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By Molly Moriaty Lane, who is the managing partner at the San Francisco office of Morgan, Lewis & Bockius.

In an environment where clients are under constant pressure to manage legal expenses and where RFPs have become a favored way of sourcing legal services, large law firms must be creative and flexible about recruiting, managing, and retaining their talent. Long gone are the days when all associates were hired, promoted, and compensated through a standard grid based on the number of years out of law school. Instead, large firms today must hire and rely on a pool of “diversely tracked” associates, including contract attorneys, alternative-track associates, and traditional-track associates.

In response to the message that they need to think more broadly and creatively in terms of talent management and client service, many large law firms have modified their hiring practices. In its latest Law Firms in Transition Survey, Altman Weil reports that in 2011, 79 percent of large law firms used contract lawyers, up from 62 percent the year before. In 2012, two-thirds of the surveyed firms responded that using more contract (i.e., “temporary”) lawyers will be a permanent trend in the future. Firms have also increased their population of alternative-track (or non-partnership) associates. According to Altman Weil, 52 percent of firms with 500 to 999 attorneys reported they were likely to increase their hiring of non-partnership-track associates in 2012, a 14 percent increase over 2011.

Maintaining a diversely tracked associate population has a number of benefits. For firms, those benefits include price and staffing flexibility and the ability to retain experienced associates. A pool of associates with varying compensation levels, rate structures, and career paths allows firms to offer a broader range of services to valued clients, managing them in ways that meet the clients’ goals, both in terms of work product and cost. For example, firms handling repetitive, commodity-type work under an alternative fee arrangement can staff these projects with alternative-track associates who are compensated and billed out at a lower rate than their peers on the traditional path. In addition, associates with a particular expertise can be directed to matters for which their skills will bring the greatest value to the client. Firms also gain flexibility with respect to an associate’s career path, which may ultimately provide greater stability and consistency in a representation over the long term.

Alternative-track positions also benefit associates by offering varied job opportunities, career path options, and flexibility. When firms are not locked into hiring first-year associates at their grid base pay, it can provide opportunities for a broader range and a greater number of associates. Instead of hiring five first-year associates at an average salary of $160,000, a firm might instead hire three first-year associates, an experienced SEC specialist on a reduced 60 percent schedule, two lower-paid staff associates to handle small litigation matters for a client on a fixed-fee arrangement, and a senior attorney to provide labor and employment counseling. Such a hiring strategy provides employment opportunities for seven hires rather than five. Furthermore, an associate with expertise in a particular area who is paid and billed out at a lower rate may have different career options than those available to a traditional seventh-year associate with a salary at the top of the market grid but who is unlikely to make partner. And, finally, alternative-track associates may have greater flexibility with their schedules as a result of expectations for lower hours and nonbillable work.

These benefits do bring with them certain challenges. For example, firms must ensure that alternative-track associates are part of the organization’s fabric and are not made to feel like second-class citizens. On the flip side, firms cannot hold alternative-track associates to the same expectations as partnership-track associates when, say, there is a trial or a large transaction for the clients or matters to which they are assigned. These are matters, however, that can be addressed through vigilance, communication, and/or compensation. All in all, the benefits to alternative staffing arrangements far outweigh the challenges.