Planning For A Successful Hire
Why are you hiring?
The very first question is, why do it? Hiring is expensive, time-consuming and ends in heartache a disproportionate amount of time. You could just do what I do and get all that turmoil for free by cheering for Boston College sports.
If you’re hiring a lawyer because you have too much work to handle, you could consider raising your fees and seeing if that reduces the amount of work without reducing revenues. If you’re doing it because you like mentoring young lawyers, you could explore teaching at a local law school or paralegal program. If you just want to grow the firm, you could spend some time thinking about why. Growth for the sake of growth tends to make you busier but not much else.
The bottom line is if you’re going to hire, you’ll want the answer to “why” to mate up with an articulated firm strategy that depends on adding headcount.
What’s your time frame?
I talk with a lot of lawyers whose plan is to hire a new law grad, train them to be a great lawyer, make them a partner, and then sell them the firm. To call this a low percentage shot is a gross understatement. It happens, but I wouldn’t plan my hiring strategy around hitting this kind of grand slam.
Instead, if you’re planning to hire a new law graduate, I’d suggest thinking of it in a time frame of around three years. That’s long enough to get through the “sucking chest wound” phase and to see the fruits of your managerial labor as your new associate becomes a valuable member of the firm. But it’s not so long a time frame that you should lose your associate to poaching or starting a firm of their own. When you hit the three-year mark, if everybody is still happy, you can build a new strategy for the next three years to get to the next level.
Evaluation of Current Resourcing
One of the things that is important in regret-free hiring is making sure that you are using all of your current resources before you spend hard-earned money a new one.
What’s the utilization rate of the current team?
Assuming this isn’t your first attorney hire, an initial metric to consult is the utilization rate of your existing attorneys. If you can’t easily lay your hands on your team’s utilization rate (or if you are unfamiliar with the concept), utilization rate is basically a measure of how much of your lawyers’ work hours are spent on billable work. If the rate is too low, you know you have more capacity to get work done with the existing team before adding a new member.
Is this something technology can do?
When you evaluate the excess work that needs to be performed, it’s worth spending some time and considering if there is a technological solution to increase the efficiency of the current team rather than throwing a body at the problem (a time-honored law firm management approach, to be sure). The 800-pound gorilla in this equation is the meteoric increase in AI-backed tools working their way into law practice. We are in a moment of profound change for the technology tools used by lawyers. If what you really need is a young lawyer to do research and some drafting, you may find the time is soon (or already) upon us when that position can be filled by an AI-backed tech tool.
Thinking Through the Finances
What will it take for the new attorney to be profitable?
I frequently talk with lawyers whose approach to hiring is, “I have some extra work to be done and an extra office, so if I just do a little better than break even on a new associate, why not just hire one?” It’s a reasonable question and bears picking at.
New lawyers need to trained, supervised and managed. All of that takes a substantial time commitment on the part of the managing attorney. That’s time that can no longer be spent developing business, doing legal work or managing the firm. Your mileage may vary based on your firm, the complexity of your practice area, your clients’ expectations, and your tolerance for risk, but I think it’s a reasonable starting point to plan for a new lawyer to need constant attention for the first six months, and then a decrease of about 25% of managerial time every six months after that.
Even when they are able to work independently successfully without massive amounts of billable work having to be written off, new lawyers will still need oversight and help throughout the first three-year block of time.
Are you just filling empty offices?
More than a few firms with long-term commercial real estate commitments have empty offices and unused office space. It feels bad walking past empty dark offices and feels even worse when it is time to look at the firm’s expenses.
As a result, it’s not uncommon for law firms to decide to hire specifically to fill those empty offices. I completely understand that emotional reaction, but letting your real estate drive your personnel strategy is a bad idea for a law firm. Instead, have the hard conversation (even if it’s just with yourself) and acknowledge that the landscape has changed with commercial real estate. You may need less of it than you have, and that’s just the way it will be for a bit. Maybe you will find a perfect fit lateral partner to join or be able to sub-lease some of the space to another firm. But don’t compound the problem by hiring an attorney because the optics are less stressful.
What’s salary multiple you need in excess work to justify hiring?
Let’s assume you will need to pay a new attorney $75,000 per year. If you have $75,000 in excess work, you know you will take a steep loss on the new attorney. You’d be paying them 100% of every dollar they earned back in salary. As previously mentioned, the new attorney will take substantial management time, to say nothing of firm overhead to and any credit awarded for origination of new business. If you were to pay your new attorney 50% of every dollar they earned (leaving 50% for overhead, profit, etc.), you would need $150,000 in excess work to justify hiring. And you would need to have the expectation of repeating that excess each year.
Fifty percent is on the high side, especially for a new lawyer. I generally recommend to firms that they work through the numbers at between a 3x (33%) multiple and 4x (25%) multiple of salary. Meaning, they would need $225,000 or $300,000 of excess work to justify hiring.
No Regrets Hiring
We’ve all seen the meme of the misspelled “No Regerts” tattoo. Hiring badly is the human equivalent of that sitting in the office across the hall from you every time you walk in the door. Only it is a ton more expensive.
I realize this article amounts to a very conservative approach to hiring. But hiring people is the single biggest expense that most law firms will make. It’s hard to get right, frustratingly easy to get wrong, and is a giant pain to get yourself out of when it has gone bad.
Discretion is the better portion of valor here. Go slow. Do your due diligence. Get answers to the critical questions before you hire. Recognize that hiring someone is not going to solve all your problems. It can be great when it goes right, though, so put yourself in the best possible chance of making that happen with no regrets.