Biglaw, Howrey LLP, Money, Skaddenfreude, Weirdness

Nationwide Pay Raise Watch: More About the Howrey Weirdness

Howrey LLP Abovethelaw Above the Law blog.JPGBack on Wednesday, we reported that Howrey LLP plans to chuck lockstep compensation for its associates. Starting in 2008, the firm will employ a “competency model,” in which it would “determine salary based on individual evaluations and various forms of progress indicators.”
Today our scoop was picked up by The Recorder (and then by the WSJ Law Blog). From The Recorder:

In a radical departure from the status quo, Howrey is getting rid of lockstep compensation for its associates….

While Howrey first-years will start at the market rate — the firm recently raised them to $160,000 — all other associates will advance through different levels based on personal evaluations instead of seniority. Each level has a salary range, and [partner Henry] Bunsow said top performers would be paid more than market, while some could make less.

“The goal is not to have associates make less than their counterparts at other firms,” Bunsow said. “If poor performers can get a better deal somewhere else, that may be a marketplace reality — we would hope that this system wouldn’t promote that.”

“The goal is not to have associates make less than their counterparts at other firms” — sounds a bit defensive, but whatever.
This system will be highly customized, but complicated:

The evaluations will be based on performance and experience, which could shorten the partnership track for some and lengthen it for others. Since Howrey is a litigation-focused firm, factors like writing, deposition, trial practice and client presentation skills will be considered, Bunsow said. Although there will be bonuses based on hours, that will be just one of many considerations in the evaluation, he added….

Associates will be assigned to partners who will be responsible for their development and their individual evaluations. A full-time staff person will be hired to oversee the program and to make sure that associates feel they are being treated fairly, Bunsow said.

Okay, we’re getting a headache. This sounds like the brainchild of a Soviet bureaucrat.
And this is just the simplified version. If you’re interested in the dirty details, an internal Howrey email — which includes mention of a “Competency Czar” — appears after the jump.

