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In a recent post, Business Unusual in a Down Economy, I wrote about how the current economic conditions provide the right opportunity for law firms, law schools, etc. to introduce paid internships after graduating law school.

Kudos to our friends over at Drinker Biddle! Rather than defer their 37 first-year associates, they are designing a 1-year training program designed, get this, to set these young lawyers up for success.

Rather than immediately assign the incoming lawyers to client matters, the firm will enroll its hires in a new training program that will provide courses on taking depositions, writing briefs, and meeting client needs. The instructors will include Drinker attorneys, professional development staff, and firm clients. The 37 first-years also will shadow partners’ client meetings and court appearances. The associates may handle some client work, but at significantly reduced rates.

The program does come at a cost. Drinker will reduce first year associate salaries, which range from $145,000 to $160,000, to an annualized rate of $105,000. Salaries will return to whatever the “prevailing market rates” are in the spring of 2010. This will enable the firm to cover the costs of the training program.

According to my friends at Drinker Biddle, the details of the program are still in development, but the program will relieve both the new associates and partners from worrying about billable hours v. training these young men and women on how to be a good attorney. The training program will provide the opportunity for associates to actually participate in, shadow and LEARN from their partners and senior associates on how to become an attorney.

This is nothing less than a win-win-win for the associates, the firm, and the client, who will, after the program is completed, benefit from these now well-trained and prepared attorneys.

I believe that the current economic conditions and the challenges faced by our industry provide firms the opportunity to defy the status quo. It allows a law firm, like Drinker Biddle, to step outside that proverbial box and do the right thing.

The young men and women graduating law school today are not prepared to be lawyers. They need training in the practical application of their education, just like doctors do.

These young men and women need to learn business development and marketing skills, which do not come intuitively to the majority of lawyers.

They need to learn good office skills, how to work well with others.

And, they need to learn how to participate in, and contribute to, the economic and business success of both their individual legal practices, and their law firms as a whole.

Associate Residency Programs: It’s Time

Between reading The Lawyer Bubble and this article from The American Lawyer, Calling All Unemployed Law Grads: Greenberg Is Hiring, I have to say, “It’s time, already.”

Well, in truth, I have said it before. Several times, actually. Click here to see >> Law Firm Internship posts on the Legal Watercooler.

What do we need to do to start a required residency program for recent law school graduates? A true internship where they will be vetted, properly trained, and find the niche that best fits their skill set and personalities?

We KNOW that the best of the best law schools DO NOT prepare lawyers for the actual work and practice of the law.

We KNOW that law firms are required to take these highly educated people with no skills and teach them how to be lawyers, versus a law school graduate.

And we all KNOW, wink wink, that the summer associate programs are not training grounds either.

So why not acknowledge what we all know and fix a problem that needs fixing already?

Have a 1-2 year internship where these young graduates get to rotate through the different departments: corporate, litigation, tax, IP, regulators, etc.

Let them find where their interests lie, and where they fit in as well.

Let them transition from student to corporate flack, learn the ropes of working in an office (the very first real job for most), and dive in in year two on a specialty.

Let them spend time not only working client files, but coming out of the shadows and attending client meetings, depositions, going to court to just listen and learn, without the pressure to bill, bill, bill (over bill).

And, yes, be paid a lot less money. Why? Because they are learning. They are not providing value … yet.

At the end of year two the associate will be as prepared and trained as they can be. The firm can then offer them a full-time position at a proper market rate, or they will be better equipped to take their skills to another platform, which they are doing any way.

And before anyone says, “They’ll never do it,” why give them a choice?

Doctors do not leave medical school without going through rotations. They don’t graduate and start treating patients the following Monday. They go through a residency program. And, for many, they follow that up by a fellowship. All the while making a moderate salary.

I hope more and more firms jump on the internship bandwagon. Properly train these young associates on not only the skills they need to practice law, but the skills they will need to manage the business-side of the law firm (including rotations in accounting, marketing, and IT).

Like most things legal-industry, the law firms will only be pushed into change by client pressure. But it would be nice to see a proactive partnership between the Association of Corporate Counsel, the American Bar Association, the state bar associations, and the law firms to come up with a system that will provide a platform for success.

After all, these young associates are coming out of school with $200,000+ in debt. They cannot afford to fail. Law school is too expensive to be a mistake.

One thing I have noticed with most law firms is that they suffer from a case of “WW____D” (“What Would “fill in the blank with your favorite AmLaw 50 firm” Do).

When Gunderson increased associate salaries to $145,000 in 2000, I remember my boutique law firm waiting around to see what “so-and-so” decided to do (we ended up matching the $145,000).

