Lat--no feature to flag posts as spam? Seems to work for huffingtonpost.com

Awesome, Lat, deleted all the nonsense!!! My substantive post almost ended up FIRST!

It is a complicated formula. The Vault description is only part of the story. There is something called your "lodestar rate." There are also provisions relating to whether you work on contingency matters or not.

It's option A. And it's actually significantly under market. 1st/2nd years don't bill out at $400 per hour. When you do the math using actual billing rates, you find that associates have to bill at least 2,400 hours to make the same total compensation that associates at other firms make for billing minimum hours (over 2600 hours for senior associates).

For example, the billing rate for 4th years is $390/hr. 2000 hours x 390 x .3 = 234,000. Base + comp for 4th years at firms that paid market bonuses is $290k. So a BSF associate who billed 2000 is making $56k under market this year. Even at 2300 hours, the BSF associate is making more than $10k less than associates at other firms who only bill 2000.

And in reality it's worse than that because the hourly rate is usually discounted.

Does anyone know the billing rates for 1st and 2nd years there? I find this very intriguing.

(Although the though of my coworkers in swimsuits is a scary one!)

11:32 is right. Though the numbers are even worse than what he/she says. You really must bill 2500-2800 hours to get market compensation, and that's assuming you never get assigned to a contingency case, client development work, or work for which the client ends up not paying (and you usually have no control over any of these factors).

Anything that comes out of Jamaica will apply to future years only. Bonuses have already gone out this year, and pretty much everyone got screwed.

Followed by millions of petty and stupid "They have law firms down in Floirda?" Why woudl anyone ever want to practice law in Florida?

Whoa, I am at non-Vault 100 firm, and I bill out at $400 as first year.

11:32 - that's true, but most associates bill more than 2000 hours. Billing rates for "first years" go up to $320 in January of the first year (assuming a September start). At that rate, a first year billing 2200 hours gets 2200 x 320 x .3 = $211, 200, approximately market. For 2500 hours, that number equals $240,000, which is way above market. So whether you are above or below market depends greatly on the number of hours you bill, which is exactly what the system was intended to do. Presumably people looking to work at BSF will self-select, and only those looking to work more than 2200 or so will work there.

11:42, is that what the partners told you and you believed them? How cute. Ah, first years.

BSF ranked 167 out of 167 firms surveyed for mid-level associate satisfaction. The firm experienced a massive exodus of mid-level and senior associates in 2006, which was mostly due to the compensation structure and the absence of bonuses. This year will be no differnt. A significant number of people received no bonus or were significantly under market. Too little, too late!

The formula is a good first step toward making law firms economically rational entities.

$250/hour x 2000 hours = $500,000

$500,000 x 0.3 = $150,000

$150,000 + $30,000 bonus = $180,000

Seems a little under market? Only if you assume the people attracted to such a system are average.

2200 hours: $210,000
2400 hours: $240,000

We all know 2200 and 2400, for a certain type of NY lawyer, is nothing extraordinary. Especially for a first year. Increase the billing rates and watch the salary jump well beyond normal NY salaries. So the system seems to be superior for enterprising 1st and 2nd years. (Who, if they are enterprising, can also jump to other Biglaw later)

The problem for midl-evels and above in this system is how we define "bonus". If Boies bonus = NY bonus, this system is FAR superior for most overachieving associates. Although, if I were making a recommendation to Boies, I would increase the % of revenue earned by associates as they move up in seniority. It wouldn't have to be substantial.

What this system will do, if adopted by a couple larger firms, is encourage more of the hardest workers out of law school to flow to firms that most appreciate their level of devotion while their relative slacker brethren remain in a lock-step system. It will take some time because, as smart as lawyers tend to be, there is an overriding herd mentality and risk aversion that ensures first mover firms will not reap as many awards as a more rational marketplace would afford.

It's also a nice system in that it, I'm assuming here, grants attorneys more power to regulate their work-life balance.

11:44 is using fuzzy math. Most cases bill out at a 10% discount. So assuming 2500 hours:

320*.9*.3*2500= $216,000. That's $10K above market, and you had to bill 2500. And you had to avoid contingency work (as Boies admits, you have little control over what you work on).

According to Amlaw, PPP were over $3 million last year. I predict that this year will be even higher. Now we know why.

JMA is an idiot. It's not 30% plus a 30k bonus. It's 30% total.

"What this system will do, if adopted by a couple larger firms, is encourage more of the hardest workers out of law school to flow to firms that most appreciate their level of devotion while their relative slacker brethren remain in a lock-step system."

I wasn't aware that padding hours made one a hard worker.

anon should learn to read:

"30 percent of all revenue you bring to the firm as salary plus bonus as well as some credit for pro bono."

