Legal clients in today’s world are looking to save money on legal costs.  Some clients negotiate billing structures other than the just the hourly rate,[1] some companies bring more work in-house,[2] and many negotiate with law firms to unbundle services by cherry picking exactly what tasks the clients want from the law firms.  But, according to Michael Trotter in Declining Prospects, it is “the growth of [in-house corporate legal] departments in capability, size, responsibility, and confidence” that has been one of critical factors driving change in the legal market over the last couple of decades.[3]  The effect of this growth is that some of the largest companies are starting to consider the merits of training their own attorneys from the ground up.  Two large companies in particular, Hewlett-Packard and Pfizer, have adopted different approaches to the same solution by hiring lawyers directly out of law school.

Before discussing the two models for training new lawyers in the in-house environment, it is worth considering the pros and cons of instituting such a system.  The dominant reason that companies generally hire from the ranks of law firm associates is that freshly minted lawyers just out of law school do not have the practical skills to immediately become a productive member of a legal department.  Additionally, in-house legal departments generally operate at maximum capacity just handling the legal work of the company, and they and do not have the time, manpower, and resources to train new attorneys either individually or as part of an in-house program.[4]  Law firms, on the other hand, are structured in a tiered format to take the inexperience of junior associates into account.  They expect, and are expected to, train junior associates as they move up the ranks.  Law firms train their associates to conduct legal research and write high quality briefs, negotiate and draft legal documents, and complete deals and transactions.  Thus, poaching mid-level talent from law firms allows companies to bypass the time and expense of teaching lawyers the basics of substantive law and the fundamental practical skills required of  in-house counsel.

On the other hand, acquiring law firm associates and integrating them into in-house legal departments is not without its hiccups.  Companies usually have to do a certain amount of “untraining” to get lawyers to move away from the law firm way of thinking and embrace the business philosophy of the particular company.  For example, law firm training can at times focus more on risk avoidance and reactive decision making, whereas in-house corporate law practice more often focuses on forward looking risk management and damage control.[5]  Also, even for the most competent law firm associate hires, besides the “untraining,” the companies inevitably need to invest in additional in-house training. New hires, no matter what level, still need to learn the company-specific aspects of the job (company procedures, services, products, etc.).[6]  Thus, hiring fresh law graduates can allow the company to mold individuals from the get-go as far as mindset, best practices, and particularized skill sets.[7]

The other major benefit that companies realize from hiring newly graduated lawyers is lower costs.  Starting salaries for in-house attorneys are significantly lower than that of “big law” law firms.  In 2009 according to the ABA Journal, the starting salary for lawyers in the new Hewlett-Packard training program was $115,000, plus a $15,000 hiring bonus.[8]  HP Legal’s Chief of Staff and Deputy General Counsel Amy Schuh recently stated in an interview with InsideCounsel.com that all four of the new attorneys that started in the pilot training program class are already excelling at mid-level associate work.[9]  Taking a smart lawyer and bringing them up to speed quickly on the company’s particular needs at a significantly lower rate than would be paid to outside counsel is an effective strategy for large companies that have the capacity for it.

In 2009, Hewlett-Packard was the first large corporation in recent years to hire recent law school graduates for grooming in its own in-house attorney training pipeline.  Over the past few years the program has slowly expanded and changed to fit HP’s hiring needs, hiring four attorneys the first year, nine the second year (five in the United States, four in India), and six U.S. based attorneys last year.[10]  Hewlett-Packard begins its training with two intensive week-long seminars (also known at HP as “boot camps”).  Over the course of the attorneys’ first year they also undergo training on practical skills such as sales, legal research and writing, and document review.  Finally, the first year attorneys go through two more weeks of seminar and web-based training, this time focusing on skills such as negotiation.[11]  This is not to say that new lawyers at Hewlett-Packard escape the legal “grunt” work that law firms are famous for assigning to first year associates.  The most junior attorneys are admittedly assigned to many of the projects that senior attorneys do not want to do, but, nevertheless, need to get done.[12]  However, any soon-to-be or new law school graduate who is grounded in a sense of reality should expect to have to pay his dues by doing grunt work and climbing from there.

Taking a different angle on training in-house counsel, Pfizer started its own training program in fall of 2011.  Pfizer’s program takes a cross-training approach with its program by exposing new lawyers to both its in-house side of the equation, as well as to the law firm side at one of three law firms that are part of the Pfizer Legal Alliance, as noted earlier.  The three law firms participating in Pfizer’s program are Skadden, Ropes & Gray, and DLA Piper.  New attorneys hired into the Pfizer training program spend two years doing six month rotations between Pfizer’s in-house legal department and one of the law firms.  After repeating the cycle twice, the attorneys have the choice of whether they want to work at Pfizer or the law firm at which they did their rotation.  Pfizer pays the lawyer’s salary for the duration of the two-year program.  This program could result in Pfizer paying an attorney’s salary for two years, only to have that person choose to work at the law firm instead.  However, Pfizer still sees this scenario as a winning situation; even if lawyers coming out of this program were to choose more often to work with the firm, the result would still be that Pfizer would now have lawyers embedded in their partner firms who are intimately familiar with Pfizer, its work, and its needs as a client. Because of the continual risk of “losing” the attorneys to the law firms at the end of the training program, this type of training model seems to only make sense when the company has an solid and ongoing firm-client relationship with the participating firm.

Although this hybrid-model is beneficial to Pfizer and the lawyer who gets to experience both worlds of corporate law, the real winner in this program appears to be the law firms.  At worst, they end up with an attorney at Pfizer who knows their firm well, and they have had an aggregate 12 months free labor, albeit at the junior level.  At best, the firm gets a well-trained third-year associate for free who also happens to have close ties with one of their biggest clients.  This win-ultra-win situation for the law firms makes me wonder if large law firms should start instituting this type of training program within their own ranks in conjunction with their biggest clients.

The reality is that today’s legal clients do not want to pay for the training of junior associates.[13]  However, clients might change their tune on this issue if a few new law firm associates were to spend two six-month rotations in the company’s ranks to learn more about the inner workings and legal needs of the company.  In such a program, it would then be hard to imagine that the same company would object to that lawyer being assigned to that company’s projects (especially given the chance that the lawyer might cross-over to an in-house position soon thereafter).  And again, the worst outcome for the law firms would be that they would pay an associate’s salary for two years only to have that associate join the in-house team with the client.  The upside of this scenario is that the law firm would then have a lawyer, imbedded with one of their biggest clients, who has loyalty to the law firm and will likely channel work to that particular firm down the road.  Additionally, given high attrition rates for associates at “big law” law firms, there is a high risk that the same lawyer might have left within a few years anyway, so it would be difficult to determine whether the risk of losing the training program associate is an extra risk or a risk that already existed within the system of “big law.”