Deferred associates, doughnut holes and the future of litiga

Last week I attended the 2010 NALP Annual Education Conference in Puerto Rico. I managed to keep away from the beach long enough to attend several interesting panel discussions. The first session, Recruiting in the Aftermath of a Recession, provided a very informative, if not entirely encouraging, overview of the BigLaw recruiting scene. The panelists — Helen Long, Director of Legal Recruiting at Ropes & Gray; and Frank Kimball, of Kimball Professional Management in Chicago — offered a lot to think about. Among the key takeaways:

1. Bridging the generation gap: law firms need to learn to deal with today’s new associates. Kimball finds millennials a “fascinating” generation, a combination of tech savvy and naiveté. They are ambitious and impatient and “have e-tools but lack human contact,” said Kimball, who also said “they are drowning in data but won’t swim” because, despite the wealth of resources available to them, they rely more on “sketchy hearsay” than solid research. They are understandably confused and dispirited these days. According to Long, the key is to be “transparent, candid and responsive.”

2. Good news: we have entered the recovery phase of the recession — or at least we have passed the worst. Law firms are exercising “prudent cautious optimism” as they see signs of life:
   • Deal volume is up
   • Senior corporate associates are busier
   • Lateral listings are slowly rising slowly, and we should see more by the end of the year
   • As voluntary attrition among junior associates increases, there will be more midlevel hiring

3. Bad news: litigation is a no-growth industry. Lateral hiring had been falling for several years before the recession (reasons include high hourly rates, e-discovery, push for settlement, decrease in litigation volume nationwide). According to Long, this fundamental change in litigation will challenge all firms and it is permanent. In large markets only the largest cases are profitable, which narrows the range of litigation in terms of the type of clients and scale of cases. The panelists predict a two-track system for associates: partner track and discovery track, with little room for recruitment on the partner track. (As a one-time litigator who imagines that many law students are dreaming of litigation careers that include more than document review, this was kind of depressing to hear.)

4. Dealing with deferrals: how will law firms absorb all the deferred associates?
   • Stagger arrivals
   • More terminations
   • Discontinue incentives to defer
   • Retain fellowship options as a safety valve
   • Some of the best associates will choose not to return because they feel the bonds of trust have been broken.

   With respect to voluntary attrition, Long addressed the question of how firms should deal with deferred associates: with “compassion, clarity, communication,” she said. (Indeed, transparency, communication and empathy were some of the key themes at this conference.)

5. The “rolling doughnut hole.” The classes of 2009-2011 will be disillusioned and small, which will create a need for midlevel lateral associates, which will be a problem because not enough of them will have had training. So there will be a feeding frenzy for the talented, trained few, and firms may have to hire associates at a more junior level. The implications were outlined via two different analogies — a “rolling doughnut hole” and a snake eating a rabbit. So what will firms do?
   • Stop hiring for now — wait till the bulge works out of the system
   • Force the hiring pyramid into a diamond — rely less on entry-levels and more on laterals
   • Consider the apprenticeship model (à la Howrey or UK-style traineeships)
   • Use the fellowship/public service option

6. Good news: the associate lateral market is looking up for 2010-2011. Lateral associate hiring is down more than 90 percent from 2006-2007, but it is coming up a little. Watch for these signs of activity:
   • Voluntary attrition
   • New associates who don’t return
   • Associates who go to government or in-house or to other smaller markets

7. Bad news: the recession’s impact on law students will be greatest at schools below the top 20. Law schools face rising costs, rising demands and falling endowments, though they continue to have rising enrollment. Among the issues confronting career services:
   • Budget cuts
   • Pressure from frustrated students and “helicopter parents”
   • Pressure from internal administration
   • “Wrestling with the US News monster”
   • Law firms question whether to keep recruiting on campus

   Can the profession absorb all these law grads? (No)

   • Supply/demand rules don’t apply to schools
   • Some schools are changing (e.g., two-year JD programs), but this doesn’t seem to be terribly popular with law firms because it makes it difficult to compare students across schools.
   • Schools will nevertheless resist reducing enrollment and will find it harder to place students — especially schools below the top 20.

Stay tuned for Part 2 of NALP Conference 2010, which will outline some steps students can take to help determine the practice area that’s right for them.

- posted by vera