<b>Commentary:</b> 'Cloaking' Information and the Marketplace for Lateral Associates

Estimating what it costs a firm to lose a highly educated professional is more art than science, but an impressionistic review of the literature suggests rough agreement that a year's worth of salary is probably a safe minimum guess. Couple that with the fact that, in law firm land, associates literally represent the future of the firm, and you might imagine firms would invest readily and heavily in professional development and training to cultivate both talent and loyalty.

Ah well, as we all know, lawyers do not generally enjoy a reputation as astute business managers ' nor, in many cases, as “people people” ' and those two realities lead, in many firms, to benign neglect of associate training.

That does not mean, however, that firms are oblivious to the costs of attrition. Indeed, last spring The National Law Journal reported that firms are taking steps to make it harder for headhunters to poach associates, primarily by removing information about associates from their Web sites ' information as basic as direct-dial numbers, e-mail addresses and biographical or practice-group data. More recently, [LFP&B sibling] Law Firm, Inc. reported that only four of the top 10 firms deserved an “A” for the completeness of associate information on their Web sites (see, www.lawfirminc.com/texts/0505/dls0505.html).

The first question this raises is simply whether “cloaking” associate information has any effect; and the second, more interesting, question is whether firms' cloaking associates ' but not partners ' tells us anything about how the market for lateral associates differs in structure and function from the market for lateral partners.

Into the Spotlight

As to effectiveness, it strikes me as borderline desperation.

Jonathan Lindsey, managing partner at the recruiter Major, Lindsey & Africa, and someone presumably on the front lines against these shenanigans, sees increasing restrictions placed on associate information on firms' Web sites and in the details they give law firm directories. Such an approach is “not a particularly useful exercise,” he says, dryly. If recruiters are so lazy, incompetent or technologically challenged that they cannot reach associates they want to in this environment, they're in the wrong career. (Believe it or not, recruiters were making good livings before the Internet was invented and somehow found ways to identify and contact desirable associates in that prehistoric era.)

Finally, in yet another triumph for the law of unintended consequences, a prominent recruiter in Washington, DC, told me in confidence if a firm adopts “cloaking,” it has essentially turned the klieg lights of attention upon itself and is viewed as fertile ground for finding associates looking to move.

As to the market structure question, there are actually two “associate lateral” markets: One to other law firms and one to in-house positions. (Yes, there is also a “partner lateral” market to in-house positions, but on an entirely different plane of responsibility, and it is relatively small in scale compared with the associate/in-house market.) Associates moving in-house is the easy case: Law firms should love it when their alumni move in-house. This is perhaps their single richest vein to be mined for big-deal new business down the road. Indeed, if this were the only market, law firms would be insane to shield associate information.

That tells me that firms believe the lateral-to-another-law-firm market is of far greater significance. Economically, what does the departing associate's firm lose? For starters, it forfeits its investment in training and development (as noted, this may not be that great a loss), which is captured by the “receiving” firm, but ' assuming it had enough work to keep the departing associate busy ' it must replace the associate as well, incurring headhunter fees and having to deal with an unproductive new hire until the replacement can get up to speed. This cost is the primary source of that “one year's worth of salary” estimate.

Good Riddance, Schmoes

The next question is whether the firm loses the present value of any part of the departing associate's future billable hours. This is where it gets truly interesting.

For simplicity, let's assume all associates fit into one of three categories: I'll call them schmoes, joes and pros. Schmoes are probably miserable themselves, and firms are, relatively speaking, miserable having them onboard. Losing schmoes probably raises morale all the way around, and since their billable hours are likely to be both few and of low quality (high write-offs), the economic loss is immaterial.

Joes are your journeymen associates: They'll bill pretty much your annual target, and you'll certainly make money off them, but they aren't on your A Team and are pretty certain to depart before the up-or-out year arrives. The important economic point is that joes are fungible. This sounds like an inhumane thing to say, and it is (and joes know it as well, by the way). When you lose a joe, you really have lost no irreplaceable revenue; someone will come along to take his/her place, and even if that person comes with a recruiter's price tag on his or her head, the cost/benefit to you of hiring the joe will, by hypothesis, be positive – otherwise, you wouldn't replace the underemployed and unprofitable joe who left. Again, no materially negative economic impact.

Keeping the Pros

This brings us to the pros: Partnership material by all indications, these are the individuals you want to focus all your coddling and grooming efforts on. Assign them to the high-visibility matters, keep them amply busy but not going into cardiac exhaustion, put them on display in front of your core clients and, oh yes, pray that they stay until the anointed year.

Of course, “praying” is not taught at business school as a management technique. The care and nurturing of pros is a two-way street: They are delivering top-notch work, and your firm in turn should ensure they receive a top-notch experience as they grow into their career. If you do that, all the headhunters in the world can call, in vain. If you don't, the pros know they're good, and they won't suffer being unappreciated. If a pro departs prematurely, your firm takes a big hit, economically and reputationally – clients will be asking what happened to them and wondering if they know something about how the firm treats its lawyers that the client doesn't.

So come off it; put the associate info back up on the Web sites. And while you're at it, why don't you include the professional business-side managers of the firm? Just because Jeffrey Immelt doesn't generate billable hours for GE doesn't mean it decides to keep him off its site.

