Salary Cuts

Salary Cut Watch: Drinker Biddle Cuts Salaries AND Rates

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Sorry to go all caps on you. But we finally have a firm that is using the crisis to seriously rethink the nature of the first year experience, instead of just firing them, deferring them, cutting their salaries, or generally acting like first years are solely responsible for ruining the Biglaw model with their entitled insistence on being employed after three years of legal education.
The Legal Intelligencer and AmLaw Daily reports that Drinker Biddle will actually allow first years to start in September:

Rather than immediately assign the incoming lawyers to client matters, the firm will enroll its hires in a new training program that will provide courses on taking depositions, writing briefs, and meeting client needs. The instructors will include Drinker attorneys, professional development staff, and firm clients. The 37 first years also will shadow partners’ client meetings and court appearances. The associates may handle some client work, but at significantly reduced rates.

There is a catch. For the first six months, first years will be paid on a scale of $105,000. That is a bigger reduction in salaries than we’ve seen at other firms. On the other hand, Drinker Biddle is also reducing the rates that clients are charged for first year work.
Anybody else notice that responding to client concerns about the value of first year attorneys by reducing billing rates makes intuitive sense? I think Drinker Biddle management would do very, very well on the LSAT.
After the jump, we see that Drinker is rethinking the entire first year experience.


We’ve obtained the internal communication from Drinker Biddle about the firm’s new first year program. For the first six months, first years will be treated like apprentices instead of spare manpower:

The First Year Class. We have also decided to welcome and train our incoming lawyers rather than defer their arrival for months or a full year. It is not in the best interests of the firm or our clients to have untrained lawyers arrive at the firm later rather than sooner. It may well turn out that there is not enough first-year level client work to keep these new lawyers occupied. Indeed, we recognize that some of our clients are now unwilling to accept newly minted lawyers on their matters, believing that they should not be obliged to pay top dollar for new lawyers who are still learning their craft. That being said, if we are to provide our clients with the highest quality mid-level associates, we cannot shrink from training and developing those lawyers. They do not come ready made.
Accordingly, we are advising all of our incoming lawyers to join us in late September of this year and to expect to spend the first several months of their practice receiving intensive training – a training program far more rigorous and focused than any we have previously provided. Although much of this training will be focused on traditional legal skills relevant to particular areas of practice, we also expect to spend substantial time educating our new lawyers about our clients’ businesses and Drinker Biddle’s approach to adding value in countless practical ways. Our incoming lawyers will be expected to observe partners in their daily interaction with clients, with adversaries, and with the Courts. Although the program will inevitably involve some “classroom” time, our new program will be designed as a form of apprenticeship to the practice of law, free from the burden of billable hour requirement. The faculty and administration will be DBR lawyers and professional development staff, and the curriculum may include sessions with our clients. We will also be looking to all of our lawyers to make special efforts to find opportunities for our new lawyers to gain the kind of real world experience our clients expect – even if we cannot bill for the time.
During this initial period – when our training program will consume most of their time – we will pay our incoming lawyers at an annual salary rate of $105,000. Any client work they perform will be billed at a significant rate reduction to ensure that, if new lawyers perform work for clients, the value is clear. In the spring of 2010 – once our new lawyers have been with us for at least six months – we expect to bring their compensation in line with then prevalent market rates for first-year lawyers. In this way, we intend to address the often-repeated criticism that we are training our lawyers at our clients’ expense while at the same time ensuring that our overall compensation system for associates is logical, consistent and fair.

