Change May Be Coming To Firm Staffing Models

By Shannon Henson

Law360, New York (December 08, 2009) -- While the associate ranks have been hardest-hit by the downturn, a Law360 survey shows many large law firms still have high ratios of associates to partners — a staffing model some legal consultants say needs to change.

According to a Law360 survey, some law firms have retained staffing structures that have ratios as high as five associates to one partner. Of the responding firms, Paul Weiss Rifkind Wharton & Garrison LLP has the highest ratio of associates to partners, with a U.S. staff of 572 associates and 102 partners.

Other firms with high ratios of associates to partners included: Cleary Gottlieb Steen & Hamilton LLP, which reported 463 associates and 112 partners; Debevoise & Plimpton LLP, which has 424 associates and 114 partners; and Cravath Swaine & Moore LLP, which reported 357 associates and 88 partners.

However, it's not uncommon for the number of partners to far outweigh the number of associates at a firm, and both the mean and median partner-to-associate ratio for Law360's survey hovered around 1.35 partners to every one associate. And consultants say that billing pressures from clients may force some law firms with large numbers of associates to adjust their staffing philosophies.

“Clients are no longer prepared to pay for young lawyers or the time they put into a matter,” said Jerry Kowalski, founder of legal industry consultancy Kowalski & Associates.

Associates have long been considered the profit centers of firms. The more associates a law firm can put on a case or matter, the more it can bill a client.

Jack Zaremski, founder and president of Hanover Legal Personnel Services Inc., said Wachtell Lipton Rosen & Katz, which is highly profitable, has long operated with a low ratio of associates to partners.

“It's part of how they attract the best talent,” Zaremski said. “Lawyers know going in that they will work hard, but there is a good chance that they will make partner.”

The floundering economy has undoubtedly forced law firms to become more efficient, producing more work in less time, Zaremski said. But he questioned whether the recession would have a lasting impact on staffing philosophies, saying the ratio of associates to partners will remain a function of the economy and how much business a firm can generate.

Cadwalader Wickersham & Taft LLP, which has 386 associates and 95 partners in its U.S. offices, also had one of the highest ratios of the firms that responded. W. Christopher White, the firm's chairman, said the firm makes staffing decisions based on the needs of its clients.

In the recession, the firm laid off attorneys and also shifted some lawyers from transactional matters to restructuring work. Currently, the firm is actively seeking to add attorneys. “We're in a growth mode now,” White said.

While Cadwalader has a high ratio of associates to partners, some law firms successfully operate with a very different approach to staffing, with partners outnumbering associates by a fairly significant margin.

Among the firms that responded to Law360's survey, the three with the highest ratio of partners to associates were regional firms. Kaufman & Canoles PC reported that it has 81 partners and 22 associates, Nexsen Pruet has 101 partners and 31 associates, and Bowles Rice McDavid Graff & Love LLP reported 83 partners and 26 associates.

Kowalski anticipates that the staffing approaches of firms like these will become widespread. “We have repeatedly said that the paradigm is changing, and the old structure ... just doesn't exist any more,” he said.

Kowalski said law firms increasingly would have higher numbers of partners than associates because clients have become less willing to pay unseasoned attorneys.

“It's actually easier for a partner or experienced attorney to sit down and handle a matter than calling in a young associate, explaining a transaction or lawsuit, having them draft a document, then reviewing it and and revising,” Kowalski said.

Frank Michael D'Amore, founder of Attorney Career Catalysts LLC, said clients have become less inclined to have young associates handle their work. Many clients would rather pay a senior attorney $700 an hour to get a quick answer than pay a young associate $300 and have to wait, he said.

And “even if the client isn't insisting on it, more partners are holding on to their work because they aren't that busy and they want to keep their hours up,” D'Amore said.

Kowalski said he expects law firms to outsource more work, allowing them the opportunity to staff up when a deal or major case calls for it. With such a staffing system, “there's no overhead, no need to pay a salary on a regular basis,” he said.

No matter how staffing attitudes change, D'Amore said law firms will be more skittish in the future about retaining high ratios of associates to partners.

“If the ratio is high and the work slows, you are dead in the water,” D'Amore said. “You have a lot of overhead, and that's what leads to having to cut people. Firms going forward are going to be a lot more careful. I think we'll see firms act with a lot more caution than they had in the past. What they felt through the recession will be very raw and alive with them.”