"Older and Dumber"
Law Firm Lateral Hiring
The largest corporate law firms ("BigLaw" in common parlance) continue to demonstrate an astonishing ability to ignore the lesson of the Great Recession - namely, that the number of lawyers the firm has must be commensurate with the amount of work the firm has. The flood of partners that left Dewey & LeBoeuf - which before its rapid demise numbered well over 1,000 lawyers - for other law firms vividly illustrated that law firm lateral hiring remains the growth strategy of choice, mainly because lateral lawyers seem to be available everywhere.
McDermott, Will & Emery hire 45 Lateral Partners
In just one astonishing example, the big Chicago-based firm McDermott Will & Emery had, by the end of July, added 45 lateral partners since the first of the year. Six of them were from Dewey, but many came from other firms. McDermott's co-chair was quoted by Business Week as explaining the hiring binge this way: "I think there's a flight to stability and excellence. The instability that was generated by the collapse of Dewey makes a platform like ours very, very attractive to lateral candidates. We don't carry any debt. We're completely self-financed."
How Do Clients Feel About The Lateral Hiring Strategy?
All well and good for the lawyers hired, but what about the clients - are they thrilled about such an influx of high-priced laterals? One observer quoted in the ABA Journal, Indiana University law professor William Henderson doubts it. Henderson wrote that, although NALP figures show 2011 starting associate salaries down 17% from 2009, BigLaw continues to pay starting salaries of $160,000 even as clients balk at paying to train new lawyers and outsourcing takes away associate work. Henderson says that instead of paying less money to associates, BigLaw is hiring fewer of them - and hiring high priced laterals instead. He notes that keeping salaries high and entry-level hiring low "is not a farsighted or innovative business strategy" as it focuses on acquiring lateral partners with portable books of business just to increase the bottom line at a time of stagnant revenues. This, he writes, "may work fine for this fiscal year but over the middle to long term, BigLaw is going to get older and dumber."
Hire Laterals or Hire Associates?
It's also easy to conclude that clients will get more disgusted and wiser, and gravitate to those firms that leverage technology to keep headcount down and costs reasonable. One might, however, look at another industry for comparison. For example, at about this time of year, major league baseball teams trade or "buy" experienced players to enhance their playoff chances. Are they hurting their future for short term gains? Fans seem to gravitate toward those teams that do what they can for the short term, even when the strategy may hurt the longer term impact.
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