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TRENDS REPORT | Is the Grass Still Greener on the In-House Side?

 

FROM: April / May 2005, PAGE 6 BY: Robert W. Denney

Although you could hardly call it a “mass migration,” there has been a consistent trend in recent years for lawyers to leave their firms and go in-house with corporate legal departments. While that movement continues, a reverse trend appears to have started, with some of those same lawyers returning to their former firms. What’s going on?

For many lawyers, working in-house hasn’t turned out to be the happy alternative they expected. Closer scrutiny from shareholders and regulators has meant more work, longer hours, more stress and less job security for in-house lawyers. Further, even though the salary gap has narrowed in recent years, in-house lawyers still generally earn less than their peers at major firms.

Reducing costs, increasing caseloads. Most general counsels will admit they’re under tremendous pressure to control—and even reduce—the costs of running their departments. The initial strategy was to reduce the number of firms they sent work to while putting pressure on the remaining firms to reduce fees. But in most corporations, this hasn’t produced the results demanded by senior management.

So the next strategy has been to cut the department’s size.

At the same time, however, workloads have continued to increase in most corporate legal departments. As a result, a reduced number of lawyers must handle a greater number of cases. As one GC puts it, “I don’t know any lawyers in our company or any other who work only 9 to 5 anymore. My lawyers laugh at the idea that their lives are less stressful than law firm partners and associates.”

The heavier workload might be bearable, at least for a while, if in-house salaries increased along with it. But reports reveal that compensation packages in corporate legal departments—including health benefits, 401(k) programs, bonuses, retirement plans and stock options—are still generally lower than they are in law firms.

What about job satisfaction? Faced with the compensation disparity and reduced staffs in their departments, GCs are increasingly referring the most complex matters and interesting work to outside counsel. As a result, the in-house lawyers are left with repetitive work—and many feel their professional development is being shortchanged, if not ignored.

In an attempt to counter this situation, some GCs try to capitalize on what they feel is a major advantage that in-house lawyers have over outside counsel: the opportunity to work side by side with the client (meaning the company) throughout a project’s life, rather than simply dealing with a specific piece of litigation or a periodic transaction. Other GCs follow the theme orchestrated by Stephen Todd, general counsel at U.S. Steel, who says, “We don’t have to go out and find clients, and we don’t have to show people that we’ve worked 2,500 hours. A lot of people don’t like the stress of client generation.”

In-house recruiting still strong. Despite increased work pressure and generally lower salaries for in-house positions, GCs say they have few problems recruiting good lawyers. They state that advertised vacancies in corporate legal departments draw scores of applicants, many of whom are currently in law firms. This is corroborated by legal search firms. While admitting she can’t compete for high-end partners, one GC feels she is competitive at the lower levels. Based on the various surveys, however, this may be the exception that proves the rule.

At first glance, this doesn’t make sense—until you review the analysis of another GC. “We have no problem recruiting. That’s easy. The problem is keeping good lawyers on our staff.” Based on that comment, which is cautiously echoed by many other GCs, much of the recruiting may result from the need to replace in-house lawyers who have left for other pastures.

Who has the better lawn? What all this seems to add up to is that the grass is green on both sides. It just depends on what kind of lawn a lawyer wants. For those who remain in-house, the absence of billable-hour and business-development pressures offsets the heavier workload and lower income. This seems to be particularly true with lawyers who were with smaller firms. For those who return to law firms, the higher income and, possibly, more challenging work are worth the other pressures.

For the foreseeable future, expect both trends to continue, not as conflicting movements, but more like power mowers running in parallel on different sides of the road.

Bob Denney ( bob@robertdenney.com), President of Robert Denney Associates, Inc., finds the grass greener than ever as a management and marketing consultant to law firms.