Estimating what it costs a firm to lose a highly educated professional is more art than science, but an impressionistic review of the literature suggests rough agreement that a year's worth of salary is probably a safe minimum guess. Couple that with the fact that, in law firm land, associates literally represent the future of the firm, and you might imagine firms would invest readily and heavily in professional development and training to cultivate both talent and loyalty.

Ah well, as we all know, lawyers do not generally enjoy a reputation as astute business managers ' nor, in many cases, as “people people” ' and those two realities lead, in many firms, to benign neglect of associate training.

That does not mean, however, that firms are oblivious to the costs of attrition. Indeed, last spring The National Law Journal reported that firms are taking steps to make it harder for headhunters to poach associates, primarily by removing information about associates from their Web sites ' information as basic as direct-dial numbers, e-mail addresses and biographical or practice-group data. More recently, [LFP&B sibling] Law Firm, Inc. reported that only four of the top 10 firms deserved an “A” for the completeness of associate information on their Web sites (see, www.lawfirminc.com/texts/0505/dls0505.html).

The first question this raises is simply whether “cloaking” associate information has any effect; and the second, more interesting, question is whether firms' cloaking associates ' but not partners ' tells us anything about how the market for lateral associates differs in structure and function from the market for lateral partners.

Into the Spotlight

As to effectiveness, it strikes me as borderline desperation.

Jonathan Lindsey, managing partner at the recruiter Major, Lindsey & Africa, and someone presumably on the front lines against these shenanigans, sees increasing restrictions placed on associate information on firms' Web sites and in the details they give law firm directories. Such an approach is “not a particularly useful exercise,” he says, dryly. If recruiters are so lazy, incompetent or technologically challenged that they cannot reach associates they want to in this environment, they're in the wrong career. (Believe it or not, recruiters were making good livings before the Internet was invented and somehow found ways to identify and contact desirable associates in that prehistoric era.)

Finally, in yet another triumph for the law of unintended consequences, a prominent recruiter in Washington, DC, told me in confidence if a firm adopts “cloaking,” it has essentially turned the klieg lights of attention upon itself and is viewed as fertile ground for finding associates looking to move.

As to the market structure question, there are actually two “associate lateral” markets: One to other law firms and one to in-house positions. (Yes, there is also a “partner lateral” market to in-house positions, but on an entirely different plane of responsibility, and it is relatively small in scale compared with the associate/in-house market.) Associates moving in-house is the easy case: Law firms should love it when their alumni move in-house. This is perhaps their single richest vein to be mined for big-deal new business down the road. Indeed, if this were the only market, law firms would be insane to shield associate information.

That tells me that firms believe the lateral-to-another-law-firm market is of far greater significance. Economically, what does the departing associate's firm lose? For starters, it forfeits its investment in training and development (as noted, this may not be that great a loss), which is captured by the “receiving” firm, but ' assuming it had enough work to keep the departing associate busy ' it must replace the associate as well, incurring headhunter fees and having to deal with an unproductive new hire until the replacement can get up to speed. This cost is the primary source of that “one year's worth of salary” estimate.

Good Riddance, Schmoes

The next question is whether the firm loses the present value of any part of the departing associate's future billable hours. This is where it gets truly interesting.

For simplicity, let's assume all associates fit into one of three categories: I'll call them schmoes, joes and pros. Schmoes are probably miserable themselves, and firms are, relatively speaking, miserable having them onboard. Losing schmoes probably raises morale all the way around, and since their billable hours are likely to be both few and of low quality (high write-offs), the economic loss is immaterial.

Joes are your journeymen associates: They'll bill pretty much your annual target, and you'll certainly make money off them, but they aren't on your A Team and are pretty certain to depart before the up-or-out year arrives. The important economic point is that joes are fungible. This sounds like an inhumane thing to say, and it is (and joes know it as well, by the way). When you lose a joe, you really have lost no irreplaceable revenue; someone will come along to take his/her place, and even if that person comes with a recruiter's price tag on his or her head, the cost/benefit to you of hiring the joe will, by hypothesis, be positive – otherwise, you wouldn't replace the underemployed and unprofitable joe who left. Again, no materially negative economic impact.

Keeping the Pros

This brings us to the pros: Partnership material by all indications, these are the individuals you want to focus all your coddling and grooming efforts on. Assign them to the high-visibility matters, keep them amply busy but not going into cardiac exhaustion, put them on display in front of your core clients and, oh yes, pray that they stay until the anointed year.

Of course, “praying” is not taught at business school as a management technique. The care and nurturing of pros is a two-way street: They are delivering top-notch work, and your firm in turn should ensure they receive a top-notch experience as they grow into their career. If you do that, all the headhunters in the world can call, in vain. If you don't, the pros know they're good, and they won't suffer being unappreciated. If a pro departs prematurely, your firm takes a big hit, economically and reputationally – clients will be asking what happened to them and wondering if they know something about how the firm treats its lawyers that the client doesn't.

So come off it; put the associate info back up on the Web sites. And while you're at it, why don't you include the professional business-side managers of the firm? Just because Jeffrey Immelt doesn't generate billable hours for GE doesn't mean it decides to keep him off its site.