aaaahhh. I love the smell of 3rd-rate-firms-finally-admiting they can't compete in the morning.

This won't work

This is a good trend.

Lockstep only works for small, elite firms where every lawyer is great (e.g., Williams & Connolly, Wachtell).

time to apply to medical school.....

Any discretion on a law firm part can and will be used to screw its associates. Just sayin'

Another way for a firm to reduce compensation in tought times, no real news here.

The real question is what the heck the 32% of you who said you liked Orrick's plan were thinking. In case you people fail to grasp this, let me explain it in simple terms - not one associate will ever earn one cent more than they would have under lockstep in any of these systems. NO ONE, NOT ONE CENT.

This is not a risk/reward situation, this is a risk/status quo situation. With hard work and luck, you might be able to keep your compensation commensurate with your peers at lockstep firms, but in no situation will you earn more than them. The partnership model ensures that mangement will use any available discretion to line their pockets at your expense. The only defense against them is complete transparancy and an utter lack of any discretion. Any one who hasn't figured that out yet needs to wake up.

These second and third rate "firms" should just die and decrease the surplus population.

-Scrooge

Does this firm still exist?

TTT.

Dear Lat and Elie: Don't you think it's about time for ATL to do actually do a bit of real journalism and actually ask the law firms who claim that the compensation hits are in response to client needs whether they are actually lowering rates charged to clients? If the firms are, in fact, lowering rates charged to clients, fine. But if they are not, and are making public statements that are clearly at odds with that (e.g., SSD and Orrick in the last day or so), then they should be subject to public scrutiny.

NY to 190!!! DC to 160!!!! Philly to 160!!!
BigLaw unite!!! March on Washington!!
NY to 190!!!
NY to 200!!!!

Why is Colonel Sanders paying its employees so much???

Agreed, 7. Look at firms that have very subjective requirements for bonuses. I work at one, and the top bonuses are pretty much what most attorneys would consider market. It is unlikely that "top performers" will actually benefit that much from the change, and most people are likely to be worse off. This is not a good trend.

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11 - it is you and the hundreds of similar posters that need to wake up and smell the RFPs and alternative/reduced fee structures that in-house counsel are demanding from firms. Of course firms are not going to reduce the rate card, but the effective rates charged are coming down big time, and most certainly not increasing as in years past. I'm not saying that I as an associate should take that hit rather than the $1M per year take home partners, but don't think this is all opportunistic; it's reactionary for sure.

What a shithole. They're clearly just taking advantage of a poor economy to screw their own employees. As soon as the economy picks back up, they'll lose their best attorneys, and no one from a halfway decent school will give them a serious look.

This firm is screwed long-term.

If there was ever a thread that called for a comment from the "spread the b_ttcheeks" guy, this is it.

Squire TTTanders!!!

How can this be the "Orrick effect" if Howrey and Drinker were already doing it?

I read a study recently that claimed that companies, including law firms, that pull stunts like this, lose the trust of the bottom tiers of their internal totem poles (e.g., associates, staff, etc.) for an average of seven years.

Cue Michael Ray Richardson...

16, you're missing my point. I'm asking Lat and Elie to directly question the firms that claim they are lowering salaries in response to client demands. I.e., if a firm publicly states this as a reason, don't just reprint it on ATL, ask the damn questions like "you say that the salary decreases are in response to client demands. how exactly do you pass the savings to your clients?" As it is, Elie's just been repeating the claim without questioning it.

the allegation that clients are demanding lower associate rates is BULL F*CKING SH*T. They are demanding LOWER BILLS, and I doubt the 300 an hour jr. associates make really sticks out compared to the 1000-2000 an hour the partners require.

The lowering the associate rates is an INDIRECT, not direct result of client requests. Partners are human and humans will always care for their person before others (if they didn't they'd be doing pro bono work full time, not partners). As a result, they will cut from associates before they allow profits to be removed from the ir cold dead hands.

The death of lockstop would be very bad (in any form). Anyone thinking otherwise is a fool.

Fuck you, Mystal!

