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August 30, 2007

Common Questions after EIW

8/30/07

As EIW comes to a close, students will have any variation of three basic questions relating to EIW: 1) When should I hear back from employers about callbackss? 2) What do I do if I don’t get my desired callbacks (or any callbacks?) 3) How do I schedule and prepare for callbacks?

While the OCS staff is certainly available to meet with you on an individual basis to address your concerns and answer questions, below is some general guidance from OCS counselors on the three basic questions.

1. What should I hear back from employers about callbacks?

While it’s true that you or some of your peers may have received callback invitations during EIW (and in some cases the day of the screening interview) employers are all different and handle callbacks differently. Students can typically expect to wait anywhere between 1-2 weeks to hear back from employers. Some of your peers may get callback offers earlier than others-the fact that you have had to wait does not necessarily mean that you are not getting a callback. Similar to your experience with law school admissions, some get accepted earlier, some later, and so on.

2. What do I do if I don’t get callbacks?

After two weeks or so of waiting for a callback you might be in either of two positions: (1) received rejection letter from firm(s) or (2) not heard back from firm(s). For the firms that have rejected you, put them to bed and don’t waste time mourning over or thinking about them. For those that you have not heard back from, you should be proactive and follow up with the firms by both leveraging other callback offers against this particular firm and/or by expressing your great interest in visiting with the firm on a callback. To leverage an offer, you simply let the firm that you seek a callback from know that although you already have a callback from firm X, but that you are really interested in interviewing this particular firm. In short, don’t give up until you either get the callback or a rejection.

3. How do I schedule and prepare for callbacks?

Scheduling callbacks is relatively painless. Typically you’ll be given the number of the law firm recruitment coordinator (or travel agent) who will help you schedule your callback interview. While it might be advantageous to schedule a callback soon after you receive the invitation, there may be other good reasons to not schedule it as soon as possible. For callbacks on the West Coast, due to the travel time and time change, you might consider blocking off several days to complete all your callbacks in that region. For callbacks where travel time is not a major issue, you can plan your callbacks to best fit your class and personal schedules over a period of weeks.

As far as preparing for callbacks, for the most part think of them as multiple screening interviews. You should be prepared to speak to your resume, about your grades, and of course why you are specifically interested in their firm. Often times you will get a schedule of interviewers before the callback, which makes it possible to research your interviewers to come up with good questions and points for discussion. You can also ask for a schedule a day or two before the callback.

Posted by hafeezt at 02:53 PM | Comments (0)

What Every Lawyer (and law student) Should Know About the Economics of a Law Practice

Below is a great article on the basics of law firm economics. As the author points out, most lawyers-let alone law students-have no idea (or rudimentary at best) about the economics of law firms. Students and young associates may think that law firms are doing them a favor by offering them entry level positions at firm. However a better understanding of law firm economics may lead one to conclude that firms actually make money from associates-even entry level associates.
Whatever the case may be, it can't hurt to have a basic understanding of how law firms make money and more importantly, how they make money off associates.

What Every Lawyer Should Know About the Economics of a Law Practice

Melchior S. Morrione
Marketing the Law Firm Newsletter
08-30-2007

Why do so many lawyers know so little about the economics of practicing their profession? Not surprisingly, it's because their law school education did not address any of the business aspects of practicing law. So most young lawyers join law firms with little understanding of how they operate and without a clue as to what it takes to make a law practice successful and profitable. Many lawyers, especially those who join large firms, manage never to master these concepts -- and, in many cases, work hard at avoiding them.

This abyss between law school education and professional practice is finally being acknowledged in academia. Harvard Law School has established a research center, under the direction of professor David Wilkins, to identify the broad issues that have transformed the legal industry. In addition to research projects, it has identified the need to make law school curricula more relevant to current issues in the profession. I would hope that this will include the basic economics of practice, how law firms operate, how services should be delivered and how to adapt to the changing needs of clients.