The criticism about padding hours is a legitimate issue and a potential problem.

(1) Bill padding already happens ... in massive quantities even if virtually no one admits it; (2) Scrutiny systems will be more valuable and will need to be adopted. This may mean less billing flexibility or more billing oversight than lawyers currently enjoy. It's a trade off. Fine for some, horrible for others.

Of course, the bill padding issue could, largely, be obviated if more firms moved to a Wachtell/ Investment banking billing system.

So what we are saying is that a client would be an idiot to hire Boise because an associate that wanted an extra $100 every day would just erase the 8 and put in a 9 when filling out his timesheet that night.

The sentence describing the compensation system is poorly worded. An accurate description would be: associates receive 30% of the revenues they bring in as their total compensation (including salary and bonus).

Base salary at BSF is a draw on the 30% and the year end bonus is the difference between the base salary and 30% of the revenues the associate brings in for the year.

12:08:

"Of course, the bill padding issue could, largely, be obviated if more firms moved to a Wachtell/ Investment banking billing system."

Which system is that? Great way to propose a solution without actually proposing a solution.

12:20PM is right. And for at least 50% of associates, that works out to an above-market bonus. Particularly in the early years, associates receive well above market bonus.

1st years billed out this year at $320/hr. The formula comp system says you get 30% of the total revenue you generate as your overall comp (base + bonus).

if you bill 2200 hours, you get 320*2200*.3 = $211,200 - that's $6,200 over market.

if you bill 2400, you get $230,400 - already well above market. That's $25,400 over market.

and some of us, who work our asses off and bill 2600 and 2800 get much more:

2600 = $249,600 That's $44,600 over market.

2800 = $268,800 That's $63,800.

This system is fantastic in the early years. If the percentages were ratcheted up for the later year so that you didnt constantly have to bill more hours in order to maintain a spread above market, then it would be flawless.

If you're in your first 4 years at BSF tho, you're killing your friends at other firm's comp. And if you bill less than 2200 in NY city, there is a problem. I dont have a friend at any firm in NY who bills less than that.

To add insult to injury, the firm has not given the so-called "special" bonus instituted by almost every other NY firm. This is especially disturbing in light of the firm's recent settlement of over 2 billion (yes, billion with a "b") dollars in the Amex case.

On another note, it's worth mentioning that the majority of BSF associates are on planes to Jamaica at the time of this posting. I bet that there would be a lot more posts if that weren't the case.

The folks who are doing the math w/out noting that there are scores of associates who work on contingency and other matters that don't count in the formula compensation calculus are missing the entire picture.

12:39 -- Stop the fuzzy math. No one has cases that only bill out at full rate. See the post at 11:53.

On large contingency cases, BSF allows their associates to choose either a guaranteed fixed rate or a % of the contingency payout...before they start working on a matter. So they have the best of both worlds.

Furthermore, in ANY field, entrepreneurship and extra hard effort should be recognized. A lock step payout is very socialist and rewards slackers. So long as a reasonable number of hours results in a comparable compensation to other big firms, the BSF system is superior. (And I bet anyone at the firm meeting who stands up and argues for lock step is a slacker!)

Lastly, padding bills is a red herring. EVERY firm's partners have that issue.

1:01 - You are wrong. It is not the case that the firm allows is associates "to choose either a guaranteed fixed rate or a % of the contingency payout...before they start working on a matter." Perhaps that transpires in a special case, but that's not the ordinary course.

Anon at 12:35:

If firms bill by project then the hours actually worked by the associates don't impact the fee generated. Their slice of the revenue stream would be dictated by an internal formula. Thus the incentive to bill pad is decreased.

This is where the next nit-picky d-bag who thinks contrarian tendencies equal intelligence says one of two things: 1. wouldn't lawyers still bill pad in order to gain a bigger allocation of the fee slice?; or 2. wouldn't this decrease the quality of attorney work since there would be an economic incentive to rush through all deals when more work did not equal more pay for the firm?

Let's see if you can figure out those answers for yourself. I know lawyers aren't applauded for this sort of thing but actually try and think constructively.

Remember two things. (1) When discussing something new you're not comparing the new system against some sort of platonic ideal. You're comparing it against the opportunity cost. ACTUALLY THINK THROUGH THE OPPORTUNITY COSTS AND THE CONSEQUENCES OF CONSEQUENCES instead of feeling a smug satisfaction that you found a potential problem. (2) The actual details about the BSF system aren't the big story here (I can't find the detailed memo outlining the system -- I worked off Lat's summary which some suggest is flawed). The big story is that a large well-respected firm is moving toward a performance based model that BETTER compensates hard work/efficient work (depending on structure) than the status quo. Do I care if 30% makes little sense and a future firm needs 35-40% to make the numbers pop for an enterprising first year? No. Neither should you.