21 and 23 are both right

7 nailed it. Nuff said - you can close comments on this thread now.

22, I'd say the number of associates that genuinely "trust" their firms is miniscule, particularly lately. But your point is a good one in general.

Maybe Michael Richardson and the Spread the Buttcheeks Guy took the day off.

I'm sure P.E. is hard at work, though.

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Actually, 7, if it prevents across-the-board salary cuts, then it will, in fact, lead to some associates making more money than they otherwise would.

You should ask associates who have been laid off or had their salaries cut if "status quo" sounds like a reward to them.

9.5% unemployment rate. Thanks Obama!

Can we please return to capitalism now so our economy can fix itself?

LOL at 32. Yes, the unbridled markets of the Bush era were a recipe for success. The is definitely Obama's fault.

9/11, however, was not Bush's fault because he had barely even taken the reins by September, and it's not like he had a memo saying that Bin Laden was planning a massive attack on US soil, right?

Mystal ate the buttcheeks commenter.

Philly is all Ghetto. Same for Philly firms.

"Increasingly, clients are looking for a clearer value proposition from their service providers, and are increasingly skeptical about paying a particular hourly rate for one lawyer versus a higher rate for another lawyer, based solely on 'age and grade.'"

If this is the really the problem, how the hell does doing away with lockstep solve anything? Clients are still going to complain that the bills are too high, regardless of how a firm determines hourly rates for associates.

I agree with the other commenters who have called b.s. It is the firms that want to end lockstep. Clients just want lower bills.

By the way, I hope an attorney did not write this memo. Were they trying to see how few thoughts they could cram into the most words possible?

23,

We do ask for lower associate rates and/or limit their use. 300 is probably ok depending upon what the associate is doing. I rarely enjoy paying to have the law firm look up something they should already know or that a legal assistant should be doing.

Just saying.

Client troll.

26, you're wrong. I think 30 nailed it much better than 7. 7 doesn't know wtf he's talking about...a real mouth breather that guy. I'd say 30 is the real genius on here.

Sugar covered comment devoured by moderator.

Squire Sanders... Blank Rome... Alston Bird... these firms have changed the course of History for BIGLAW. I predict Pepper Hamilton & Sheetz or Winston & Strawn to be next.

Curious how this will all work with billing rates - they will bill a 4th year out at 1yr rates if that's the work quality? As I recall, these are the same firms that bill you out at the next class years rate starting each September and then put the class year salary increases through in Jan/Feb. Good luck with that....

SkaddenDC is more elite than Williams & Connolly.

With its Latin American practice, there are very few corporate law firms that can match Squire Sander's global resources, strength, practice diversity, and reputation for excellence and innovation that allows clients to accomplish very complex cross-border legal issues.

This ain't Colonel Sander's lawfirm.

I just blarfed and sharted at the same time. I think I started my weekend a little too early.

Since when is being paid depending on the quality of the work controversial? Lockstep NEVER paid for better work, and never paid less for lesser work, so it made no sense, and allowed a lot of people to coast by doing just the mediocre level of work, knowing that they weren't going to make partner and would eventually leave. Lockstep flouts the more performance-based pay scales of companies. Over time hopefully lockstep will go away but hopefully firms will still be subject to controls so that (for example) women and persons of color don't have lower pay due to the subtle discrimination they often face anyway. Lockstep at least avoided discriminatory pay differences…

Also I realize that there's a greed factor among partners - they want to make exactly what they are making now, no less - and that's not cool either - but the whole system has needed to change for a long time and the rampant inflation in associate salaries in the past decade has been a dangerous trend - Now you have the mass layoffs because associates who weren't profitable were making insane salaries. So wouldn't it make sense to not pay much to juniors, then start raising salaries for experienced associates and have THOSE salaries rise fast as the associate becomes profitable? I think juniors are paid WAY too much and seniors are often paid WAY too little for what they are contributing, in many law firms. there's a steep dropoff at some point - and someone who is too senior to get pay raises anymore absent promotion to partnership or senior counsel status, stops even getting standard class-based pay increases or COST OF LIVING increases. Very senior non-partners have stagnant pay for many years, so they can either lump it or leave. These the types of persons who will ultimately leave for a more lucrative practice because they aren't paid for extra years of experience. Why should pay just halt at x years out of school?

if these firms are truly ending the lockstep model because it doesn't make sense to pay purely on "age an d grade," how about some recognition of the "value proposition" "junior" attorneys bring who have prior work experience? e.g., 5 - 10 years as a consultant, scientist, etc. What's that I hear? The sucking sound of silence?