This is a good line: “That being said, if we are to provide our clients with the highest quality mid-level associates, we cannot shrink from training and developing those lawyers. They do not come ready made.”
This is a better line: “Any client work they perform will be billed at a significant rate reduction to ensure that, if new lawyers perform work for clients, the value is clear.”
For months, law firms have been complaining that clients don’t want to pay for first year associate work. But instead of using that rhetoric as an excuse to eviscerate first year salaries, Drinker seems to be actually addressing the root problem, instead of the merely messing around at the (profit) margins.
And shockingly enough, they’ve achieved a much larger salary reduction than firms who just want to go back to 2007.
Will other firms follow Drinker Biddle’s lead and offer real training to first years before it bills them out to clients?
Read the full memo below. There are actually a lot of changes going on at Drinker, and most of them seem refreshingly logical.
DRINKER BIDDLE — MEMO — PROFESSIONAL DEVELOPMENT
TO: All Lawyers
FROM: Alfred W. Putnam, Jr., Andrew C. Kassner
The economic convulsions of the last six months have led law firms throughout the country to reexamine how they develop talent and provide value to their clients. Many firms have reacted to the economic downturn with attorney and staff reductions, and by telling their incoming lawyers to defer their legal careers for up to a year. Similarly, many firms implemented across-the-board salary freezes for 2009 and limited the bonuses they paid at the end of 2008.
We have tried to take a different path. Our strategy has been to maintain traditional practices rather than focus solely on capital markets. We have attempted to maintain a balance of practices to ensure that when economic cycles turn, we continue to be able to offer the services that our clients require. All of which means we cannot stop investing in our younger lawyers just to meet the immediate demands of a down cycle. For this reason, we honored our bonus program for lawyers and staff last year, and we did not implement an across-the-board salary freeze. The flexible associate compensation system we implemented several years ago when many other firms preferred lock-step systems has served us well during times of both economic expansion and contraction.
That being said, economic change has required us to review a number of our policies and practices to make sure that the services we provide are perceived as valuable when measured against the bills we send for those services. In particular, we want to make sure that the firm’s economic perspective is appropriately aligned with that of our clients who have made their viewpoints clear both in individual meetings and through the “Value Challenge” initiative of the Association of Corporate Counsel, an institution with which our firm is proud to be working closely on these matters.
To this end, we today announce a number of items regarding the staffing of our matters and the development of our lawyers:
* Associate Compensation. We have begun a review of our compensation program to ensure that it is aligned with the needs of our clients and the professional development of our lawyers. We expect the review to be completed by the end of the fiscal year for implementation in FY2010, and we are confident that our work will yield a system that strengthens both our firm and our relationships with our clients.
* Associate/Counsel Bonus. We have completed a review of the bonus program and have decided that it should be consistent with our more flexible base salary system. Currently, bonuses are determined almost solely by the recording of billable hours. Our clients are now telling us – in no uncertain terms – that they question whether the value provided to them is properly measured in this way. This means that we will probably be entering into a greater number of alternative fee arrangements over the next few years – arrangements that do not value or reward hours as such. With this in mind, commencing with FY2009, we will award bonuses based on merit and quality of service, not merely by number of billable hours. It does not follow, of course, that billable hour production will cease to be a significant factor. Hard work deserves to be (and will continue to be) rewarded. From now on, however, exceeding billable hour targets will not be the only factor in bonus awards. Continued investment in the firm and delivery of value to our clients will also be considered. We will shortly provide you with a memorandum that describes the modifications to the bonus system. (We should also add that the firm will continue to provide business development bonuses to our associates and counsel.)
* Evaluations. When we moved to a structure focused on management at the practice group level, our Practice Group Leaders took on greater responsibilities. We have found that, especially for the larger practice groups, requiring Practice Group Leaders to conduct associate and counsel performance and salary reviews in January and February is increasingly difficult given the other pressures of that time of year (e.g., year-end collection efforts; business and financial planning for the new fiscal year; completing partnership promotions; preparing for the annual partner allocations process). We have therefore decided to move the annual performance evaluation cycle to the fall. This is a change only in the timing, not the substance, of the evaluations. We should also note that salary decisions will continue to be made at the end of the year, and associates and counsel will be notified of salary decisions by the end of February.
