston-based Fulbright & Jaworski has 27 attorneys in its new associates class, which is markedly fewer than the 48 associates hired for the class of 2003. The firm made offers to 58 of its 2003 summer clerks for this fall’s new associates’ class. It’s difficult to predict how many summer clerks will accept offers, known as the “yield,” from a particular summer group, says John Sullivan, a partner in Houston and the employment chairman for the firm. “I think it just ebbs and flows from year to year and you can’t necessarily put a finger on a particular reason why,” he says. “There are so many variables that enter into students’ decision about where they want to take a full-time position. Some are based on variables beyond our control, such as geography. There’s no science about why some summers’ acceptance rate are much higher than others.” MAKE ME AN OFFER Dallas-based Akin Gump Strauss Hauer & Feld, the largest Texas firm, made offers to 42 of its 45 summer clerks, for a 93.3 percent offer rate this year — the highest among the 23 firms. The firm’s offer rate the previous year was 86.2 percent, and the firm has 24 new associates this fall in its Texas offices. “We try to do the screening on the front end because it’s not fair to the students to be hiring a lot of [summer] folks knowing we won’t need them,” says Eliot Raffkind, the firm’s hiring partner in Dallas. “We do spend a lot of time before deciding how big the [future fall] class will be and try to err on the side of conservatism.” Raffkind says the firm’s strategy is to hire about the same number of summer clerks each year and then supplement new associate classes by interviewing third-year students rather than over-hiring during the summer. “Having too large a [summer] class creates several issues for you,” he says. “It affects your ability to make good offers, which hurts your reputation among students. And the quality of the work is diluted because you have to spread the work among more students. Several Texas firms have higher offer rates for this summer including Jones Day, which offered positions to 93.1 percent of its summer clerks in Texas; Houston-based Vinson & Elkins with a 92.7 percent offer rate; Baker Botts with 88.6 percent; and Dallas-based Thompson & Knight with 86.5 percent. Also, Winstead Sechrest & Minick of Dallas extended offers to 86.4 percent of its summer clerks, and Locke Liddell & Sapp had an 84.8 percent offer rate. Joseph Dilg, V&E’s managing partner, says the firm moved to a first-half session for its 2004 summer clerks. V&E made offers to 51 of its 55 clerks. “By not stretching out for the full summer, we don’t have people on vacation and we’re not trying to find projects for law students,” Dilg says. “We’re still getting feedback but we think it [the first-half only session] was beneficial for the students because we could concentrate on the experience they had and they could get lots of information.” He says the firm is hoping for a high yield from the 2004 summer program. At Jenkens & Gilchrist, the offer rate for summer clerks dropped from 100 percent in 2003 to 53.3 percent this year. The firm has a new organizational strategy for the 2005 new associates class; that strategy affected the number of permanent offers made to the 2004 summer clerks, says Andrius R. Kontrimas, managing shareholder for the firm’s Houston office and chairman of the firm’s recruiting committee. He says the new associate offers are made not by practice group but by department, with the firm divided into three departments: business, advocacy and intellectual property. When new associates join the firm in the fall of 2005, they will not be assigned into a practice group for their first two years. Instead, they will be part of a pool of associates available to work on various projects in their departments. Not only will this mean a more efficient use of resources, but it also will mean a decrease in the number of total first-and second-year associates required by the firm, he says. “If they join the business department, they may do a real estate project one day, a tax project the next day, and a securities offering after that,” Kontrimas says. The concept is attractive to students, he says, since many of them don’t want to select a specialty until they’ve worked at the firm. The lawyers in the advocacy group will be involved in areas such as bankruptcy, labor and employment, and commercial litigation. The IP group will handle all aspects of IP law. SHOW ME THE MONEY A handful of the largest firms increased the base salaries paid to new associates. Hughes & Luce increased its starting base to $110,000 from $105,000. Akin Gump’s base is $110,000 compared with $100,000 the previous year, and Brown McCarroll moved to $95,000 from $90,000. Winstead Sechrest & Minick increased its starting base to $115,000, up from $110,000. In January 2005, Thompson & Knight will bump its new associate base salary of $110,000 to $115,000. Thirteen of the firms are offering a base of $110,000 to the 2004 class of new associates. Litigation-only firm Beirne, Maynard & Parsons added $10,000 to its 2003 base to hit the $110,000 prevailing rate. “The bottom line is we’ve got a high standard for attorneys that work here, and we just need to be competitive and make sure we get the best talent, whatever that market might be,” says Mark Waite, a Beirne, Maynard partner in Houston and the firm’s hiring partner for new associates out of law school. “If a competitor is paying a certain amount for that same talent, we have to do our best to pay that — if we can.”

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