Foreign lawyers account for 20% of associates at Big Law. Would it kill law firms to hire Americans instead? Why does the government continue to hand out work visas to foreign lawyers in the face of a glut of qualified U.S. talent?

mmmm...economic protectionism at its finest in #47. Where'd you get the 20% number? Not 20% at my firm.

@45 - but doesn't a bonus along with lockstep account for some of the problems you described? (i.e. bonesus pay more for more work and receiving no bonus pays less for less work)

43 - Exactly how do you accomplish a legal issues?

50 - eff you. you beat me to it.
43 - you just don't get it.

49: Not when they're basically lock step to.

Look folks, lock step competition made absolutely no sense, which is why it is not used in any other industry. Getting away from it allows the stars to shine but also permits those who are coming along a little slower to stay employed while they get caught up.

Are partners greedy? Yes. But that comes with the territory of being an owner. And you act the same way with regard to your investment portfolio.

Wow - look at all the winging and moaning over the prospect of pay for performance!

Some of you pukes may actually have to work for a living. For those who bill and produce, you should welcome this. It means that the crappy associates won't get the same pay for wanking off in their offices all day as you do for doing client work.

48, it's a troll. Feed it and it sticks around, ignore it and it goes away. Like a mangy cat, or a raccoon or somethin'.

Hint: The 32% of those who voted that they liked the Orrick plan are not the ones really affected by the plan.

Put another way, no intelligent associate could possibly prefer this plan.

46 - If those years are in direct relationship to the practice, sure, why not.

37 (client troll),

So you don't care about the overall cost of a bill, just associate rates?

In all likelihood, firms aren't simply going to payout the same total amount of money to associates. Ex, if everyone's earning $200k, that's not going to go to 33% $200k, 33% $160k, and 33% $120k. Instead, they're much more likely to cut overall costs, resulting in a net loss for most associates. Ex, to a 20% $200k, 45% $160k, 35% $120k type of model, where they're paying out less total salary, and you've got much greater odds of being in the "paid less" group than the "paid more" group. That's why this isn't a good idea -- not because merit based pay isn't good, but that firms can't be trusted to handle it fairly (make it about incentives vs. a way to cut their costs).

NOT a single one of the truly good firms will pull this bullshit (Wachtel, Cravath, S&S, DPW, Skadden, Cleary, Weil, Willkie, Paul Weiss, Debevoise) Not a single one. Why? Because they dont have to. These firms can take a 50% hit to profits and still be more profitable thatn most other firms.

It is about time the compensation in BigLaw was based on heirarchy of firm success and selectivity. Here's to all you douchebags who chose a second rate firm for work-life balance with the same money over a top firm. We may be slaves (for now) but we'll keep our jobs and our cash thank you very much.

45- you are wrong-- ALL of the top, most respected firms are lockstep and have been lockstep and that's a big part of how they got to be the best. how do you explain that? lockstep only doesn't work at places where mediocrity exists, and the whole point of elite firms is to hire people who are exceptional, and therefore only do the BEST work-- and thus we only reward seniority-- since all are expected to do the best.

Is there a shortage of attorneys in the United States? If not, why does the government continue to issue work visas to foreign "lawyers"?

59 - Yes, and the world is flat and the sun revolves around the earth. You really think the "truly good firms" aren't looking at this and seeing that it works?

Ah, the arrogance of your ignorance.

please refrain from ever using williams & connelly in the same sentence as Wachtell.