TRIAL BY FIRE

Those who choose to practice law as solo practitioners or in a small-firm environment learn the relevance of economics early in their careers. They learn quickly that while they may be very busy working on client matters at a point in time, once those matters are completed, they need to find new work. They soon come to realize that in order to maintain a steady stream of work, they will need to pursue new assignments and new clients while working on their current matters. They discover that keeping all the balls in the air is not easy. Then there are the costs: secretary, rent, supplies, insurance, office equipment, etc.

What's left is net profit -- their compensation. At some point, they come to appreciate that their compensation is limited by the number of hours they can bill and collect from clients. And if they can hire an associate, at an overall cost less than the value of the associate's time that can be billed to clients, the difference will increase net profit -- their compensation.

THE INSTITUTIONAL COCOON

Then there are those who join large firms. Their experience is completely different. There always seems to be an endless supply of work. Their main concern is to charge the number of billable hours expected of them.

Even after they become partners, most lawyers in large firms manage to evade involvement in the economics of the business. They do not really understand, nor do they want to. Some won't acknowledge they are in a business. Others feel that the business of law is not their problem but that of the managing partner. Rather than spend time trying to understand the financial statements they receive, they focus only on their draw and annual compensation. These partners are often annoyed, and sometimes personally affronted, by management requests for certain levels of billable hours, monthly billing, reductions in write-offs, speedier collections and better management of associate time.

ECONOMIC INFRASTRUCTURE

The basic economic infrastructure of a law firm is no different from that of any other service business. There is revenue, expense, profit (partner compensation) and capital (the funds needed to run the business).

The revenue cycle is the key to profitability. Once upon a time, law firms billed their clients once a year, and the statements said simply "for services rendered" -- but that was eons ago.

It is vital to understand the role that timing plays in the revenue cycle. Although a simple concept, most lawyers fail to focus on the fact that they do not bring in a single dollar of revenue until they bill the client and collect the fee. Assuming that you are proactive and manage to bill all the time charged to clients on a monthly basis, consider that by the time the bill is presented to the client, at least 10 or 15 days will have elapsed into the next month. Even if the client pays the bill within 30 days of receiving it, a minimum of 45 days (and more like 60 days if you average in the month over which the costs were incurred) will have elapsed since the costs were incurred that produced this revenue. These costs, which include associate and staff salaries, overhead and office costs related to the work billed, have already been paid and therefore need to be funded for two months, until the revenue is received. And this is under the best of circumstances.

What if you don't bill all your time charges monthly or the client doesn't pay in 30 days? You will need to carry your unbilled inventory and receivables even longer. So how do you fund unbilled inventory and receivables? The answer is: with working capital.

WORKING CAPITAL

Because costs are incurred before revenue is received, you need working capital to run the business. Working capital is that which should funds the difference in timing between the collection of revenue and the payment of costs and expenses to earn it. In a properly capitalized firm, the required working capital is funded from capital contributed by the partners. Bank borrowing should be used only to fund temporary or seasonal shortfalls in working capital and for the acquisition of long-term assets.

IMPROVE PRODUCTIVITY TO INCREASE PROFITS

Just as solo practitioners come to realize that once they have reached the limits of billing their own time their profit can be increased only by adding an associate whose time can be billed to clients, so, too, in a large firm, the effective use of associates is the key to increasing profits. Many partners are perplexed by the concept of being able to improve their own productivity and consequent profit contribution to the firm, by learning to use associates more effectively.

Most partners will concede, albeit grudgingly, that not all functions involved in solving client problems require the same level of knowledge and experience. Therefore, projects can be broken down into discrete functions, and assignments can be parceled out to associates according to their individual abilities and experience. Delegating work should mean that everyone gets a challenge, and by pushing the work down to the lowest-cost associate capable of handing it, costs are reduced, and better value is delivered to the client. In a service business, efficiency and profitability are maximized only when people are working at their highest ability levels. So even though a partner is capable of performing the work that can be done by an associate, it is a waste of partner talent to do so.

