Law Firms

Hildebrandt: Cut Associate Salaries Now

“If you don’t cut associate starting salaries now, you are nuts. They were too high. Now we have to pay for it.”

Bradford Hildebrandt’s admonition on costly associate salaries was repeated over and over as top law firm management met at Hildebrandt’s Law Firm Leaders Forum in San Francisco last week to talk about the long-term implications of the economic downturn and the actions firms will need to take in order to adapt to a changing world.

“This is really the opportunity to look at associate salaries, and go to folks and say, ‘we are anticipating lower demand, we have to rationalize the expense base,’ ” said Danilo DiPietro, client head and managing director of Citi Private Bank’s Law Firm Group.

DiPietro’s proposal came on the heels of decreased demand for legal services, fee collection and productivity in the first month of 2009, according to the Hildebrandt Institute’s and Citi’s most recent law firm data. Bankruptcy was the only practice group to see positive growth in January.

Associates weren’t the only targets of suggested cost-cutting measures at the two-day conference. “Reducing partner ranks at equity partner levels is necessary,” DiPietro said, “That will be happening at an on the radar level in the next year.”

A second phenomenon that will impact U.S. lawyers in 2009 and beyond is the escalating growth of India’s professional class, particularly highly-educated, English-speaking lawyers.

“One year from now, the U.S. will no longer be the world’s largest English speaking country,” predicted New York Times best-selling author and trained lawyer Dan Pink. The former Al Gore speechwriter noted that India has five times more law graduates every year than the U.S.

One firm already utilizing India’s massive legal workforce to reduce internal costs is corporate law firm Haynes and Boone. Managing Partner Terry Conner said the firm currently works with 20 dedicated India-based lawyers on matters in which a legal mind would be helpful, but U.S. associates either don’t want to or aren’t benefiting from the tasks.

“ILO is not displacing U.S. associates,” Conner said, noting the cool reception the project received from some of the firm’s associates, “but it would have implications for firm long-term staffing models.”

The India outsourcing has not yet affected recruiting at the firm, Conner added.

The 14th annual forum was co-chaired by Hildebrandt and Ralph Baxter, chairman and chief executive of Orrick, Herrington & Sutcliffe. It drew nearly 110 attendees, including law firm managing partners and chief executives, legal scholars and corporate general counsel.

Follow Rachel Zahorsky’s Twitter feed and see more notes about the conference @LawScribbler.

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