W&C = D.C. joke to any top NY firm

62-- of course the big guys are looking at this, just like anyone with a brain woud. but they already know what works, because theyve been doing it for years, and they know that a few recession years (even the worst in a long time) isn't enough to change what's been raking it in for them for decades. its only recently that other firms have been staying competitive with the big firms, and that's the only thing this recession is "correcting."

p.s. i think you meant the ignorance of my arrogance... but I guess I can't fault you for your mediocrity in getting that mixed up.

60,

Riiiight, which is why most people at all big firms end up leaving or being forced out. Go, "elite firms."*

*Does not apply to Wachtell, which is really pretty elite.

no 65, most people leave because they cant take it anymore or get a sweeter opportunity. not everyone is partner material.

and no one is forced out... a few performance fires out of a firm of 400-500 people is an allowable mistake...

if you count wachtell is elite, than you have to count the rest of the biggies in NYC... trust me, Wachtell just aint that special.

It's insulting how SSD is changing associate compensation in order to meet client's concerns about billing.

What are all these shitbag non-lockstep firms going to do when OCI is a seller's market once again (which admittedly may not be anytime soon)?

67 - Are you serious? You find it insulting that a firm adjusts an unfair pay scheme in order to keep clients (satisfied and as clients)?

Those non-lockstep firms will knock your dick in the dirt because clients will prefer to work with firms that understand how to run like a business not some elitist entitlement club.

60, lockstep isn't the reason the big firms have made so much money and gotten to be the best, it's just one possible compensation structure that could succeed - otherwise how could most companies NOT pay lockstep and so many of them still be profitable and successful?

65, I can't say why most people leave, but there is plenty of better money to be made elsewhere, and working many fewer hours than law firm partners work - not to mention law firm associates - law firms are lucrative but at some point you hit a brick wall and it stops being worth it either in terms of lifestyle or real costs of the compensation - it doesn't mean that these people "can't take it" anymore, some wise up and realize they could do better elsewhere. Law firms are going to lose some of the best people to entrepreneurial gigs as they remain stuck in the ice age

49, bonuses do even the playing field but plenty of people won't be eligible for a bonus because they are more efficient and get the work done in fewer hours as they get more senior, or step onto a part time track and don't get any bonus - and part time doesn't mean qualititatively not as good and not partner material, it just means prioritizing in favor of both work and non-work goals, but the compensation dropoff is substantial and pay increases immediately halt

Psst, guys who are applauding the "lockstep" system at top firms. That lockstep system is not good for you if you're an associate. Instead of firms competing with each other on the salaries for the top associates who go to those firms, they engage in a de facto oligopoly where everyone pays the same rate. As a result, no upward price pressure. The partners are keeping lockstep at the top firms not out of the generosity of their hearts for the benefit of associates. They're keeping it because the lack of salary competition means higher PPP in their own pockets.

Imagine if the top baseball teams paid their players on a lockstep basis. How much money do you think Alex Rodriguez would have missed out on? Do any of you law students understand how businesses actually work and how lockstep is bad for anyone above average when everyone is paid the same?

Other professional service industries (accounting, consulting, medicine) are not lockstep, and one, big accounting, is up or out.

So why should law firms be lockstep

70: Actually, 70, the lockstep system is great for associates, unless they are true "stars" who could demand a salary relative to their peers analogous to what ARod gets relative to the league average. There is no "making partner" concept in baseball, but there is in law firms. If associates really are so great that they can demand elite compensation from law firms, they are clearly partner material and will be made partner shortly thereafter. For the other 95% of associates, they'll get bent over and cornholed by the partners as the author of post #7 above describes. The marginal salary that the elite performers will get, relative to their peers, pales in comparison to the amount of salary that the partners will screw the other 95% of associates out of. Your argument is bullshit.

72, if under a lockstep system the non-star associate is getting paid more than he would otherwise be paid under a non-lockstep system, why are the partners purposely giving more money to the non-star associates? The partners are free to make the decision to break lockstep any day they want to, and boost their PPP under your analysis. Maybe the partners have such generous charitable impulses? These non-star associates are not that irreplaceable compared to their market rate counterparts, are they?