RELUCTANCE TO DELEGATE

Getting partners to delegate work to associates is difficult, at best. Many who have tried have been unsuccessful because they just dump the work on the associate, without properly planning, communicating and supervising the assignment.

I believe I've heard all the excuses for not delegating. Some of my favorites include:

* I barely have enough work to keep me busy.
* Clients want only me to work on their matters.
* I can do it faster.
* Explaining things to associates is a waste of my time and the client's money.
* Why bring associates to client meetings; they don't say anything anyway.
* Associates never get the job done right the first time and are always late.
* Only a few of our associates are any good, and they are never available when I want them.

Some managing partners suffer from the same mind-set. I have known managing partners who, when they sought to improve the firm's bottom line, just told their partners to bill five more hours per week. What they should have said was to bill five fewer hours per week and use that time to go out and get 20 hours of new work from existing and new clients that could be done by associates.

HOW LEVERAGE AFFECTS PROFITABILITY

The improvement in profitability that can be achieved through the effective use of associates is best demonstrated by an example. To simplify the analysis in our example, assume that for every dollar the firm collects from clients, 55 percent goes for expenses, and 45 percent is net profit to be shared by the partners. Assume, too, that the firm is large enough that adding one or two associates to the staff will not materially alter the 45 percent profit factor.

As shown in the accompanying chart, a partner billing 1,700 hours will generate revenue of $1,020,000 and profit of $459,000. If this partner's billable hours increase to 1,900, the revenue goes up to $1,140,000, and profit rises to $513,000. Not bad.

But suppose, instead of increasing billable hours, this partner's billable hours are reduced to 1,500, and the 200 hours is used to find new work, a good portion of which can be done by associates. If the partner can bill 1,600 hours of Associate 1's time, then, although the profit from the partner's hours is reduced to $405,000, the combined profit from the partner and Associate 1 is $621,000. Therefore, even at 1,500 billable hours, a partner leveraged with one associate billing only 1,600 hours is considerably more profitable than that partner billing 1,900 hours alone. And if the partner could bill 1,800 hours of an associate's time (Associate 2) the combined profit is increased to $648,000. Now if the partner could find enough work to keep both associates busy, the combined profit would be $864,000. And this, while billing 1,500 hours and spending 200 hours marketing and developing new work. This is how real money is made in a professional services business.

The numbers are compelling. But to achieve them requires that managing partners recognize the need for partners to devote time to marketing and provide the motivation and tools to help them learn how to develop effective delegation skills.

EVERYBODY WINS

The key to successfully growing a law firm is to have all the lawyers in the firm performing at their highest-ability levels. And while partners often resist, bringing associates into the firm is a fundamental tenet of growing a healthy law firm. It is the way young lawyers learn how to serve clients, working on the job as part of a team solving client problems. And it is the only way to train and develop new partners.

Everyone benefits from leverage -- clients, associates, partners. Clients get better value because all team members working at their proper experience levels get the job done at lower billing rates. Associates learn how to deliver service under the guidance of an experienced partner. And partners are able to spend more time interacting with their clients and performing the functions only they can handle.

CONCLUSION

This is not rocket science. It is Economics 101 for a law firm. I will admit that learning to delegate effectively does not come easily. It requires the development of project management skills, which, once learned, will put the partner in the position of spending more time planning, supervising, and reviewing the work and less time doing it -- without compromising quality. But the bottom line is that everyone on the client team participates at their highest-ability level in delivering better value to the client and increased profitability to the firm. And isn't that the objective?

Posted by hafeezt at 11:20 AM | Comments (0)

August 13, 2007

Associate Moneyball

Bruce MacEwewn of the blog Adam Smith, Esq. http://www.bmacewen.com/blog/
"Associate Moneyball" comments on the American Lawyer's recent story on associate recruitment and hiring by the top law firms. Bruce focuses in on the traditional law firm recruitment model which often times falls short of helping acheive law firms' recruitment goals (as associate retention rates continue to rise) and leaves law students less than satisfied with their choices (among other things, law students have a hard time differentiating one firm from another). Below is an except from Bruce's blog:

"Is this any way to recruit associates?" asks a lead story in this month's American Lawyer.

