In-house Lures: Should You Take the Bait?
The Legal Times – November 19, 2001
By Mary W. (Adelman) Legg
The economy is plunging and law firms are once again going through rounds of lay-offs. Despite their every effort not to repeat the lay-offs of the early eighties and nineties, the continuing decline in business has forced many firms to face the facts, and trim their ranks. Those who retain their coveted positions remain nervous in this unsettled market about whether the firm’s cuts will ultimately reach them. Even partners with substantial books of business are keeping viligent watch on their firms during this tumultuous time.
Increasingly, those who practice in law firms are wondering whether there is another way to earn a living in the practice of law. Attorneys in law firms frequently view the illusive in-house position as a panacea for the ills of law firm practice. Most, however, recognize that this ostensible panacea comes with a price: a significant reduction in compensation. But hours and compensation are not the only difference between law firm and in-house practice. There are many other differences that one should consider before deciding to move in-house, regardless of the motivation or desire to do so.
There are many more law firm than corporate positions, so based on the laws of supply and demand, corporations can be very selective as to whom to hire. Corporations rarely hire attorneys directly out of law school. Corporations usually do not have the time, staff, and in many situations, the expertise to devote to training junior attorneys. Corporations, therefore, look to law firms to provide the training for their future in-house staff. In-house legal departments require at least two years of law firm experience before most will even consider hiring the junior attorney. The level of attorney most sought after by corporations is one who is five to seven years out of law school and has dedicated their practice to one or two areas of law.
Staying in a law firm too long, seven to 10 years, can severely limit one’s marketability to corporations. Just as law firms hire their associates based on year of law school graduation, corporations are hesitant to break this model and hire someone who has more experience than what the job requires. Whether their hesitancy is based on a fear of conflict between more junior attorneys who have been with the company for years, or a fear that the over-qualified attorney will over-lawyer the case, or a combination of factors, in-house legal departments categorize candidates by their year of graduation. Once in-house, however, the emphasis is on tenure with the company rather than on year of law school graduation.
For those who did graduate more than 10 years ago, obtaining an in-house position remains a possibility. Some major corporations in the area hire only attorneys who have over 10 years experience. Additionally, some senior level in-house positions, and particularly general counsel positions, typically require ten plus years of significant legal experience. There is no one clear path to becoming a general counsel of a company. Attorneys have ascended to this peak via every conceivable method, none standing out as any more successful than another.
Reduced compensation for in-house counsel is one of the key reasons attorneys in law firms are hesitant to move in-house. Attorneys who have strong law firm experience (three to seven years of experience in a particular area in a firm that is recognized as a leader in that area) can expect to make between $75,000 and $120,000 per year. It is typical in the Washington, D.C. area for in-house counsel who have been practicing for 10, 20, or more years to earn between $100,000 and $160,000 per year. Bonuses of five to twenty-percent and stock options may or may not be available.
General counsels of major corporations can be the exception to the general rule that in-house attorneys are compensated below their law firm peers. According to the 2001 General Counsel Compensation Survey conducted by The American Lawyer, the 100 highest compensated general counsels received and\ average of over $1 million in salary and bonus during 2000. According to the 2000 Am Law 100, only a fraction of the top law firms average over $1 million per year in compensation for their partners. Wachtell, Lipton, Rosen & Katz topped the chart at an average compensation of $3,285,000 for their 72 equity partners. When stock options, either the granting, the value, or exercising, are included in calculating the top 100 general counsels’ compensation, their annual compensation is pushed into the tens of millions of dollars (ACCA Docket, October 2001).
Between the salary of $160,000 and the highly compensated general counsel in a major corporation, there are senior attorneys who earn upwards of $200,000, including salary and bonus. This level of compensation is rarely offered by corporations, and then only to those who excel in select niches within particular corporations. This level of compensation is expected by 5th year associates in major firms.
With this vast differential in income among in-house (often excluding general counsels) and law firm attorneys, why do so many desire to work in-house? In-house positions do offer many benefits, both tangible and intangible, that one usually does not find in law firms. The most apparent and well-known benefit to working in-house is working fewer hours. Although corporate life is now far from the cushy 9 to 5 job it may have been, it still does not require the time investment dictated by firms. The post poignant difference is that working on weekends is virtually unheard of among in-house attorneys. Due to downsizing, budget cuts, and the philosophy of “doing more with less, ” attorneys’ workweek in-house can be almost as hectic and long as those who work in law firms.
Even though the duration of in-house and law firm attorneys’ workweek may be comparable, there is a palatable difference in the atmosphere between corporate and firm legal departments. The tension and stress in a law firm and the compulsion of its attorneys is much greater than that found with in-house legal departments. Whether this difference is due to the number of hours firm attorneys must bill and then devote additional non-billable time to client development, or the fact that they must bill in six or 15 minute increments, law firm attorneys are, in general, less satisfied with their careers.
