Buying ‘Options’ on Associates Is a Bet Economy Will Improve

Law firms that are deferring start dates for incoming first-year associates but paying them substantial sums during the interim months are essentially buying options on these associates, points out an article in Human Resources Executive.

Does that make sense financially? Yes, if you expect the economy to improve significantly, so that it will be easier for associates to find work elsewhere during the deferral period, according to Peter Cappelli, the director of the Center for Human Resources at The Wharton School. "What's the value of the option? It is equivalent to eliminating the risk of not being able to find equally qualified candidates in the future period," he writes.