One particularly interesting statistic emerged from our in-house survey last month: 33% of respondents said they felt law firms were not handling their work at the appropriate level. And the biggest losers in all of this? The senior associates.
For general counsel, extracting the ultimate value from external legal advisers is really about making the most of existing legal spend, rather than simply driving firms down on price. But the current high leverage models employed by the majority of modern law firms preclude firms from resourcing work cost-efficiently: there are too many associates to carry.
In our 20-year LB100 retrospective in September, Allen & Overy (A&O) senior partner David Morley explained that the current high leverage model cannot survive. ‘At the moment the industry model, with roughly one partner to every three and a half associates, is broken,’ he said. ‘Our clients don’t like it, because they don’t want to carry the cost of training our lawyers or for us to maintain that fixed resource. Our people don’t like it either. It’s too inflexible. Either they are being overworked, which is exhausting, or under-used, which is unsettling. There’s pressure on the model from all sides.’
Morley explained that A&O is looking at a new approach, which could mean fewer associate lawyers in ten years’ time, not more. Now is unfortunately a terrible time to be an associate, particularly a senior associate. Clients are only sending complex work to external law firms and want partners servicing those matters. If they must outsource commoditised work, they want it done by very junior (and cheap) external lawyers.
Firms generally made up too many associates to partner in a bid to keep them during the frothy years.
For the senior associates there’s no place to go. Firms generally made up too many associates to partner in a bid to keep them during the frothy years, occasionally even individuals that would never have made partner outside a boom.
This, combined with low attrition rates among senior associates, means that law firm managers are talking about the ideal shape of their firms being an hourglass – heavy at the top with partners and at the bottom with junior lawyers but with very little in-between.
Addleshaw Goddard had to make 24 lawyers, mostly at senior associate level, redundant in June. Clifford Chance and Herbert Smith both had to make cuts to their associate ranks earlier in the year. With senior associates stuck in this sad limbo, expect more news of departures to trickle out of the larger firms. The ‘alternatives to partnership’ that have become so fashionable in recent years are all very well, but today’s senior associates are actually facing the harsh reality of ‘up or out’ like never before.