Tuesday, May 31, 2011

More on non-partnership career choices for lawyers - it's "outsourcing" that keeps jobs in U.S.

Here's our previous report on the law firm mini-trend of hiring "staff attorneys" for less pay.  Last week the New York Times published this story fleshing out the details a bit more. Other than having to move to some not very popular cities, this sounds like a really good option for attorneys who would rather trade money for less time at the office.

The nation’s biggest law firms are creating a second tier of workers, stripping pay and prestige from one of the most coveted jobs in the business world.
Make no mistake: These are full-fledged lawyers, not paralegals, and they do the same work traditional legal associates do. But they earn less than half the pay of their counterparts — usually around $60,000 — and they know from the outset they will never make partner.

Some of the lawyers who have taken these new jobs are putting the best face on their reduced status. “To me there’s not much of a difference between what I’m doing now and what I would be doing in a partner-track job,” said Mark Thompson, 29, who accepted a non-partner-track post at Orrick, Herrington & Sutcliffe when he could not find a traditional associate job. “I still feel like I’m doing pretty high-level work — writing briefs, visiting client sites, prepping witnesses for hearings.”

. . . .

Lawyers like Mr. Thompson are part of a fundamental shift in the 50-year-old business model for big firms.

Besides making less, these associates work fewer hours and travel less than those on the grueling partner track, making these jobs more family-friendly. And this new system probably prevents jobs from going offshore.

But as has been the case in other industries, a two-tier system threatens to breed resentments among workers in both tiers, given disparities in pay and workload expectations. And as these programs expand to more and more firms, they will eliminate many of the lucrative partner-track positions for which law students suffer so much debt.

Mr. Thompson is one of 37 lawyers in Orrick’s new program, which is based in this small Rust Belt city an hour southwest of Pittsburgh. An international firm headquartered in San Francisco, Orrick is one of a handful of law firms, including WilmerHale and McDermott Will & Emery, experimenting with ways to control escalating billing rates.

“For a long time the wind was at the back of these big law firms,” said William D. Henderson, a historian at Indiana University-Bloomington.

“They could grow, expand and raise rates, and clients just went along with absorbing the high overhead and lack of innovation. But eventually clients started to resist, especially when the economy soured.”

For decades, firms used essentially the same model: charging increasingly higher rates for relatively routine work done by junior associates, whose entry-level salaries in major markets have now been bid up to $160,000 (plus bonus, of course), a sum reported by the big law schools. Even under pressure to reduce rates, firms are reluctant to lower starting salaries unilaterally for fear of losing the best talent — and their reputations.

“Everyone acknowledges that $160,000 is too much, but they don’t want to back down because that signals they’re just a midmarket firm,” said Mr. Henderson. “It’s a big game of chicken.”

So now firms are copying some manufacturers — which have similarly inflexible pay because of union contracts — by creating a separate class of lower-paid workers.

At law firms, these positions are generally called “career associates” or “permanent associates.” They pay about $50,000 to $65,000, according to Michael D. Bell, a managing principal at Fronterion, which advises law firms on outsourcing.

These nonglamorous jobs are going to nonglamorous cities.

Orrick moved its back-office operations to a former metal-stamping factory here in 2002, and in late 2009 began hiring career associates. Costs of living are much cheaper in Wheeling than in San Francisco, Tokyo or its 21 other locations, saving $6 million to $10 million annually, according to Will A. Turani, Wheeling’s director of operations.

“It’s our version of outsourcing,” said Ralph Baxter, Orrick’s chief executive. “Except we’re staying within the United States.”

You can read more here.

(jbl).

http://lawprofessors.typepad.com/legal_skills/2011/05/more-on-non-partnership-career-choices-for-lawyers-its-outsourcing-that-keeps-jobs-in-us.html

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