September 2014

Trend Analysis & News Roundup

Innovation in Recruitment

What do we talk about when we talk about “innovation” in law firm recruiting? Usually, it’s either of two related subjects: the decline of the traditional summer associate program and/or the rise of data-driven empiricism in the identification of suitable candidates. A look at the current recruiting landscape suggests that the former has been exaggerated and the latter has yet to truly find much traction in the industry.

The peculiar premise underlying OCI is that it is perfectly rational to entrust one’s entire entry-level hiring process to a series of superficial 20-minute “cattle call” interviews two years ahead of when the candidate will actually become a full-time employee. The results of this system suggest otherwise. According to NALP, nearly half of all law firm associates are gone within three years. Compare this with an attrition rate of less than five percent at Fortune 100 companies. Further, considering that the all-in costs of bringing in a first-year to a Biglaw firm is, according to ABA numbers, around $250,000, one might think that conditions were ripe for a serious reconsideration of the status quo.

Many law firms wonder if they can free themselves of their reliance on (expensive) summer programs and instead look to the lateral market to fill their talent needs. Each approach offers particular advantages. Law student recruiting — i.e., a traditional summer associate program — provides firms with access to top talent, the ability to train lawyers from the get-go, and the development of camaraderie within the class, which facilitates the building of a strong firm culture. Lateral hiring, in contrast, helps firms match their current needs. For example, a firm might have a gap in its talent pipeline because of attrition by lawyers in a particular practice area. Of course, most large law firms employ a hybrid approach of both summer associate hiring and lateral recruiting. As firms struggle to find the correct mix in this “New Normal,” we are seeing some firms abandoning on-campus summer recruiting altogether, in favor of a more cost-effective approach of obtaining summer associates through résumés sent in directly by candidates or through law school career services offices with whom the firm communicates.

On the other end of the spectrum, a few select firms (e.g., Skadden) have gone as far as resuming 3L recruiting in order to fill undersubscribed practice areas. Reportedly, about 20 percent of the Skadden’s summer class consists of 3Ls. To be sure, plausible 3L candidates typically have experience in other firms or government agencies (such as the Justice Department or the SEC). Fall recruiting of 3Ls used to be more common before the Great Recession—which brought about several changes in the summer associate hiring process. Most notably, summer programs have contracted dramatically, by 50 percent or more. Consequently, standards are higher than ever before: firms are looking for any reason to reject candidates. After all, there’s more client pressure on the cost front. As is widely known, some clients will say in the master engagement letter that they will not pay for first-year associates.

As a matter of practicality, combined with entrenched habit, large firms in major cities are not going to abandon their summer programs. The summer programs do give firms a ten-week look at the candidate, a chance to get to know the candidate’s personality and assess their work product. Not to mention the steep costs associated with the headhunter fees that would be involved in maintaining a pipeline via the associate lateral market (up to $40,000 per placement).

In light of offer rates that often hover near 100 percent, it seems dubious that the programs perform any real screening function. Outside the legal industry, the ongoing revolution of the human capital resource allocation market has adopted Moneyball-style, Big Data empiricism. Around 80 percent of the Fortune 500 companies now practice some sort of data-driven assessment in their hiring processes. Seeing as the legal industry takes many of its cues from its corporate clients—where the average length of the interview period has doubled over the past five years—perhaps Biglaw will follow suit and become more cautious and deliberate in their interviewing and hiring, while at the same time employing work-force analytics software that can make the process cheaper and more efficient.

Some innovators within the profession are urging firms to employ more sophisticated and reliable hiring and development tools commensurate with the law firm talent challenge. For example, Bill Henderson has pointed out that there is research showing that the current most popular law firm hiring tool — the one-on-one interview—ranks only slightly above a coin-toss as an effective hiring approach.

Among those seeking to find a role for evidence-based hiring tools in the legal space are The Right Profile (known for their work with pro sports teams — Bill Belichik is a fan) and a team of psychologists in Chicago who have developed the Sheffield Legal Assessment. It is the first online trait assessment purpose-built for the legal profession. General market instruments such Myers-Briggs and Caliper tend to clump lawyers together into an undifferentiated mass. Thus the need for an attorney specific test, accounting for the personality traits and patterns distinguishing lawyers from everyone else and even among lawyers from one practice area to the next.

However there is significant doubt about the efficacy of psychometric testing. The Myers-Briggs Type inventory, by far the most widely employed such assessment tool, has been seriously criticized, if not debunked. The literature shows that personality type will change for 50% of individuals simply through retesting, i.e., very low “decision consistency.” The best correlations between job performance and personality assessments are about .3 (indicating about 9% of the variance in a person’s job performance can be accounted for by a personality assessment). A correlation of .3 is hardly significant (considering that tests like ACT or the SAT have been shown to correlate upwards of .7 with first year college GPA).

Ultimately, “innovation in recruitment” in the legal industry is conspicuous by its absence. There have been a few changes around the edges—shifts in timetable, the “Super Days” for callbacks—but nothing radical. Considering the expense and risk at stake in attorney hiring, real and widespread experimentation and innovation seem inevitable. But for now, it’s basically more of the same, only with fewer people involved.


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September 2014

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HUMAN CAPITAL DATA POINT

The Economics of a Biglaw First-Year

EXPENSE
Salary $160,000
Recruiting $25,000
Benefits $52,800
Computers $5,000
Secretary $30,000
Space $15,000
Training $40,000


TOTAL: $327,800

Source: Trenton H. Harris, Arnold & Porter LLP


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