We've seen firms use various approaches to reduce the size of their new associate pool. Until now, however, I had not heard of any firms publically buying out offers. Well now Strook & Strook & Lavan is offering potential new associates $75,000 to decline their job offers. Remember the old-fashioned "cold offer" – when the firm made a summer associate a faux permanent offer with the goal of preserving both the firm's stellar record ("100% of our summer associates get offers") and the law student's opportunity to get other jobs? Here, Strook is turning warm offers into cold ones – and of course that requires compensation.
The problem, it seems to me, is that this deal encourages exactly the wrong outcomes, from the firm's point of view. The best candidates – those with strong credentials and the capacity to obtain other jobs quickly – will leave and take the loot. The weaker candidates will stay around. That doesn't mean there isn't a place for buyouts. They just have to be targeted at the new associates the firm would like to dump. And that, it turns out, might cost a bit more money.
Dan,
Are you not justifying your conclusions from a particular perspective on efficient outcomes, albeit one that is intuitively correct? You suggest that those associates with better credentials who can get jobs elsewhere will take the $75K and a new position, which is efficent from their perspectives, while those with inferior credentials will decline the "buyout" and stay, leaving the firm with lesser qualified candidates, which is inefficient from the firm's perspective. However, the issue may simply be that the firm needs to cut short term costs, even at the expense of long-term benefit, which means that a savings of $75K is efficient (or necessary) given the firm's need to cut costs. And if only those who can go elsewhere will be inclined to take the $75K buyout in this increasingly difficult job market, then at least some savings accrue to the firm where these "better" candidates leave (coming in the form of the difference between their regular salaries and the $75K buyout), rather than no savings at all. This is still an efficient, and beneficial, short-term outcome for the firm, assuming that they must trim costs, even if it does have negative long-term effects. Your thoughts?
Len – You're clearly correct that this may be a necessary short term approach, although they could also defer the offers for another year and a half and perhaps yield simiar results – with lower short-term cost. And they could defer the offers of selected associates, allowing the better ones to start earlier.
I'm not an employment lawyer, nor do I know the details of Strook's offers, but could they simply withdraw offers with no compensation? (Given that the jobs are at-will, and for no fixed term, it seems likely.) If so, the $75,000 seems designed primarily to preserve firm reputation. They might be able to achieve both reputational protection, and retention of quality, simply by using a sharper scalpel.
A good name is easier lost than won.