Keep on drinking the Koolaid that the partners' financial decisions are in your best interests.

Following on to 72, everyone thinks they're a star, and most associates get good reviews ... but trust me, unless you're billing 2500 hours per year and are truly irreplaceable, you're not worth shit to these guys, especially now. If your counter-argument is that in a hot market, competition among law firms will drive up prices for top associates ... well, sure, that is possible, but only for a handful who have portable business or ultra-high billables. (The lack of transparency would also make apples-to-apples comparisons difficult.) Even that is subject to firms changing back to a lockstep system after this "challenging period in the economy," as they might call it -- I call it a "Greater Depression" -- has come and gone. I would bet everything I own that 98% of associates would come out worse under a non-lockstep system. I would bet a slightly smaller amount that 100% would come out worse.

Is the firm suggesting that it will pass its compensation savings on to clients? A client of this firm should call and demand an immediate discount since the cost structure of the firm is going down. The firm is free to change its billing rates at any time, offer discounts, write off time, etc, to benefit a client at any time. This new plan has nothing to do with clients and everything to do with reclaiming recently lower revenue for partners by lifting it from pockets of employees. That's their right as business owners, but this "plan" is smoke and mirrors.

"With its Latin American practice, there are very few corporate law firms that can match Squire Sander's global resources, strength, practice diversity, and reputation for excellence and innovation that allows clients to accomplish very complex cross-border legal issues."

LOL... SSD has a mail drop box in every country in the world, but few attorneys who can try a case to verdict. Overpaid hacks is the problem, not lockstep.

the driving force behind lockstep is time. in an industry where you bill by the hour and there is a fixed and predictable career track, spending hours and hours evaluating fine gradations among associates (and in most instances the gradations would be fine and debatable) is a waste of time.

Law firm partners hate management (with compelling reasons illustrated by the current financial difficulties faced by the profession and the mad scramble by partners to save themselves), law firms are not badly managed, they are unmanaged, and a non-lockstep system would automatically require more management time than a lockstep system.

So firms run lockstep because the cost-benefit of a non-lockstep system is negative.

When, on the other hand, you are in financial straits, dropping lockstep allows you to thereafter conceal salary cuts. You don't have to announce "class 200x is being cut 10%" because there is no longer a set pay for class 200x. Take this to the bank: the firms that drop lockstep are also planning substantial across the board salary cuts and they don't want to make it easy for web sites like this one to find out about them.

when and if the good times return, the firms will return very quickly to lockstep and they will be quite up front about why - it saves management time, and therefore, billable partner hours. And since good times imply rising salaries, they don't have to worry about negative publicity because of salary cuts - there won't be any salary cuts.

All Orrick, Squires, Drinker et al. have announced is they see the bottom falling out of the associate market and they want to avoid as much negative publicity as they can - smart move - when, say on 1/1/2010, they cut all first years to 100k. Any inquiries from this site etc. will be met with gobbledegook - we don't follow lockstep, individualized assessment, different career paths, etc. when in fact all they did was wack salaries across the board.

Law firms announced salary increases over the past few years to garner positive publicity both with students (we are a successful firm) and actually with clients (we are a successful firm-clients like to think, within limits, that their lawyers are smart and successful). Why should anyone be surprised when, on the downside, law firms try to avoid the mirror image of that publicity?

First year associates should be paid no more than $75K, plus benefits. While this is more than they are worth, it's still a decent salary for someone who knows nothing and contributes little or nothing. After the first year, salaries should be increased according to their contributions to the firm. This could mean a huge increase, a decease, or getting fired. The idea that a first year associate is entitled to a huge salary is pure bullshit.

57,

In my mind the two are not mutually exclusive. What works best for me is to sit down and set up a work plan and budget with the law firm and if they overrun I never see it. We work together to decide what work should be done, and if the law firm should do it, etc. Maybe our in house ediscovery team, maybe review should go to a third party consultant.

This also informs the overall matter strategy, and may force settlement. Like anything else what gets measured watched gets mattered and you can bet i am pissing and moaning about copy costs, .1 for reviewing a good job email etc. You pay attention to the small stuff and the overall number takes care of itself.