What is "this way?" We all know the drill, most of us from both sides of the table:

* Top law schools orchestrate dances of 20-minute interviews between visiting firm partners and law students;
* questions are kept superficial (one Latham recruit got a steady diet of fantasy football questions);
* grades and class rank are presumed to be valid proxies for post-employment performance; and, in the event,
* of students offered summer jobs by "big" firms (> 250 lawyers):
o just 28% accept
o 40% of whom are gone by their 3rd year, and
o 62% of whom are gone by their 4th.
* And, according to NALP, half of associate departures are "unwanted" by the firms.
* Finally, depending on who you believe, replacing a needed associate costs from one to three times their fully loaded annual costs.

Worse, the pressure is intensifying. According to the National Law Journal's "250" report (ranking the largest 250 US firms by lawyer headcount), the number of associates at those firms has increased 76% over the past decade while the number of law school graduates has gone up just 7%. Firms are going to more law schools, reaching farther down into the class ranks, or both. And at the elite schools, firms are simply pushing harder. Georgetown Law, for example, anticipates a 10% increase in firm interviews this year, and the same again next year.

Need I add that most of this takes place with students fundamentally in the dark about what differentiates one firm from another?

"[Students] aren't helped much by firm marketing materials, which often say the same thing and make firms indistinguishable from each other. "They all tell you they have great clients, and they work hard but [have] a very collegial atmosphere," says the Stanford student. "It's the same discourse over and over again."

Fine. Diagnosis is one thing, prescription another.

To continue reading this blog entry, please visit Adam Smith, Esq. at http://www.bmacewen.com/blog/

Posted by hafeezt at 11:43 AM | Comments (0)

August 01, 2007

Annual Survey Shows the New Reality of Associate Life

Four facts -- from too few lawyers to too many sent packing -- set the stage for the latest war for talent

Aric Press
The American Lawyer
August 1, 2007
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Put aside the conventional wisdom. Here's the state of associate life.

-Associates aren't miserable, except perhaps in certain high-pressure New York precincts. The average satisfaction score hit a record high this year: 3.81 on a five-point scale.

- Associates don't plan on staying. Despite the high level of job satisfaction, only 44.9 percent of the respondents predicted that they would be at their firms in five years, and only 11.7 percent expected that they would become equity partners at their current firm.

- Despite all the hand-wringing over associate retention, law firms report that in nearly half the associate departures -- 49 percent -- the firms were either neutral about the departures or happy to have the associates leave. (This statistic comes from the latest survey by the National Association for Law Placement.)

- There may not be enough lawyers to feed the hiring appetite. According to our survey of summer associate hires, Am Law 200 firms expect to bring on roughly 10,000 associates next fall. That astonishing number equals about one-quarter of all the students who will graduate from U.S. law schools next year. To put it another way, the top 20 law schools will only produce about 6,500 graduates.

What do these four facts mean? For law firms, at least three things. First, in the short run, the war for talent will become more ferocious. Second, the cost of talent will only increase. And third, the need for firms to differentiate themselves will become apparent even to the hidebound.

This year's famous hike to $160,000 in starting pay for first-year associates did not buy hiring firms anything in terms of separating themselves from their competition. The firms that can afford to pay more will pay more; but there is a price point that not all Am Law 200 firms will be willing to match. We're confident that that number begins with a 2.

As costs rise, the price of a mistake only grows. The feverish but unsystematic, even casual, recruiting habits of firms seem painfully inadequate now. Firms will sharpen their techniques or start losing ground to others who have grown weary of viewing recruits through a glass darkly.

As we have argued before, firms are not all alike and do themselves and their potential associates little good by pretending otherwise. Firms need to define themselves and then make their distinctive qualities known to the job market.

A word for potential associates: Enjoy! The seller's market will last until the next downturn -- by which time most of you will be on to something else.

Posted by hafeezt at 11:43 AM | Comments (0)