Recruitment of Junior Attorneys

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

Hiring associates at $120,000 per year is a bad idea as a basic profit analysis shows a loss of $10,000 per associate.

Detailed Solution

I. Background

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?

III. Costs

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

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