The same thing happened when Simpson Thacher raised first year salaries to $160,000 in 2007. It was all over for the California firms when Quinn Emmanuel opened up their wallets to match.

When White & Case openly laid off attorneys in November 2008, it quickly provided cover for other firms to follow suit. And, boy, did they ever. So much so that Law Shucks was set up to just track law firm layoffs.

And there have been so many deferrals of first year associates of late; it’s just old news when the latest firm joins the fray.

But now we’re starting to see a new law firm “wave:” cancellations of summer programs and on-campus interviews (OCI).

Morgan Lewis, which announced its decision last week, was quickly joined by other firms over the past few days, including Ballard Spahr, Thompson Hine and Squire Sanders, “Above the Law” reported. Orrick Herrington & Sutcliffe has said that it would delay its on-campus interviewing until early next year in order to first see how many offers it gives to the 2009 summer class. Orrick said it would make some of those offers good for 2012. And now Weil Gotshal & Manges has followed suit, offering incentives for current summers to take a 2012 start date, according to reports from The Legal Intelligencer’s sister publication, the “Am Law Daily” blog.

Changing or canceling summer programs is a growing trend law school leaders have said they hoped wouldn’t catch on.

So riddle me this, if this wave continues, and we get to the point where there are few, if any, summer programs, how will the future’s “youngest and brightest” new lawyers find a job at a top-notch law firm? Let alone pick up the “on the job” skills that they don’t teach you in law school?

I will go back to law firm internship programs being a well-rounded solution. Okay, a young associate will ONLY make $100,000 per year upon graduation, but even here in Los Angeles that’s enough for a really nice apartment in Marina del Rey, student loan payments, and the monthly lease on a BMW 3-series.

In return, the young associate will gain on-the-job training, partner mentorship, client face-time, the ability to “sit in” on depositions and trials, heightened job satisfaction and much, much more.

No shock here, but I like law firm internship/fellowship/apprenticeship programs.

Clients like these programs.

Recent law school grads without a job like these programs.

And while we as a society find it perfectly acceptable for a young doctor to graduate a top-ranked medical school, $100,000 plus in debt, and go directly into an internship program at a minimal salary, to learn the trade, for some reason it is unacceptable for lawyers?

I never really expected universal acceptance of law firm internship programs, and believe that it will take years for them to take off industry wide, but I hope that one day they will become the norm.

With that in mind, I have to admit that I was quite “shocked” to read the following comments in this ABA Journal article from Carter Phillips, managing partner of Sidley Austin’s Washington, D.C. office:

“If you’re a top-flight law student and you talk to one firm offering $80,000 or $100,000 to take extra classes and then you talk to another firm offering $160,000 to do work you can bill to a client, I don’t see that as much of a choice,” he said.

Really. $160,000 jobs. Which firms are still offering these?? And what job offers, let alone multiple job offers? From what I’m reading, most “biglaw” firms, including Sidley, are offering deferrals and reduced salaries, in addition to the weekly layoffs.

As far as I can tell, a job secured in October 2009 is much better than one promised in … well … January 2011.

According to a May 8, 2009, Above the Law post (with copy of firm e-mail):

New associates heading to Sidley Austin, on the other hand, got “optional deferral” news. The firm e-mailed incoming associates yesterday announcing the “Pro Bono Assistance Program:” a January 2011 start date with a $75,000 stipend attached.

I’m going to pull out my little crystal ball here and make a prediction:

These young men and women who complete these law firm internship programs will be highly successful attorneys. They will continue to practice law in greater numbers over time, while their peers become dissatisfied with their careers and leave the law.

These young attorneys will be better business developers, and will be counted amongst their firms’ rainmakers. They will be better suited to the work that they perform, and will be more satisfied.

Why?? Because they will be better prepared, trained, mentored and educated in the practice, and business, of law.

Another law firms, Howrey, announced this week that they too will begin an apprentice program for their 1st and 2nd year associates.

Starting this fall, Howrey will begin selling recruits on a new program at the firm in which associates will spend their first two years serving as “apprentices” before taking on significant client work.

As part of the two-year program, associates will spend the majority of their time at the litigation-heavy firm attending training seminars where they will learn the practical skills of lawyering, said managing partner Robert Ruyak in an interview.

During their first year at the firm, associates will take classes on legal writing and research and will work on pro bono projects to give them hands-on experience without charging clients. In the second year of the program, associates will be embedded at client sites for several months at a reduced billing rate of between $150 and $200 an hour. They will also continue to take classes on litigation skills such as trial tactics, cross examination, and mediation and arbitration.