Many who work in-house prefer the type and variety of work they handle over what they would be handling or did handle in a law firm. Many in-house counsel have stated that some practice areas, such as corporate transactions, allow them the luxury of selecting what to keep – the interesting, challenging work – and what to turn over to outside counsel – the laborious, routine projects. Attorneys in law firms take a different view of the type of work in-house counsel keep and what they refer to outside counsel, but in any event, typically, it is in-house counsel that makes that decision.
Additionally, in-house counsel become more involved in the entire matter that is of concern to the corporation, including the business concerns, while outside counsel see only an isolated segment of the problem. Outside counsel often lament that they do not see the big picture when working on a case for a client: they feel like a hired gun. In-house counsel, however, assist in implementing solutions and seeing the matter through fruition. This broad agenda requires in-house counsel to let go of or start implementing solutions or contracts before the elements of the project are completely finished. In-house counsel freely and uniformly admit that they must create or accept a “C” piece of work because they do not have the time to tweak it to a “B” or perfect it to an “A.” In-house counsel are not evaluated or rewarded based on the amount of time they spend on a project. Rather, they are evaluated based on what they produce. Obviously, sub-standard work is not acceptable and typographical errors and other mistakes can reflect inadequate substance, but, in-house counsel do not have the time to create a publishable piece of writing for each of their projects. Those who choose to go in-house must be willing to accept good work that is sufficient to get the job done, rather than belabor it until it is perfect.
This change in priorities is so great and so important that corporations often favor a candidate who has spent a year or two in-house over one who would be coming directly from a law firm. An attorney spends many years in a firm learning to be meticulous and thorough. Loosening this standard to the appropriate level is where mature judgment and discretion are critical. In the absence of strict law firm training, one may not be able to accurately judge when “good” is “good enough. ”
One of the major complaints voiced by in-house counsel after they transition from a law firm is the reduction in their status. Not only do they usually receive a significant reduction in income, for which they were prepared, but they also no longer hold the status that they held in a law firm. Law firms exist for their attorneys. Attorneys make money for their law firms and they are therefore the firms’ most valuable assets. All “non-attorneys” at the firm exist to benefit the attorneys; their goal is to make attorneys more productive. When an attorney moves in-house, however, a 180-degree transition occurs. Except possibly in the intellectual property area, the attorney is now a liability – “a cost center” – rather than an asset. The entire corporate structure reflects this reality. The staff in the company do not exist to promote the attorney’s efforts. The attorney may even be referred to as “staff.” There is no longer the important distinction between attorney and non-attorney. This change is a truly humbling experience for many former law firm attorneys.
Moreover, many corporations do not provide their attorneys with offices. Rather, most of the attorneys work in cubicles. Attorneys’ personal and professional telephone conversations can be overheard. In order to avoid indiscretions, the attorney, not the attorney’s assistant, may reserve a conference room when working on a confidential matter. This egalitarian environment can be disruptive to in-house counsel, even when they have offices. The in-house clients they service are often in the same building. Despite the fact that the in-house attorney may be under a tight deadline, the client can bound into their office with a new problem of the day.
Since in-house counsel must frequently interact with in-house clients, corporate counsel carefully evaluate a candidate’s interpersonal skills during the selection process. In-house legal departments need counsel who can instill trust with the corporate business people. Corporations usually do not have attorneys, even junior attorneys, who work in back rooms, isolated from the clients. As important as law schools and grades are to law firms, interpersonal skills are as important to in-house legal departments. Both elements are important to each organization, but each place a different emphasis on them. In-house departments consider the law school and glance at the candidate’s rank, but they weigh experience and interpersonal skills much more heavily.
The forgoing conclusions are generalities. Both law firms and corporations are increasingly allowing modifications in schedules and salaries to accommodate individual needs. There are attorneys in law firms that have worked with their firms to decrease the tension they are under. Whether they reduce the number of hours they must work, work out of a different office, telecommute, move into a different practice group, or develop a book of business, many are very content in their firms. Some attorneys in corporations are not satisfied with their positions because they feel under paid, under-valued or over-worked to the point that they fear they may commit malpractice.
Despite the economy, many companies are thriving and are hiring. First, start networking. If working in-house sounds right for you, there are steps you can take to increase your chances of obtaining an in-house position. Networking is a very involved process and must be undertaken carefully and systematically. But, in brief, contact your colleagues in law firms and particularly in corporations. Let them know your goals and ask them “not for a job” but if they can refer you to someone who may know of an in-house position, or to someone else who may know of an in-house position. Attend meetings that may attract in-house counsel. When introducing yourself to them, be conscientious of their time and motives for attending the meeting, and be careful not to be over-bearing. Periodically, but politely, follow-up with all of these people.
Second, broaden your job search. Contact reputable search firms. Since search firms are inundated with resumes, try to contact them through a referral from one of your colleagues so that your resume has a better chance of standing out among the others. Work with the placement office of your law school. Check web sites weekly. The American Corporate Counsel Association’s web site (www.acca.com) has possibly the most extensive list of in-house positions on the Internet. Third, keep trying. The D.C. legal community is very close knit, and you will get out of it what you put into it.