Actually JMA, it appears that the story is that the firm is moving away from its "performance based model".

Does everyone at least agree that for those who bill a very high number of hours (say 2500+), BSF beats virtually every other NYC firm except maybe Wachtell?

This whole discussion is confusing two issues: raw compensation and incentives. Say BSF set billing rates such that 75% of associates would receive above-market comp, and 25% would receive below market but would be billing 2100 hours or less. I'm not saying that's how the numbers work out now, but if the system could be calibrated in this way, wouldn't it be much better than lockstep? Or is the problem simply that it's inegalitarian?

1:16 - no!

1:06 -- YOU are wrong. A friend of mine was an associate at BSF -- and he told me that he stupidly chose guaranteed billing over a % payout on a contingency matter that paid out huge. Of course, you don't read in the headlines about the big contingency cases that don't pay out ... such as SCO ...

The BSF system empowers associates. If you work like a dog, AND/OR work on a successful contingency matter, you'll make vastly more money there...under the current system. Many hundreds of thousands of dollars are possible for young associates. What's wrong with that???

1:16 - the problem isn't that it's inegalitarian it's that the numbers don't match your hypthetical.

BSF advertises itself as paying above market compensation (see the website under recruiting). But how it works out is that probably 75% make well UNDER market. For a 5th year, you'd have to bill over 2600 to make market. People are angry because they're billing 2200 or 2300 hours and making significantly less than associates down the street billing only 2000.

I don't think anyone would be unhappy if people billing 2000 hours made a little under market and people billing 2200 made above market. But it's understandable that folks are disappointed that they're being paid significantly less than associates at other firms and yet are working more hours.

1:23/1:01 - It's you who are wrong. I'm not relying on my friend who "was" an associate at BSF. I'm speaking as someone who is and has been for years a lawyer at BSF. The simple fact is that it is not the case that an associate can opt-in or opt-out of the risk on a contingency matter at the time s/he begins working on it. If that's what your friend told you was the case for all contingency matters, that person was was wrong.

1:16 -- Very fair points. They need to pay a competitve salary for 2200 hours. But if you're billing 2,000 at a top firm, you're a slacker in my opinion. And for each 100 hours above 2300, there is a massive marginal lifestyle sacrifice. For example, if you bill 6 hours every Sunday, should those marginal 300 hours (from 2200 to 2500) go to the partner's profits like they do at the other big firms. I wish the other firm's would adopt the BSF model ... and not the other way around!

"Most" cases are NOT at a 10% discount. Over 50% are not at a discount. Maybe what you happened to work on was - and if I recall correctly, beginning Jan 1, the blended rate across years goes into effect, which means that those of us who work on full rate cases will be subsidizing you. You have no complaint 12:54.

The BSF system works great for folks who don't mind killing themselves (or, perhaps, padding their hours) for the extra cash. For those who want to make some quick money for a few years out of law school, it's not a bad option. Just be aware that this will come at the expense of pro bono and other professional development opportunities, which are neither compensable nor particularly encouraged. Note also that the firm expects associates to be involved in recruiting and other firm-development activities that are not compensable. (Call it corporate pro bono.)

BSF has many great lawyers and is a money-generating machine, at least for the few equity partners and, to a lesser extent, the non-equity partners and associates like 12:39 who bust their asses. (That is, until DB gets hit by a bus.) Good for them. But it is not for nothing that the firm has seen a significant loss of morale and massive exodus in the associate ranks in recent years (and is in fact considering revamping its comp system).

JMA would probably say that the system is working as it should--the inefficient workers are being weeded out. He may be right--perhaps the firm is simply undergoing a process of becoming more efficient. But it might be that over the long term a firm with such a system will disproportionately attract and reward bottom-line oriented drudges who measure the "quality" of one's work by the number of weekends foregone. (I think JMA would refer to these people as "enterprising.") God knows they are not in short supply, and I would be happy to concede to them the opportunity to work with each other. In fact, firms that adopt this system could be doing the rest of us a favor by quarantining them from the rest of us. Have you ever met anyone from Wachtell?

people should also note that there is apparently a great divide in the firm between corporate group associates, who seem to be pretty content billing crazy hours and making a lot more than their peers, and litigation associates. However, it also seems like the corporate group is better run, works on fewer discounted deals, and generally has an even distribution of work. If the whole firm ran as well as the corporate group did, morale would probably be a lot higher.

Did Nostradamus or the Delphic oracle say that DB would be hit by a bus? I always here people saying that DB will be hit by a bus. How can we be so sure about that?

Not only may there be a discount to the client, the partners may discount the associates time in many instances before the bill is calculated. These numbers do not come off billeable hours at many firms, but do at BSF.