Howrey started working on the program about two years ago when the firm decided it was going to move away from lockstep compensation for its associates. (In January, the firm did away with its lockstep model for associates, instead paying them based on measured levels of competency.)

I, for one, am happy to see this trend towards an apprenticeship/internship for recent law school graduates continue.

Pollyanna warning: In anything bad, good can rise. Firms can either embrace the opportunity to change, or not. Today’s economic reality, the mass lay offs, and law firm dissolutions provide the kindling for good change to occur. What law firms do with these opportunities is yet to be seen.

Whether it’s called an apprentice program, internship or fellowship, another law firm has joined the bandwagon.

Kudo’s to Louisville, Ky.-based Frost Brown Todd for launching their apprentice program.

Rather than raking in a full salary, these apprentices will spend their first 1,000 hours learning on the job at lower pay and under stricter scrutiny. The pressure to bill will also be relieved under the program. New associates in the apprentice program will earn $80,000, but only be required to bill 1,000 hours. That’s 800 fewer hours than previous classes were expected to bill, firm chairman John Crockett told the ABA Journal today.

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In the firm’s press release, Crockett addressed the ongoing debate over the current law firm hiring model. Paying top dollar for inexperienced lawyers and then immediately having them work for clients isn’t making sense to law firm managers or clients.

I am a huge proponent of these programs. So, come on, who’s next??

The idea of paying a recent law school grad $160,000 (oops, I mean $140,000), when they have no applicable skills has been a lose-lose proposition for the law firms, the associates, and the client.

As more and more law firms grapple with the economy, business as usual will never be the same for the legal industry.

We have watched, over the past few months, as AmLaw 200 firms shed thousands of attorneys and staff. And while law firm layoffs at Latham, White & Case, Pillsbury and other AmLaw 100 firms make the news and blogs, the smaller firms are flying under the layoff radar.

But law firms are FINALLY becoming more proactive in challenging their same-ol’ business models. We are hearing talk of rolling back the astronomical associate salaries, de-equitizing of partners, cutting back of billing hour requirements, and reducing hourly billing rates.

A big concern in all of this is: what about training the young associates? I keep hearing how clients do not want to pay for summer or first-year associates working on their files, which, in this economy, has lead to many a firm cutting their summer programs and either delaying start dates or rescinding offers to incoming first-year associates.

Has the time not come to require newly graduated law students to complete an internship prior to receiving their licenses to practice law? I wrote about it here last August.

One thing we ALL agree on is that law school does not equip young associates for the day-to-day challenges they will face when practicing law. Seeing the pass/fail rate of the bar exam, law school does not prepare you for that either.

However, each September we escort these young men and women, in their ill-fitting suits, carrying shiny new briefcases, to a window office near the top of a high-rise, and pay them upwards of $150,000-$165,000 per year, all the while billing them out at several hundred dollars an hour to the client … and they know NOTHING.

The Atlanta firm Ford Harrison introduced their “Year One” Associate Development program in 2007.

“Our goal is to close the gap between what law schools teach and what clients demand,” said C. Lash Harrison, managing partner of the law firm. “By placing the emphasis on learning rather than billing, Ford & Harrison will increase the capacity of its associates to handle greater responsibility earlier in their careers.”

So, while you’re mulling over another round of layoffs, cutting salaries, de-equitizing of partners, and reducing rates to battle the effects of the current economy, why not consider an “on-the-job training through mentoring, hands-on work assignments and direct observation of client matters …modeled after the medical school’s resident approach”?

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Many general counsels find that associate salaries stand in the way of good client service. In fact, many GCs are doing their best to not pay for what they consider to be on the job training for first and second year associates on their files. The Association of Corporate Counsel (ACC) framed the problem this way in its (R)evolution in the Law Firm Service Market (emphasis added):

Some blame the ubiquitous billable hour and its perverse drivers toward inefficient and terribly expensive results. Some blame the morph of law firms (professional enti­ties) to a business model (profit driven). Others point to the almighty “profit per partner” ratings, highly leveraged pools of stunningly inexperienced and overpriced associates, and an increasingly de-equal­ized middle class of partners. Indeed, one of the most disturbing trends in all of this mess and despite the tall stacks of money paid out by clients is the incredible num­ber of lawyers who are either pushed out of the profession, or run screaming from the building, often before they’ve enjoyed any semblance of the career and professional fulfillment we all envisioned we’d have when we were in law school.

Our friends at ACC don’t have the magic solution that will fix it all, but they are talking about a conversation (hooray!) and a movement (bigger hooray).

What ACC’s Value Challenge is and isn’t: The value challenge is not an answer, but a movement. It’s not about laying blame; it’s about creating responsibility for change.

