Trainee problem threatens pyramid

THIS year is turning out to be one of the worst to be a trainee lawyer. This September Clifford Chance will axe 21 of its 70 trainees on qualifying, giving the firm a retention rate of 70 per cent. Last year the firm kept on 95 per cent. American firm Jones Day will keep on 54 per cent of its trainees in London and Denton Wilde Sapte and Taylor Wessing will both hit around the same mark.<br /><br />Firms are betting that the work flow will not return to 2006-2007 levels for quite some time and many are also offering fewer places on their 2011 intake. Allen &amp; Overy has closed its application process early, while Field Fisher Waterhouse will not bring a single trainee on board in 2011. Other firms have offered trainees lump-sums to defer their places, some up to &pound;10,000.<br /><br />So what does it all mean for the City&rsquo;s lawyers? Some, at least, are aware that the nature of law makes it difficult to react quickly to change. &ldquo;Law firms are in an odd position where we do recruit people a long time in advance, up to three to four years, and I get the sense that some firms feel it&rsquo;s like steering an oil tanker,&rdquo; says Jeremy Cape, graduate recruitment partner at Denton Wilde Sapte.<br /><br />But with waters looking choppy, some are trying to become more agile. In the future, Cape says, many firms plan to hire ad hoc if they find themselves with vacancies. &ldquo;The problem has been that the law firms perhaps didn&rsquo;t envisage the downturn being quite so bad and now feel like they&rsquo;ve over-recruited. They&rsquo;re thinking now that they&rsquo;ll err on the side of caution and under-recruit and pick people up later,&rdquo; he says.<br /><br />It sounds clever, but it might not be a great tactic. Some in the industry believe that the current culling of trainees could backfire and leave law firms with a generation gap a few years down the line.<br /><br /><strong>SUPPORT STRUCTURES</strong><br />In the worst case scenario, an absence of young trainees could eventually even threaten the pyramid model that firms use, whereby one partner is supported by a few senior associates who in turn have more junior lawyers underneath them. When the economy recovers, law firms might find that their pyramids are thin at the junior lawyer level &ndash; which is where much of the nuts and bolts work of a deal is done.<br /><br />Firms found themselves in this position in the 90s and experienced wage inflation as they frantically tried to hire lawyers from a smaller pool of talent. If they have to engage in big recruitment, then that could seriously hit law firms&rsquo; bottom line. Legal recruiters don&rsquo;t come cheap and fees can hit between 10 and 20 per cent of what is likely to be an inflated salary.<br /><br />Industry commentator Tony Williams, at legal consultancy Jomati, says that firms are adjusting their working model: &ldquo;Obviously, firms are taking the view that the economy will either not recover rapidly or that they will reengineer their businesses so as to need fewer trainees and young lawyers, possibly by outsourcing.&rdquo;<br /><br />But, he adds: &ldquo;Firms should not just be addressing the trainee pipeline but looking at their needs and the quality of performance across the firm including partners.&rdquo;<br /><br />Cuts in trainee retention and recruitment might be an inevitable short-term symptom of the credit crunch, but law firms are businesses that sell experience and legal nous. Once the deals start flowing again, they may find that their short-term cost-cutting means that they have less to sell, or at least that they will have to pay more for the raw materials.<br />