I wouldn't be surprised if 10% of my time has been shaved before the bill goes to the client because some things took me longer than it should have. But guess what, I don't care b/c it doesn't affect my compensation. At BSF it would.

Where is the Boies firm staying -- Sandals or Round Hill?

2:08 - That's true, and that's a good answer to the dreaded "padding" accusation that some have made about the BSF comp system. The partners know that the firm still has to send out a reasonably fair bill to clients or else they will lose business in the long run. Associates may be able to pad a little (as at all firms), but partners have an incentive to stop it from getting out of control. Associates, knowing this, should reign in the padding so as not to look like cheaters in front of the partners.

Ritz Carlton.

And it's my understanding that Boies Schiller doesnt shave off hours - not because they dont want to, but because they cant afford to - given the compensation model and the size of the firm. bigger firms can do that. BSF has 200 people.

Aruba, Jamaica, ooh I want to tak you....

to Bermuda, Bahama, come on pretty mamma.

What's worse is that at the firm retreat to Jamaica in 2004, the firm gift to all of its lawyers was a copy of David Boies' autobiography.

Otis,

I think you've perfectly summarized the status quo.

I'd only color two factors differently. First, those "drudges", whatever you think about them as socially worthwhile individuals, subsidize what I guess you'd call the "non-drudges" (or, what a partner might call, the lazy SOBs). (There is a strong argument that drudges subsidize partners more than lazy SOBs because many NY lazy SOBs are still profitable vehicles but that is not particularly relevant to this discussion. If partner profits fall, they will crack the whip across the board. If they don't, they don't tremendously care that person A contributed $100,000 and person B only $50,000. Frayed expectations trigger advanced oversight and partner demands).

Regardless of what group we personally fall into, it seems fair to me that people should reap what they sow. Harder and better workers deserve higher pay. A rational firm will incentivize this behavior. If some firms do incentivize this behavior and other firms do not, rational extra-hard working individuals should tend toward those firms that seek to reward their lifestyle choices.

Second, the BSF model is very good for attorneys overall. The situation at BSF may be bleak and cold and overly demanding for the vast majority of attorneys. I don't know and I don't really care. What I'm in love with is a model that increases non-partner attorney bargaining power.

Lawyers, particularly well-regarded lawyers are always in high demand because of certain inefficiencies in the broader market place (I say this not to be a snob but to recognize the basis of why some of us charge $300 per hour for doing work that could probably be done only marginally worse for $20 per hour). The most notable inefficiency being risk aversion of those hiring lawyers. That risk aversion is pretty well summarized by the popular saying "win with anyone, lose with Cravath." There is a principal-agent problem w/r/t those hiring law firms because Company X is bearing the cost of the hire, but Executive Y is bearing the cost of a failure should they hire a firm that does a poor job. (One could argue that Executive Y would also bear the cost of overpaying for legal work but they don't in the vast majority of corporations because the same principal-agent problem exists for the people who oversee them and for the board of directors. Shareholders, the ones getting screwed, usually suffer a collective action problem that precludes acting against the original Executive Y's inefficienct butt-covering behavior).

So, because demand for top quality legal talent is both scarce and relatively inelastic (even if it shouldn't be) and top law firms need top legal talent, shifting to a performance based model will, eventually, force firms to engage in a pretty vicious compensation competition.

This hasn't happened yet only because the cost of acquiring information, for associates, about superior firm compensation system was notoriously unreliable and difficult to come by until about 5 years ago. With information flowing more efficiently (and thus a change to one firm's compensation policy more likely to have an effect on recruitment than it did 5-10 years ago), loyalty to firms being seen as less of a virtue (two way street, none of us expect to make partner, none of them expect to keep us) and law firms no longer wedded to anachronistic egalitarian schemes I think we'll see a huge compensation battle in the next decade or so that will completely reshape the industry. These recent salary increases were just the canary in the coal mine.

A notable exception to the "Special Bonus" seems to be Morrison & Foerster - New York. Has anyone heard if they plan to offer this bonus?

Recently, I was asked by a friend of mine (who is at a top 5 law school) what I thought of the law firms with which I work. I do have some views, but I also wanted to do some internet research and ran into the Morrison & Foerster "Special Bonus" question. Interesting ... I had initially thought about recommending the firm, but this throws a wrench into that plan.

All that said, I'm not convinced that my internet research is exhaustive enough to figure out if Morrison & Foerster pays fairly and values its employees as much as other firms do. While not the only criteria for picking a law firm, pay is certainly important.

Can someone let me know if Morrison & Foerster has announced the "Special Bonus"? If not, what do others think of this?

so what happened in jamaica?

11:12
200,000 hours?
I think someone is padding their hours.