“Solutions” that Perpetuate the Problem
I don’t care what caused the problem, I want to know what are we going to do about those darn associates that no one wants to hire, train, mentor or pay for?

Right now the “we won’t hire them” model is picking up favor. For these firms, they see it as a better economic and business model to recruit a mid-level associate who has already been trained on someone else’s dime and is now seen as “profitable.”

If you follow the legal blogs, you have seen the posts on first year classes being cut back in size and start dates being postponed. More and more firms are reducing the size or shortening their summer programs, or cutting them out all together. On campus interviews are also seeing a hit.

And while a law firm might offer, on paper, training programs, mentoring programs and the like, unfortunately, with a 2200 hour billable requirement, associates never find the time to take advantage of these.

My solution.
For many years I have been having conversations with my peers on the law firm administration side about why we do not require a two-year paid internship for lawyers coming out of law school, similar to doctors. I am not alone on this.

From Mike Dillion, Executive Vice President, General Counsel and Corporate Secretary Sun Microsystems Inc. on his “The Legal Thing. Notes from the General Counsel”:

Our legal education system needs to provide better practical training. In this respect it should mirror the residency requirements of medical schools or legal programs in other countries. For example, in Germany, a practice residency is already incorporated in the law school curriculum. In addition, law schools need to recognize that the “legal profession” is also a business for providing legal services. To be successful, lawyers need to be trained in how to manage a competitive business enterprise. Interestingly, future members of our profession already understand this and are focusing on the issue.

And Atlanta law firm, Ford Harrison, has already begun their program:

This unique 15-month regimen, in which all first year associates will participate, emphasizes on-the-job training through mentoring, hands-on work assignments and direct observation of client matters. It is modeled after the medical school’s resident approach.

The central component of the program is the elimination of billable hours requirements for all participants. Instead, an attorney’s performance is tracked and measured through participation in clinical hours. The firm’s new lawyers will be immediately engaged in the labor and employment law practice by participating in collective bargaining sessions, depositions, trials and hearings, labor or other arbitration cases, EEOC on-site investigations and strategy meetings.

I would like to add that not only does the legal education system need to provide better training, but so do the law firms.

Here I go all Pollyanish again, but by properly training, mentoring and exposing novice attorneys to the overall practice of law, without concern or focus on recouping costs, we can help cut the overall attrition rates, which, according to the NALP Foundation, have reached 64% within 5 years for entry level (hired as a 1st year) associates. By transitioning our legal educational system to mirror other professional services, we can increase job satisfaction and retention, heighten our client service standards, and hopefully cut down on some of those lawyer jokes.

(okay, let’s keep the lawyer jokes. I especially liked the one about the attorney, the BMW and the Rolex.)

Working in the business of law has its challenges. First of all, there are all the lawyers (ba-dum-bum-CHING). Actually, it’s the lawyers that make our jobs interesting. SEO. Not interesting. Explaining to lawyers why SEO is important, now that can be fun and challenging.

A common “challenge” we – legal marketers, partners, administrators and clients – share in common is what to do about those darn associates. These kids are coming out of law school making $135,000-160,000 a year. They don’t want to bill the hours required to pay the salaries. They aren’t profitable until they’re mid-years. They want flexible hours to pursue outside interests. They want a part-time partner track. To top it off, clients don’t want to train 1st years on their dime.

Dan DiPietro proposes in the American Lawyer article, Pay associates by performance, not by class year, that moving away from the lockstep to a performance-based system can resolve many of these issues.

According to the National Association for Law Placement, firms lose 80 percent of law school hires within five years. With the decline in law school applications in recent years, it’s going to get even harder for firms to recruit and retain top talent.

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… performance-based pay gives partners an effective means to encourage star performers and boost the performance of mediocre associates. Nearly every law firm would pay its top performers more to keep them. A lockstep compensation system not only prevents firms from doing so, it forces them to pay mediocre performers at the same rate as stars. Knowing that mentoring, training, and feedback will all feed into associate compensation, partners should be more willing to put the time and
effort into such programs to keep their top talent happy.

I have yet to meet someone in our field who does not agree that law school graduates are ill prepared to practice law the day they pass the bar. Their first few years are in fact an internship, yet they begin their careers in the top 10% of household incomes. On day one we reinforce the entitlement behavior we all loathe.

By tying salary and bonuses not to a lockstep system, but to performance, we will be able to guide, mentor and promote associates who are better prepared to succeed in private law practices. Motivation of lawyers will move away from a number and towards something they must earn. While we might never be able to “put the genie back in the bottle” as to starting salaries, we can at least mitigate the damage it can cause.