Outsourcing BigFirm Associate Jobs
( see also Outsourcing law firm jobs)
The angry associate response to Milbank Tweed's $30 to $65K year-end bonus announcement (see also Cravath complaints) has been followed by another BigLaw announcement that has the legal world reeling.
After the first of the year, the 650 member international law firm of Marley, Scrooge and Jones will begin outsourcing the work done by its first through third year associates. See How Important is the Quality of Labor and How is it Achieved in the December 1 issue of Harvard Business School Working Knowledge.
"I don't know what took us so long," said managing partner Bertram Jones of MS&J. "We've been in denial for years about the new reality -- associates simply don't stay with us for more than two or three years. After you factor in recruiting trips, the cost of summer associate programs, signing bonuses for federal clerkships, full pay for "Bar Exam Summer" and the rising cost of bar exam courses for our first years, we don't really begin to recoup our investment until our associates are third years, at which point fifty percent of them have moved on."
But what about those high billing rates for BigLaw's young associates, don't they make up for the original investment?
"Not really," says Robert Marley, III. "A first year associate's time is generally cut in half before it can go on a client's bill. We also spend an enormous amount of our senior associates' and junior shareholders' (non-billable) time training these young people how to practice law. You can't in good conscience charge the client $400 an hour for an attorney's OJT. Even if we could, the clients just won't pay it anymore."
But outsourcing?
Ebenezer Scrooge, IV, partner in charge of associate training says, "listen, the menial tasks most of these young people perform -- document reviews, fly-specking thousands of pages of transactional documents, doing the occasional research memo can be done just as well in Bombay. I mean, Mumbai."
So how will BigLaw re-populate its ranks?
Scrooge, a baby-boomer, says. "Believe it or not, given our own life styles and the prep school and Ivy League educations we provided for our children, we won't be able to afford to retire until our late seventies. That's another good fifteen to twenty-five years for many of us. The term 're-populate' is not in our vocabulary."
When asked how the new outsourcing program will affect mid-level and senior associates, Jones smiled for the first time during our interview.
"It's the mid-level to senior associates who have been getting scrooged (sorry Eb) all these years. As our expenditures on recruiting and first year salaries have risen, the mid-level to senior associates' salaries and benefits stagnated. This will allow us to give our fourth to tenth year attorneys a fair return on their billables."
And where will the new mid-levels come from?
"Let someone else teach them how to practice law," snorted Marley. "They'll be plenty happy to join Marley, Scrooge & Jones in their fourth or fifth year. Their chances of partnership will be far better here, their salaries higher and their bonuses more in line with the value they actually deliver to our clients."
No backlash?
"Our business consultants tell us 'no,'" said Jones. With these young people, it's all about Christmas Present, not Christmas Past or Future. They may not want what money can buy more than previous generations have, but they do seem to have a higher sense of entitlement. And like all primates, they rebel when they believe someone else is unfairly taking too large a portion of the communal pie."
We fully expect to be flooded with applications by fourth and fifth years. Allowing other firms to train our future attorneys will permit us to pay our mid-levels $50 to $100K more than our competitors. And who are we to complain that they won't get good training at Milbank or Cravath? Finally, by hiring laterally, the youngsters who cannot take the pace over the long haul will have already weeded themselves out.
"It's win for our associates and win for us. I just don't know why we didn't think of this earlier."
But won't all of BigLaw follow this trend?
Marley laughed. "Are you kidding? This is a business plan. Even the first years know that "law firm management" is an oxymoron.
And just in case you're wondering, money still does not make people happy.
N.B. The links above are resources, not support for the propositions highlighted. The "facts" and opinions expressed by Marley Scrooge and Jones are the types of comments one hears from shareholders at partnership meetings, i.e., there is little basis in fact for any of them but they nevertheless drive decision-making.