Sure things change and we adjust the budget -- or they don't and the law firm eats it. It does not work well with every firm, and on every matter. But over the decades it works out. By the way, it is not at all unusual for me to identify an associate i want working on the matter even though he or she is not needed. I will pay for that "insitutional development" if there is a long term strategic fit. That associate is gonna be a partner somewhere someday --

On most matters i have three firms come in. (we now have one of those big strategic things, but its the same). Firms with silly associate billing rates don't even get invited in because there are plenty who are reasonable.

Also however, although we are very big well regarded company, and a valuable client, we are not like the investment banks who need to have a deal go through in order to get paid. Those guys have to have the best and are relatively cost indifferent. Their legal fees were a rounding error compared to commission. That's the work that has gone away.

As sort of a cf., we hire lawyers not firms -- prestige is not so important as that lawyer's capabilities, knowledge of industry and or area I laugh when i see how posh some of the firms offices. We like the ones with coffee stains on the rugs and green walls. And 300 dollar an hour associates.

The ship be sinking...

wow - lawyers may actually have to get accustomed to being paid like most other workers. The big clients of all these law firms don't automatically pay employees another $10-$15 K per year simply because time has passed. Instead, employees are hired for a job at a certain salary. They may get cost of living increases, but unless they get a promotion, their salary pretty much stays the same. This applies to everyone in the company -- from the cashier at the company cafeteria to the CEO. The way to get a salary bump is to work hard, be nice, and be a little lucky enough to get promoted.

Lockstep is for people without confidence in their own abilities and without confidence to outlawyer their fellow associates. Simply put, Lockstep is for those who don't have the fire in the belly.

77, thanks for the brilliant explanation - you set forth an overdue and completely understandable explanation for why lockstep theoretically makes sense in law firms and not other corporate entities. It also explains how the changes are in fact veiled salary cuts to avoid cutting partner profits. But I don't think that makes the changes a bad thing long-term. Short-term I think it's going to hurt some people, but longer term it could be good for everyone.

And I do think your explanation begs the question of why law firms can't start to be managed like the businesses they are, rather than (un)managed in a way that justifies lockstep to allow for lazy (or non) management

PS - 72, you have a point but you lose most of your credibility at the end when you attack another commenter's argument as "bullshit" - why show insecurity by dismissing someone else's argument out of hand?

77, thanks for the brilliant explanation - you set forth an overdue and completely understandable explanation for why lockstep theoretically makes sense in law firms and not other corporate entities. It also explains how the changes are in fact veiled salary cuts to avoid cutting partner profits. But I don't think that makes the changes a bad thing long-term. Short-term I think it's going to hurt some people, but longer term it could be good for everyone. And I do think your explanation begs the question of why law firms can't start to be managed like the businesses they are, rather than (un)managed in a way that justifies lockstep to allow for lazy (or non) management

Squire SandTTTURDS.

will this encourage jones day and baker hostetler to lower salaries in their ohio offices?

milbank is next.

83 - a short explanation that deserves a longer disquisition.

I have been a partner in a well known firm (the one with the crazy secretary), have worked for a big (now) 4 accounting firm and have been a client (tech startup, contracts and software are remarkably similar) - admittedly an appeal to authority argument (you should believe me just because).

Law firms are actually very small. There is no large multinational firm. There are referral networks masquerading as large firms, but there are no large law firms.

Accounting firms, on the other hand, are enormous. They are enormous because their clients are likewise huge, and require a single auditor to supply people across the world in large numbers, all at the same time. Lawyers claim to be like this, but they have no idea.

No matter how large the litigation, merger, ipo is, the vast majority of "lawyers" working on it are paralegals, and fewer than 8-10 are actually relevant. My chief paralegal was (a) hot and (b) smart as a whip, but she wanted kids and that was that. Doc review? She would crush 80% of the posters on this board, and would supervise a staff of 20 who would crush everyone who was left on this board.

