US law firms, already battered by the downturn and widespread layoffs, are about to face potentially their biggest staffing challenge since the credit crunch kicked in last year.
Across the country, US firms are preparing to make offers to second-year law students for the 2009 summer associate programme. Historically, at least 95 per cent of these summer associates are then hired the following autumn.
It is a cycle that is repeated every year. And as US firms traditionally make offers to the majority of their summer interns, the decisions made over the next few weeks could determine the new-lawyer intake in 2010. The big change this year, of course, is the credit crunch. A year ago no one in the market knew how bad it was going to get.
Clifford Chance partner and personnel committee chair John Christian says his firm has just made offers to 100 per cent of its 2008 summer associates, but he adds: “This is the first real decision point on staffing we’ve had since the credit crunch began.”
As Christian knows only too well, an increasing number of US firms have already had some pretty tough staffing decisions to make. Several have been forced to lay off lawyers, including Cadwalader Wickersham & Taft, which made 96 associates redundant in July.
However, Cadwalader’s summer associates have escaped the cuts, with 56 of the 58 US summer interns this year receiving offers. These figures are mirrored by those at elite firm Cravath Swaine & Moore, which has made offers to 100 per cent of its 2008 summer interns and is projecting a similar number (130) for 2009.
What is worrying many in senior management at US firms right now is that the inherent time lag in the US’s two-year hiring programme means there could be even greater consequences for firms that get their summer associate numbers wrong this year.
“I would predict that all of the leading US firms will offer virtually all of their 2008 summer associates jobs,” says one New York partner. “It’s standard practice to do so. Firms are concerned that if they don’t, their reputations will suffer. It would immediately be seen as a sign of weakness.”
Now the question is turning to how many lawyers firms believe they will need in two years’ time.
“Looking two years ahead, with such a great time lag , firms may think that things will have picked up by then and they’ll need a similar number to this year,” says Christian. “So it doesn’t automatically follow that firms will cut the numbers because of the downturn. In fact, we intend to target at least the same number of hires as last year.”
So how much of a problem could over-hiring be for a US firm versus a rival in the UK, where the economic impact of hiring new lawyers is arguably tempered by the training contract system?
According to Shaun Goodman, London-based recruitment partner at Cleary Gottlieb Steen & Hamilton, the generalist approach favoured by most of the elite US firms acts as a shield against becoming lumbered with ranks of junior, but specialist lawyers.
“One of the advantages of the leading US firms over UK firms is that they don’t have such rigid departmental structures,” says Goodman. “US associates handle a range of areas from the outset before they choose to specialise. That means US firms shouldn’t suddenly have a glut of lawyers in one area where there’s no work.”