Associate Salaries, Biglaw, Partner Profits

Ending Lockstep Salaries, But What About Billing?

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There is a report in Bloomberg today, about the attempts some firms are making to end lockstep associate salaries:

The firms are responding to the plunge in corporate, real estate and finance work by overhauling compensation for associates, who often total as many as two-thirds of a firm’s lawyers. Some, like Orrick, are beginning to reward lawyers based on performance rather than seniority. Others plan to cut salaries for starting associates, just two years after top firms raised pay to compete for talent.

It looks like associates are dispirited, disorganized, and desperate to hang on to their jobs. If I was a professional business consultant, I’d think now is the perfect time to start stomping on dirty “workers” while they are down:

“In the current economic crisis, we see the final demise of the Medieval guild in the American legal profession,” said Joel Henning, a law firm consultant at Hildebrandt International Inc.

I am unarmed. Strike me down! Give in to your anger! With each passing moment, you make yourself more my slave.

Law firms have operated for decades with associate pay structures that don’t reward performance, Henning said…. “One of the best things firms are doing is breaking the ridiculous lockstep structure of associate compensation,” Henning said. “There is no other profession that operates that way.”

Young fool … Your feeble skills are no match for the power of the Dark Side. You have paid the price for your lack of vision!

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But isn’t there something missing from this story? More after the jump.


Orrick, which has been trying to lead the charge on this for some time, believes that this will give associates the “option” of staying at the firm forever, without the pressure of trying to make partner:

Orrick’s reforms will let lawyers know if they’re likely to make partner and allow those unwilling to work the long hours required for that position to stay at the firm, Baxter said.

Clients typically pay much less for work done by a law firm associate than that performed by a partner.

“We will be perceived as a law firm that is adapting to the marketplace,” Baxter said.

But will Orrick — and other firms that are eager to slash associate salaries — actually “adapt to the marketplace” and change the other end of this arcane paradigm? Will firms reduce their billing rates for associates that no longer deserve top salaries?

If a future fifth year starts getting paid like a current second year, then shouldn’t they be billed out as a second year? If we accept the exceedingly logical premise that an “older” lawyer doesn’t automatically make a “better” lawyer, then surely that internal determination (and the resulting cost savings to the firm) should be passed onto the clients.

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How far are firms really willing to take this? If you are going to make practice law a performance based industry, then you have to make that show up on both ends of the balance sheet.

Associates, of course, don’t have any power to really impact the “new paradigm.” A 25-year-old with a massive amount of law school debt is going to take whatever job they can get. If that job pays a little bit less than it did before, there will still be an oversupply of young attorneys willing to work hard for that money.

But clients do have some say in whatever new system firms are trying to create. If a law firm is willing to say “not all of our X-year associates are worth the same to us,” maybe clients will say “great, we expect to see that distinction reflected in our bill.”

‘Medieval’ U.S. Law Firm Pay Structure Buckles Under Recession [Bloomberg]

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