So biglaw is a collection of 8-10 lawyer law firms times 100 or 1000, who share overhead and marketing expenses and that's it.

And power in a law firms comes exclusively and only from your ability to leave and take your stuff with you.

So when, as currently, times are bad, firms go back to their roots, small practices that share nothing with each other.

i know a partner in a well know firm that runs a wireless network inside his famous firm. His secretary and his associates run entirely separately from his firm, document management, time billing everything. He does have his number 1 secretary keep the firm's accounting system up to date, but he could pick his practice up tomorrow and leave.

And is this a surprise that the numb nutz on his firm's it staff don't know this. No, I (and he) view this as rational.

So when people ask why are law firms run so poorly, my view is, who says the law firm you are actually working for (the 8-10 lawyer practice group you are actually working for) is run poorly?

Lockstep? 500 parters. the admin staff does the survey, with adjustments for cost of living. Five partners spend two days reviewing the stuff, and announce the new rates.

I and my fellow partners (a) spent zero time and (b) don't have to listen to whiney bullshit from associates re timmy got 5k more than me. so cool.

But if you are going to cut salaries in the age of the internet, you announce cutting edge "no lockstep" policies, and then wait three months, and then wack the shit out of them. Yes, sally will be in my office complaining about timmy, but I won't be reading this on atl or anywhere else. small price to pay.

so 88, are you also 77 or are you just expanding on what 77 said?

88, your explanation is fascinating and makes sense. Obviously you think that lockstep does favor associates at law firms in the end. I still think law firms are dinosaurs and lawyers wanting a more cutting edge and possibly a more profitable legal practice won't be in the bigger firms. To quote Seth Godin, "small is the new big". If one argues that big firms are a bunch of small firms calling themselves something else so they are in fact the "new big", I would counter-argue that the overhead of big firms, whatever they really are, and the red tape and politics, still makes it harder for large law firms to compete in this day and age.

Nobody has yet to identify the biggest reason why the end of lockstep in BigLaw is going to backfire in the long term. It is really rather quite basic: NOT MANY PEOPLE LIKE BEING LAWYERS!

Now I am sure that I will get ripped for saying this, but it is true nonetheless. Very very few people go to law school for any reason other than the prospect of making relatively big time money very quickly.

Sure you have your crusaders for a better society and those with valueless undergrad degrees that have nowhere else to go (I'm talking to you politcal science, history, english, ... liberal arts in general), but by far most people in the US become lawyers to make more money than they otherwise would.

For example, I worked as a QC engineer in a plastics manufacturing plant for 6 years between undergrad and law school. When I resigned to go to law school full time I was making around 60K. Three years later - boom - I am making 160K. And for what. Drafting patent applications is not very interesting, but hell I'm making 100K more than I othewise would be.

And thats the rub, if firms remove or even reduce the prospect of making guaranteed money, then less people will go to law school, particularly those people with real-world experience that can actually add value as a junior associate.

Furthermore, I work hard at my job, but I am not going to spend 80 hours a week in the office in order to bill 50 hours in the vain hope that I am worthy of a discretionary raise, and I consider myself a reasonably hard-working guy. I seriously doubt many would.

How knows where this will go. It may be just a cycle like any other biz cycle. Of course, the firms will still always have plenty of liberal arts trained lawyers to do doc review and miss the important info because they have no real experience to establish a basis to judge what is important.

-On my soap box

89 - Yes, I am (was?) 77 and 88.

I and others believe that the i-tubes will kill the big firm. The killer for my friends and I years ago was marketing, pure and simple. The big name helps. It's worth 200-400 hours per year. Oh, you're X, X and X. Sad to say, but the truth. I work for Cravath, oh, yeah, I've heard of them. bang. 200-400 hours per year saved.

in the tech world, the old saying was: "no one ever got fired for buying IBM". Among in house lawyers, that attitude is still powerful. As, more or less, it should be.

And that is the issue. I remain convinced that the intertubes will have a negative effect on big firms (clients follow laywers). But it's a tough issue.

