Biglaw, Bonuses, Money, Skaddenfreude

Wilson Sonsini To Adopt Performance-Based Bonuses

recession california associate pay raises.jpgIt is still way too early to get hard numbers on what Biglaw bonuses will look like for 2008. But because of the economic downturn, we expect it will be a rocky bonus season.

As readers of The Shock Doctrine will note, it is important to be aware of fundamental changes to the way bonuses are paid out. You don’t want something to slip in under the guise of a (massive) market correction.

Yesterday, Wilson Sonsini Goodrich & Rosati announced that 50% of their bonuses would be paid out based on performance evaluations. According to the firm, the change was made in response to associates’ concerns:

To: All Wilson Sonsini Goodrich & Rosati Associates, Of Counsel, Special Counsel, and Staff Attorneys
From: John Roos
Date: September 25, 2008
Re: FY09 Associate Bonus Program

As always, the firm is committed to providing a competitive compensation package to our associates. We also are committed to listening to feedback from our associates and making adjustments to our approach to compensation as appropriate. Recently, the firm’s associates have voiced concerns about the bonus program’s heavy emphasis on billable hours. In response to those concerns and after a long and careful review of the associate bonus program, we’re pleased to announce a new component to the bonus program focused on qualitative performance factors.

[Redacted] will be sending out a memo shortly with more details on the changes, but I’d like to give you a brief rundown on the changes, as well as the process that led to them. In essence, the total bonus opportunity will consist of three independent components:

— a basic level of bonus paid at 1,900 hours;

— an adder paid at 2,100 hours; and

— a variable bonus based on work quality and overall contribution to the firm.

You’ll note that the new bonus program allows us to continue to reward high-billing associates for their hard work–a factor that many associates pressed us to maintain–but it also allows us to reward those who are exceptional performers in other ways.

More from the memo, including explanation of the qualitative bonus component, after the jump.

The memo on Wilson Sonsini’s 2008 bonus policy continues:

The new qualitative bonus component will be based on a number of factors, including productivity, quality of work, level of efficiency, business-development efforts, client-relations skills, and other practice-development considerations–the same factors that form the basis of our annual performance review process. Most significantly, bonus decisions will be determined by the members in the practice groups, putting the ability to reward exceptional work in the hands of those best equipped to gauge performance. We expect that this new approach also will generate more candid and substantial feedback from members on their associates’ performance, something that many associates have requested.

As I mentioned earlier, these changes were arrived at only after a long and thoughtful process, with a great deal of input from a number of key constituencies. In April, we formed an Associate Bonus Program Steering Committee, composed of members, associates, and administrative management. The steering committee met on a biweekly basis to hone its overall approach and goals, define performance criteria, and solicit and respond to recommendations. In addition to these meetings, they met regularly with the Associates Committee and other associate groups, as well as with many members, to ensure that a wide range of voices from all of the firm’s offices and practices had a chance to be heard.

We recognize that any change in compensation structure is bound to raise questions, and we will address those in an upcoming town hall meeting. We’d also like to use the meeting as an opportunity to provide a general update on the firm. Additional details will follow shortly.

In closing, we would like to thank all the members of the Associate Bonus Program Steering Committee and everyone else who provided input on this issue. We hope that our associates will be pleased with the flexibility of the new bonus program and how it rewards exceptional performance as well as billable hours.

Sounds like the members of the “Associate Bonus Program Steering Committee” hosed their constituents.

The Wilson Sonsini associates did receive the promised clarification of their new bonus structure:

To: All Wilson Sonsini Goodrich & Rosati Associates, Of Counsel, Special Counsel, and Staff Attorneys
From: [Redacted]
Date: September 25, 2008
Re: FY09 Associate Bonus Program

As John Roos announced earlier today, the firm has made a number of changes to its associate bonus program and is introducing a new component focused on the firm’s existing qualitative performance factors. These changes apply to all full-time and part-time associates, Of Counsel, Special Counsel, and staff attorneys in all offices.

You will recall that last year we relied on a formula that determined bonuses on a sliding scale between 1,800 and 2,000 hours. This year, we have made some fundamental changes, and in January 2009, according to the regular timetable for announcing the bonus pool based on the firm’s financial performance, we will publish a chart explaining the amounts of the bonus opportunity for each class year. At this time, however, we would like to share with you that the total bonus opportunity will consist of three independent components:

— a basic level of bonus paid at 1,900 hours (roughly 25% of the bonus opportunity);
— an adder paid at 2,100 hours (roughly 25% of the bonus opportunity); and
— a variable bonus based on work quality and overall contribution to the firm (up to roughly 50% of the bonus opportunity).

For the purpose of determining the first two bonus components, eligible hours include all chargeable hours recorded, pro bono hours, hours charged to accounts for WSGR legal services, and a cumulative total of up to 40 hours charged to Knowledge Management, Attorney Recruiting interviews, or preparing and presenting internal training courses that qualify for CLE credit. The third bonus component will be based on a number of factors that already form the basis of our annual performance review process, including work quality, productivity, efficiency, business development, client relations, and other considerations regarding practice development.

As John mentioned, we realize that our associates are bound to have questions about the new bonus structure, and we have scheduled a town hall meeting for October 1 to explain the program.

In the meantime, please feel free to contact your supervising member if you have any questions about the changes to the associate bonus program.

Thank you.

This tipster best sums up what Wilson Sonsini associates are feeling:

The firm now has an easy way to screw associates out of half their bonus. Fantastic. Again, thanks for springing this on us 8 months into the year. I love how they spin this as reacting to associate concerns… unreal.

Pretty much. Fifty percent of the bonus is now based on a subjective review with no clear standards. Sound fair?

Maybe performance reviews are fair, but you need to give the associates more to work with than “other considerations regarding practice development.” It would also be helpful to tell associates that their reviews actually mean something before three-quarters of the year is already in the books.

But in this economy, who knows. Putting half of the bonus into the nebulous “performance” category may just be the tip of the iceberg.

Keep your head on a swivel. It’ll be a very interesting fourth quarter.

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