Hello All –
I’m going to try my best to give the full report of everything that was said at the meeting today. If any of your questions were not answered please email them to Jan Brown and cc me. Also, if you would like to volunteer for the focus group please do the same thing. At the bottom of the email there is info on the new Bootcamp program, which I found interesting.
1. Bonus system – There will be no bonus system starting in 2008. There will always be the potential for people to get a bonus for doing “extra” work, but no formal bonus system. The new system kind of incorporates your bonus into you salary so you get it throughout the year instead of in one check.
a. What does that mean for people who expect bonuses this year? – Short answer…we don’t know. It could either be incorporated into your new salary so that you get it throughout the year or incorporated into you pay check so that you will get the full amount by the time the bonus checks are supposed to be cut. Either way there is no definite answer because it has not been decided. The only thing we know is that if you earn a $15k bonus and you are supposed to get 170k for salary, you will not lose the bonus that you have earned this year…meaning you should see 185k. It’s just uncertain how you will get the money that was guaranteed to you.
2. Part of the new system is to forecast the amount of hours that you think you will bill based on previous years of work and current work load. You will not be asked/forced to pay back part of your salary if your forecast turns out to be incorrect for some reason out of your control. (case settles…etc.)
3. What happens if there is insufficient work, but you are ready and willing to work? – your supervising partner is supposed to handle that; otherwise the associate will not be held responsible.
4. They expect that the salaries will increase 15-20k higher even without the bonuses. There will be a transition period and this increase will be evident more so, within the next 6-18 months.
5. The competency model will be established and finalized this fall. The last quarter of the year will be dedicated to evaluating people to get ready for the salary decisions that will be effective Jan. 1, 2008.
a. The partners that you work for will still evaluate your performance since you have worked with them. However you will have a supervising attorney that will go through your intensive evaluation and come up with your individualized plan.
b. There will be a competency Czar that will be in charge of ensuring that the partners are adhering to the standards and showing reasons why they have come up with certain plans and made certain recommendations.
c. If the supervising partner is not doing his/her job the czar will report him/her straight to senior management.
d. Supervising attorney will not determine the compensation alone. There will be help with that determination but not sure from where yet.
e. It’s not guaranteed that your supervising partner will not be someone that you work for, especially in the smaller offices.
f. Partners will not work in this capacity unless they feel like they are getting something in return so there will have to be incentives for the partners.
g. Among some of the the things that the partner will be judged on is whether the associate has a high morale, his/her productivity is good, and whether their career is developing.
6. There is a possibility that someone in a lower year could make more than someone in a higher year.
7. The goal is to get away from how many years you are out of law school and focus more on skill sets. We shouldn’t be charging clients as if an associate has a certain skill set, when he/she may not. (not a direct quote)
8. What’s the purpose of this compensation model?
a. The firm wants to capture the differences between the good and great associates and pay accordingly.
b. The firm wants to deliver the choice to the client.
9. What happens with clients who have preferred rates?
a. Ultimately its not within the associates control when it comes to what the client pays for…or what client you work for (as a 1st/2nd year mainly)
b. For upper level associates if you choose to go with work that is less profitable then that decision might come into your compensation. (I raised the question of how this effects first years especially who do not choose who they work for and was told that this really effects the more senior associates who may have some discretion).
10. How does pro bono factor in?
a. There must be some kind of imputed rate that will be given to approved pro bono so that the firm can determine your productivity. But pro bono will still be counted as billable time and your productivity standings should not be effected by your pro bono work.
11. Evaluations: We will get our in-person evaluations within the next 2-3 weeks. I was told that our original memo indicated that it took two months and because they just approved the evaluations/salaries last week, the in-person feedback will roll-out next.
12. Will there be an appeal process if you do not agree with the salary decision? – needs to be discussed in the focus group
13. Above the Law article: “Howrey is planning something weird” – they were surprised at how fast this got out. While information may be true the firm is concerned with given clients the wrong impression on the program before they have the opportunity to explain it. There will be more articles to come and a statement to the press. If you come across any other blogs please email so that she can handle a response.
14. Not sure about how to communicate the salaries without naming individuals’ salaries. Will be discussed in the focus group.
15. This is not a reaction to the salary wars that have been going on. The firm met months ago to discuss this possibility and it just so happens that its being publicized now. But please don’t think that it is reactive to the salary wars.
16. IP: the skill sets that they have will be compensated for under the new model. Also, the skill sets that associates in other practice groups have…one example was the level of maturity and poise the associate has, that will be factored into the competency models and salary.
17. Ruyak was delighted with the content and questions that we posed at the meeting today. (just a side note)
18. We will all be able to get a copy of the competencies once they are finalized. Until then they will be discussed in the focus groups, but nothing in writing until its finalized.
Another note: BOOTCAMP
The program will be changed next year. It will now be 6 weeks instead of 5. 3 weeks in office – 2 away – and then 1 back in the office. A Markman hearing will be added. Compensation will also be enhanced to match the 1st year weekly level. Plus, if you finish the program in good standing (not necessarily that you got an offer) you will receive an additional 2 weeks of pay. At the end of the second half of the summer but before a certain date (that the firm sets) if the student accepts the offer he/she will get one of two choices:
1. a $10K signing bonus
2. an advance on their last year of law school tuition. This will be taken out of your first year pay, less the 10K that you would’ve gotten as a signing bonus.
People doing clerkships will be offered something different. The student must not accept the offer until after they have finished their other summer position (if they have one).
Only 32 people firm wide will be hired as summer associates.
I think I got everything. If you need any clarification on anything please don’t hesitate to ask.
Howrey to Ditch Lockstep Compensation for Merit-Based Model [The Recorder via]
“A Bold Move”: Howrey to Pay Associates Based on Merit [WSJ Law Blog]
Earlier: Nationwide Pay Raise Watch: Howrey Is Planning Something Weird

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