Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. This week, we look at what demographic changes in law schools and Big Law firms say about a Big Law objection to hiring more lawyers. Sign up to receive this column in your inbox most Thursday mornings.
I’ve been asking law firm leaders if there’s room in their economic models to hire more associates.
Hiring more associates is the opposite of what firms’ financial ambitions demand. Fewer associates working longer hours is good for profitability, not bad!
On the other hand, most law firm leaders by now realize burnout is a concern, and Big Law’s product, after all, is its people.
But when I ask that question about hiring more associates, the response is almost always the same. And it is never a simple, “Yes.”
The partners struggle with the idea of hiring more law school graduates because of concerns over “quality.” They only hire the best, they say, and they need to make sure that continues.
“We need to maintain quality,” a partner at a leading law firm told me this week. “That has to be the start and end of everything.”
Here’s a hypothetical.
In 20 years, only 25 law firms exist in the U.S., and they all employ at least 500 lawyers. If you need a reason as to why, let’s say technology and new rules allowing outside investment led to intense consolidation. (When private equity firms offer Big Law partners the chance to monetize their equity in this model of the future, they cash out surprisingly fast.)
The firms grow so large that they employ nearly every U.S. law school graduate going into private practice. That’s because, under my scenario, law school enrollments continue to suffer the same fate they’ve endured since the Great Financial Crisis: Stagnation.
In this world, would Big Law continue to ubiquitously claim that they hire “the best of the best?” After all, they would be hiring everybody.
Or, would firms compete more furiously for the “best-of-the-best” claim? Individually, they don’t hire just anybody.
It might sound far-fetched, but this hypothetical is not far from where things are headed.
The number of U.S. law school graduates has stagnated for a decade while Big Law has quietly doubled the share of graduates it hires.
For the law school class of 2012, 4,600 graduates ended up working full-time at law firms with more than 250 lawyers, according to American Bar Association data. That was just shy of 10% of all law school graduates.
Last year, nearly 18% of graduates went to firms with 250 or more lawyers.
(I unfortunately could not think of any data to find to empirically determine whether there were more “quality” graduates.)
If the trend line from the last decade continues unabated, “Big Law” would hire about 37% of law school graduates by 2040. That figure would encompass the vast majority of lawyers going into private practice. (Last year, 48% of graduates went into private practice at law firms.)
This is not meant as a prediction. First-year enrollment was up slightly last year for the first time in a long time, and that may continue.
Nevertheless it’s a good exercise to crystallize what’s been happening recently, and to draw out uneasy questions about what’s behind Big Law’s dedication to “quality.”
For instance, is it true there is a trembling uncertainty around whether enough graduates have Big Law chops? Or is “quality” an artificial limiting factor necessary to uphold law firms’ prestigious branding and profitability?
If Big Law is concerned the country’s law schools are producing too few quality associate candidates, then why do they keep hiring a greater portion of them?
There’s one simple answer: The market has been consolidating, and Big Law needs people to do the job.
Worth Your Time
On Would-You-Look-At-That: Two weeks ago, I said Big Law firms should use this year’s blowout financial success to provide more equity partnership slots. Kirkland & Ellis announced on Wednesday it is doing just that. How about it!
On In-House Panels I: Ruiqi Chen reports BP Plc has named 26 firms to a new outside counsel panel to run from 2022 to 2024. The firms were selected after a competitive process the company says considered “rates, commitment to diversity & inclusion and capability relevant to the energy transition.”
On In-House Panels II: Ruiqi also reports
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.