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Law Firm 'Pyramid' Sees Thinning at Base

Take a pyramid, squeeze in its base, and what are you left with? A diamond. The model will no doubt need polishing, but the diamond may come to better represent the structure of law firm staffing than the pyramid, suggests Gina Passarella, a reporter for The Legal Intelligencer in Philadelphia, in her piece, Diamonds May Be a Law Firm's Best Friend in Economic Downturn.

In the first installment of a new weekly series examining the lasting effects of the current economy on the legal industry, Passarella sees a long-term squeeze on first-year associates. "In response to the current economy and a clear shift to a buyer's market, firms are moving from the pyramid model of a few partners at the top and hordes of associates at the bottom to a diamond shape in which several senior associates and junior partners make up the bulk in the middle in an effort to maximize value for the client," she writes.

An early adopter of this model was Eckert Seamans Cherin & Mellot. Fed up with soaring starting salaries, it decided five years ago to cut the firm's summer program and hire associates only in their second year or above. The firm benefits by having other firms train new lawyers, maintaining a more reasonable starting salary and avoiding costly attrition. The latest example is Drinker Biddle & Reath, which announced last week it would cut first-year salaries to $105,000 for the first six months, eliminating billing requirements for that period but requiring them to go through a more formal training process (as Carolyn Elefant noted here yesterday).

This tightening up on first-year associates is likely to be more than a temporary market correction, several industry observers predict. "Even for very robust firms that continue to have profitable work flowing in the door, there is a marked shortage of work for newly made lawyers," Drinker Biddle Chairman Alfred Putnam Jr. wrote in a letter to associates explaining the change. "In addition, the days of large law firms assigning (and clients paying for) 'armies' of very junior lawyers to large-scale litigation or transactions are over -- likely never to return."

As law firms tighten their bottoms and move to a diamond-shaped structure that is thicker with mid-level associates, that could mean bling-bling for contract lawyers. If law firms no longer maintain massive armies of low-level associates, then they will have to turn elsewhere for reinforcements, says Ward Bower of consulting firm Altman Weil. When large matters come up, he tells Passarella, firms will increasingly turn to outsourcing through contract attorneys or even to offshoring the work.

The proof of the diamond model will be in whether it dazzles clients by cutting costs. If it does, then the diamond could be forever, at least among larger law firms.

Posted by Robert J. Ambrogi on May 14, 2009 at 11:47 AM | Permalink | Comments (2)

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