Are We Selling Results or Résumés?: The Underexplored Linkage Between Human Resource Strategies and Firm-Specific Capital
Over the last several decades, virtually every large law firm has adopted some variant of the “Cravath system,” which builds human capital by hiring the best students from the best schools and providing them with the best training. At the end of a multi-year “tournament”, the best associates are promoted to partner. In theory, this system delivers superior services to clients, thus creating firm-specific capital that generates higher profits. In recent years, however, the surge in demand for corporate legal services has outstripped the supply of one key input—elite law school graduates. The ensuing salary wars have significantly increased the cost structure of large corporate law firms and undercut clients’ willingness to pay for associate training. These trends are unsustainable. More significantly, clients are unhappy and searching for ways to control costs.
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