Midsize Firms / Regional Firms, Money, Skaddenfreude

AGG Draws a Line in the Sand

The Atlanta firm Arnall Golden Gregory is refusing to match the recent round of raises to $145,000 for first year associates by Alson & Bird and several other competitor firms. They put a lot of thought into the decision:

AGG matched the February increase on March 1. Ever since, Kitchens said, he and his partners have been pondering their response to the inevitable next round of raises. “Before now, we didn’t feel we needed to study the matter as much as we’ve studied this,” he said.

[Fulton County Daily Report via Law.com]
Ultimately they decided that the best way to deal with the infamous Atlanta compression was to let first and second-years take the hit:

AGG’s new salary plan tries to reward more experienced and productive associates, he said. “What we tried to do was to have a correlation between the economic value of an associate to the firm and the base compensation.”
Kitchens declined to say how much his firm will raise pay for midlevel and senior associates, but said the base salaries are comparable to those set by Alston & Bird in August, with roughly $10,000 increases between classes.
Clients were concerned that additional salary increases for newer associates would increase their legal bills, said Kitchens. “We don’t want to be in a position where we can’t use first- and second-year associates. We don’t want clients to think they’re not getting value.”
“We have to write off a portion of first- and second-year time because they’re learning,” Kitchens said. “We don’t make a profit. It’s a sunk investment, so adding the additional sunk investment of $15,000 didn’t make sense.”
“We’re trying not to have our midyear and higher associates feel they’re underpaid in the marketplace based on their situation and their peer group at other firms. Obviously, with first- and second-years there will be a differential.”

Easy for us to say, since we’re not in biglaw and certainly not one of those first-years taking the hit, but this actually seems like a good explanation for a reasonable course of action to us. What you do guys think?
Arnall Golden Gregory Holds the Line on Associate Pay [Fulton County Daily Report via Law.com]

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