* The Hiring Program. Many of our lawyers have asked us whether we intend to modify our hiring program. In particular, given client questions about the value of very junior lawyers, it has been suggested that we should rely more on lateral hiring of more senior lawyers who have already received their initial training elsewhere. After consulting with our Practice Group Leaders and partners responsible for our significant client relationships, we believe the answer is not to cut off the source of talent and future leaders of our firm by abandoning our traditional practice of hiring lawyers out of law schools. Nevertheless, we are now reviewing how we run our summer programs and train recent law school graduates to be Drinker Biddle lawyers. Instead of focusing only on numbers, we may very well hire fewer people and commit to train them better. We are reviewing how and whom we recruit with [Redacted], and we anticipate making significant adjustments to our summer program syllabus.
* The First Year Class. We have also decided to welcome and train our incoming lawyers rather than defer their arrival for months or a full year. It is not in the best interests of the firm or our clients to have untrained lawyers arrive at the firm later rather than sooner. It may well turn out that there is not enough first-year level client work to keep these new lawyers occupied. Indeed, we recognize that some of our clients are now unwilling to accept newly minted lawyers on their matters, believing that they should not be obliged to pay top dollar for new lawyers who are still learning their craft. That being said, if we are to provide our clients with the highest quality mid-level associates, we cannot shrink from training and developing those lawyers. They do not come ready made.
Accordingly, we are advising all of our incoming lawyers to join us in late September of this year and to expect to spend the first several months of their practice receiving intensive training – a training program far more rigorous and focused than any we have previously provided. Although much of this training will be focused on traditional legal skills relevant to particular areas of practice, we also expect to spend substantial time educating our new lawyers about our clients’ businesses and Drinker Biddle’s approach to adding value in countless practical ways. Our incoming lawyers will be expected to observe partners in their daily interaction with clients, with adversaries, and with the Courts. Although the program will inevitably involve some “classroom” time, our new program will be designed as a form of apprenticeship to the practice of law, free from the burden of billable hour requirement. The faculty and administration will be DBR lawyers and professional development staff, and the curriculum may include sessions with our clients. We will also be looking to all of our lawyers to make special efforts to find opportunities for our new lawyers to gain the kind of real world experience our clients expect – even if we cannot bill for the time.
During this initial period – when our training program will consume most of their time – we will pay our incoming lawyers at an annual salary rate of $105,000. Any client work they perform will be billed at a significant rate reduction to ensure that, if new lawyers perform work for clients, the value is clear. In the spring of 2010 – once our new lawyers have been with us for at least six months – we expect to bring their compensation in line with then prevalent market rates for first-year lawyers. In this way, we intend to address the often-repeated criticism that we are training our lawyers at our clients’ expense while at the same time ensuring that our overall compensation system for associates is logical, consistent and fair.
We have mentioned our firm’s active dialogue with the Association of Corporation Counsel, an organization that counts many of our clients among its members. We intend to meet (and surpass) the “Value Challenge” posed by the ACC and its members. This starts by ensuring that our lawyers are trained early and well in the Drinker Biddle way. We began this process last year by reorganizing our firm’s CLE system. We will commit to do better by upgrading our comprehensive program for our new lawyers rather than by telling them to come back in five months or a year when we can staff them on client matters without adequate training. We have chosen to look at the current economic environment as an opportunity to change the way we develop our lawyers and serve our clients. We hope all of our incoming associates will understand, and perhaps welcome, that decision.
* Flex-Time Policy. We are also pleased to announce our continued commitment to the career development of our lawyers who decide to practice on a less than full-time equivalent basis. A memorandum explaining the policy review and the policy is going out today.
Although the current economic environment is uncertain, our partnership is committed to providing the best opportunities for our lawyers and to ensuring that our firm continues to be the kind of institution that each of us felt privileged to join. Long before any of us came to this firm – indeed, long before any of us was born – the lawyers of this firm and each of its predecessor firms were proud of the institution to which they belonged. We still are. And we wish to conduct ourselves in such a way that all our lawyers, including those arriving this fall, will feel the same way we do. We acknowledge that there may turn out to be a price to pay for that – particularly in a year like this one. If so, then we think it right to pay it: this is a time to rise to the challenge, invest in one another, and provide for the continued stability – and success – of an institution that has never been afraid to take a different path.
Drinker Biddle Sends Associates Back to School [AmLaw Daily]
Earlier: Prior ATL coverage of salary cuts

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