One law firm’s experience, so far, with a new system for finding, developing, and retaining high-quality talent.


Let’s start with the basics.  My name is Tim Mohan.  I am the Chief Executive Partner of Chapman and Cutler LLP, an AmLaw 200 firm with six offices and approximately 240 lawyers.  We were founded in 1913 when two lawyers, Theodore Chapman and Henry Cutler, left their jobs with two Chicago financial institutions to open a law practice that drew upon their specialized knowledge and experience. True to our roots, 106 years later, our firm remains focused on clients in the banking and financial services sector.

The graphic above is a visual representation of the “Cravath system,” which in its original form was a highly structured “system” in which partners trained and mentored associates in all aspects of law practice, including substantive legal knowledge, supervision of others, delegation of work, and effective client relations.

During the early 20th century, this partner-associate model was replicated by virtually every law firm serving large corporate clients.  This is because of its efficiency and effectiveness in serving three distinct stakeholders:

  1. Clients, who needed more and better lawyers to help them navigate a world of greater economic opportunity and legal complexity;
  2. Young law student graduates, who were attracted to the combination of outstanding training and a comfortable guaranteed salary;
  3. Partners, who were owners of a stable and profitable law practice that grew in a very controlled, low-risk manner.

See Galanter & Palay, Tournament of Lawyers: The Transformation of the Big Law Firm ch. 2 (1991); Galanter & Henderson, “The Elastic Tournament: The Second Transformation of the Big Law Firm,” 60 Stan. L. Rev. 1867 (2008).

Remarkably, despite all of the changes that have occurred in the legal industry over the last 100 years, all of us in “Big Law,” including Chapman and Cutler, are still using some variation of this industry-standard model.

Different market conditions

When Paul Cravath created his system, the market for corporate legal services was exploding. Thus, even if a lawyer was not successful in winning the “tournament” for partnership, the well-trained corporate lawyer had ample opportunities to join other law firms and/or start his own practice.

Today is different. The demand for traditional legal services is not growing rapidly, which has reduced the supply of relatively high-paying entry-level jobs for law graduates.  Obviously, because the cost of attending law school continues to go up, for a large number of prospective students, a career in law has become a much riskier and expensive proposition. Further, as law firms hire fewer entry level lawyers, the cost of making a hiring mistake goes up.  Thus, at a systemic level, the lack of growth increases risk.

Again, let’s break things down by stakeholder.

1) Law firms

Most large firms are facing two interconnected issues related to training and replenishing our talent pool. First, legal personnel costs, by far the largest expense that a law firm faces, are rising faster than overall industry revenues.  Because junior lawyers continue to join firms with little to no practical experience, and thus have little ability to provide immediate value to clients, law firms are absorbing a growing percentage of training costs. Second, attrition rates are also on the rise, meaning that by the time many of these associates are profitable for firms, they have left to do something else.

2) Clients

For many legal departments of corporate clients, the use of law firms has become more about cost and less about hiring trusted advisors.  Most large clients are no longer willing to defray the costs of training junior lawyers at law firms that work on their matters. Clients are looking for legal solutions at reasonable prices and expect firms to staff their work with personnel without law degrees under the supervision of lawyers if that will get the job done. Clients do not view law firms as doing enough to address these needs.

3) Junior lawyers

For prospective lawyers, the number of high-paying jobs has been relatively stagnant for a number of years now. For over a decade, Bill Henderson and other commentators have written extensively about the bi-modal distribution of starting law firm salaries. See, e.g., Henderson, “Distribution of 2006 Starting Salaries: Best Graphic Chart of the Year,” ELS Blog, Sept. 4, 2007; Henderson, “How the ‘Cravath System’ Created the Bi-Modal Distribution,” Legal Profession Blog, July 18, 2008; Nicholas Alexiou, “The Most Important Chart In the Legal Industry, And It Has Nothing To Do With The Law,” Above the Law, Jun. 28, 2018; Joshua Holt, “Lawyer Salaries Are Weird,” Biglaw Investor, Oct. 20, 2019.

A cursory review of these data reveal a stark gap between the starting pay at large firms and the starting salaries for virtually all other legal jobs.  Below is the distribution of starting salaries for the most recent class of graduates:

Source: NALP, Salary Distribution Curves

As this graphic makes clear, obtaining a well-paying legal job has become extremely challenging for all but the best students at the most elite law schools. At the same time, the cost of law school has risen dramatically over the past several years.  See Law School Transparency, Law School Costs, 1985 to 2018.

This has three consequences, none of which are great for the industry: (1) students foregoing law school because of these risks, (2) students going to law school and graduating without great employment opportunities, and (3) students taking jobs at larger law firms not because of any burning desire to succeed there, but rather to pay off their rather large amounts of student debt.

Is it any wonder why law school enrollments are at a 40-year low?  See Post 006 (documenting drop-off in law school enrollment); Post 060 (presenting updated data on stagnant law school applications and enrollment).

Time to experiment

Because of the enduring success of the partner-associate training model, I understand the reluctance to go (or more accurately, be the first to go) in a new direction.  Yet, the needs of today’s legal market seem to call for a willingness to experiment with new ways of sourcing and developing legal talent.

