Recruitment of Junior Attorneys

Style:

Candidate-led (usual style)

Topics:

Profitability analysis

Rating:

4.3 (100+ ratings)

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Times solved

Beginner

Difficulty

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Problem Definition

We are a reputed law firm. We are thinking of hiring associates right out of college at $120,000 per year. Do you think it is a good idea?

Comments

The case is designed to be presented to the candidate by an interviewer, who plays the role of a representative of a reputed law firm.

Short Solution

Show short solution

Solution

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

I. Background

Wait for the interviewee to ask questions regarding the background of the case. A few sample questions are shown below. You could use them to help the interviewee with information, if he's stuck. 

This is a basic profit = revenue - cost analysis case.

II. Revenue

Does the firm have work for new associates? If yes, could you please provide the hourly/daily billing rate and the number of hours/days billed?

Hourly billing rate: $50
Number of hours billed per day: 8 hours
Number of days worked per year: 300 days approximately

III. Costs

Should I consider any other cost apart from salary, taxes, overhead, training and recruitment costs?

Please consider only salary, training and recruitment costs. We expect an associate to stay with us for a year.

Training: $5,000
Recruitment: $5,000

IV. Solution

Let us first calculate the marginal revenue associated with adding a new lawyer.

Revenue for one year = Hourly bill rate * Daily billed hours * Days worked per year = 50*8*300 = $120,000

Costs: Total cost = Salary + training costs + recruitment costs = 120,000 + 5,000 + 5,000 = $130,000

A basic profit analysis tells us we will incur a loss of $10,000 per associate per year.

V. Concluding Observations

Hiring associates at $120,000 per year is not a good idea as a basic profit analysis shows a loss of $10,000 per associate per year. In case the salary figure is above market, we could consider offering a lower salary.

Difficult Questions

If the interviewee solves the case very quickly, you could discuss factors such as:

Quality of lawyers
Raises to be given in subsequent years
Change in the associate's average tenure with the firm
Option of hiring experienced lawyers or cheaper legal assistant, etc

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