Thus, three years ago, our firm started an initiative called the Finance Law Development Program (FLDP), based in part on our firm’s focus on the legal needs of the financial service industry. The idea for the program arose from a brainstorming session about our talent needs. Our conclusion was that we needed more new talent that could help with our client work, but who did not necessarily have to have law degrees.

The FLDP is loosely based on analyst programs run by many of the nation’s leading commercial and investment banks. Analysts are hired out of undergraduate programs, work hard for a few years, and if they impress their firms, are often offered financial help to attend an MBA program. These banks are aware that many of these analysts may not stay with them following MBA graduation. In the meantime, however, they provide valuable contributions and gain deep exposure to the bank and the broader financial services industry.

Our thinking was, and remains, why couldn’t this apply to law firms? It occurred to us that many undergraduates may be considering law school, but were scared away by the rising costs, the uncertainty of obtaining a well-paying job following law school graduation, and little knowledge of what it means to be a lawyer in a large law firm environment. Wouldn’t the opportunity to see what law firm life was really like and “try before you buy” be an appealing opportunity to many of these talented individuals?

With the above thoughts in mind, we got to work designing our program.

How the FLDP works

Below is a graphic that shows how the FLDP is designed to work within a broader “Chapman System.”

Source: Chapman and Cutler LLP

The program is fed by an internship program for rising college seniors. The internship program begins with a four-week, immersive boot camp led primarily by Chapman attorneys with some help from outside consultants.  Analysts are introduced to topics such as basic business organizations, financing structures, contract drafting skills, project management skills, applied legal technology and negotiations. They are also introduced to the business aspects of running a law firm, law firm strategy and to each of our major practice areas. [Because Finance Law Interns cost a fraction of a new law firm associate, the firm is far less worried about lost billings and thus far more willing to make investment in foundational training. wdh.]

Toward the end of the bootcamp, the firm management assigns the interns a capstone project that requires them to make a set of recommendations about a live business issue or issues currently facing the firm. This overall experience gives the interns the opportunity to learn in an in-depth way how the firm works and interact extensively with our lawyers and leadership team.

College graduates selected for the program work side-by-side as practice development analysts with attorney teams throughout the firm. Analysts also work closely with our Practice Innovations team, applying project management and new technologies to deliver better value to clients. Practice development analysts receive a competitive salary during the two-year program. For analysts electing to attend law school, the firm pays for an LSAT preparation course.

Analysts that successfully complete the program are eligible for designation as a Chapman Law Fellow. These Fellows are given an indication by us before they attend law school that we will hire them as lawyers. During law school, they would work summers at Chapman or at a placement with a Chapman client. Chapman also will extend a loan to defray housing costs that is forgiven to the extent the candidate joins the firm after law school graduation.

Results

How has the program worked? From our perspective, wonderfully well.

The quality of candidates we have interviewed for these positions has been amazing. We have heard from many of them that they are contemplating a career in law but are not positive of that direction, and that they were pleasantly surprised that this type of program existed. The analysts we have hired have proven to be as bright and eager as we hoped they would be. They are assisting us with all sorts of client and other firm work, including a program we have developed for technology-enhanced document reviews that is gaining great traction with clients.

At a recent partner retreat, the number one most-mentioned suggestion to improve our staffing was to further expand this program.

Why do we hope this type of program will catch on more broadly? Because we believe it could help address many of the more pressing issues facing the legal industry today that we discussed earlier. We can see this by looking at what is needed by the three key stakeholders:

1) law firms

  • Lower cost but highly capable and motivated junior resources to perform work that doesn’t need to be done by lawyers.
  • A better way of filtering prospective lawyers for the firm based on aptitude, cultural fit and desire to make the law firm a career.
  • A pipeline of pre-tested lawyers that can hit the ground running and provide valuable client service faster.

For law firms, we would submit that the ideal time to look at a larger pool of candidates that creates a firm’s long-term legal workforce is at a point in time prior to their hiring as lawyers. It is simply too expensive for firms to let a “tournament of lawyers” be the only method for identifying that talent pool.

2) Clients

  • Less expensive resources to perform routine work.
  • Well-trained law firm lawyers that understand their business.

Satisfying these needs, of course, can also work well for law firms. Our analysts are much less expensive resources than beginning lawyers and after two years of immersion in firm work will add immediate value to our clients as lawyers if they return to the firm.

3) Junior talent who might someday become lawyers

  • An ability to try-before-you-buy to see what law firm life is like before committing to law school.
  • If the program is successfully completed, a well-paying job virtually assured upon graduation.
  • Some potential assistance with educational expenses.

Fundamentally, to us, allowing prospective lawyers the ability to see what “Big Law” life is like before committing to law school is not just a sound business decision, it is also the right thing for successful law firms to do.

To the extent our modest update to the original partner-associate model catches on, the result will be more employable law graduates with lower overall law school debt and fewer prospective students who make the mistake of making a large investment in a career that is ultimately not for them.

An updated model to fit today’s market

Here, it seems to us that the business incentives for law firms can be once again put into full alignment with our clients and those considering a career in law.  Better employment outcomes make law school more attractive relative to other opportunities. Moreover, we hope that law schools will work with some of their key law firm employers to encourage them to consider similar initiatives, as law schools stand to benefit from better employment outcomes and lower overall cost of attendance.

We believe that our program has the potential to help with all of these issues. We look forward to further dialogue with those of you ready to try something a little different for the benefit of our industry.