Plus there is one issue I overlooked when I was young, that young lawyers should keep in mind. One day, you will be the old lawyer, and all your friends, that you suffered through the bullshit with, will also be the old lawyers. I am amused by how many gc's I know, and how much embarrassing stuff I have on them. I should have known this would happen, but I didn't. I smoked pot with a chief justice of a big state, back when the chief and i were in l school. I laugh every time I think about it. I doubt it will ever help me should I ever be in front of that court, but on the other hand....

so keep your marketing hopes up, and buy drinks for everyone.

88:

This almost makes sense when I got beyond the multiple typos and incomprehensible stream of consciousness.

It does not surprise me at all that you are a Partner.

91 (77, 88) - so do you think that intertubes hurting big law firms will come because the internet is a great leveler and it's so much easier to get the word out about law practices that might be non-traditional but competitive with (or even better than) some of the biglaw practices? That's my sense - viral marketing mixed with more traditional/tried and true marketing, could theoretically lead to a profitable and successful practice now whereas it might have been a lot harder before. Creative marketing has a lot more potential for success than in the past, it seems to me.

And if being at a Cravath saves 200-400 hours per year in marketing, what does it cost against profitability in terms of high overhead?

And couldn't a small but alternative law practice theoretically pay a non-partner MORE than a big law firm could pay, in a good year, so that lockstep is still outdated (at least, for young attorneys willing to take some risks for higher gain)?

91 (77, 88) - so do you think that intertubes hurting big law firms will come because the internet is a great leveler and it's so much easier to get the word out about law practices that might be non-traditional but competitive with (or even better than) some of the biglaw practices? That's my sense - viral marketing mixed with more traditional/tried and true marketing, could theoretically lead to a profitable and successful practice now whereas it might have been a lot harder before. Creative marketing has a lot more potential for success than in the past, it seems to me.

And if being at a Cravath saves 200-400 hours per year in marketing, what does it cost against profitability in terms of high overhead?

And couldn't a small but alternative law practice theoretically pay a non-partner MORE than a big law firm could pay, in a good year, so that lockstep is still outdated (at least, for young attorneys willing to take some risks for higher gain)?

93 - absolutely. One thing I have learned in my tech adventures is that all business models - every single one of them - is built on the technology of the time.

the second thing I have learned is that transaction costs are killer.

There are no legal mattes that require more than a half dozen smartie lawyers (and always a tax lawyer).

there are lots of things that can't be done without 1,000s (be apple or microsoft or GM), but the law is not one of those things.

So why do big firms exist? They are selling collectives. If you are a client, and don't know who to call, and you are big, then you call the big names.

The intertubes is the first techno development after the printing press itself that lowers the transaction cost of finding a lawyer (or a particularly skilled programmer, or a doctor etc.). There will be cool small firms that compete. And make net profits higher than the biggies.

But we are not quite there yet (I and others are working on marketplaces for lawyers to address this exact issue - but it will be 5 years before the in house folks get genuinely interested - the classic overnight success that took many years).

But even today, it's much easier for 5 smart folks from Latham or pH to get out there than it ever has been before, and those firms are ripe fruit when it comes to price competition.

95 - EPIC FLUNK.

Incoming SSD first-year here. I read about this on ATL and blew off Bar/Bri for the day to do lines of coke off of my own dick in celebration.

Let me explain.

I'm quite flexible.

When I decided to go to law school it was with the intention of working for a big law firm, but I had no idea what biglaw attorneys were paid. When I finally looked this up (and stumbled upon ATL in the process) at the beginning of my 2L year, I was stunned. $160k? Is this some sort of joke? When I worked as a summer associate at SSD, my mom’s favorite trick was to tell friends and family members, “guest has a paid internship with a law firm this summer!” The informee of this piece of information would invariably ask, “Wow! How much are they paying him?” To which my mother would reply, “$3100 . . . . . . . . . . per week!” This never failed to strike people as completely insane., I bought a new car (with a nice warranty and everything!) outright with my summer associate earnings, the first vehicle I have ever owned.

Even had I done my due diligence and researched biglaw attorney salaries when i was gearing up to take the LSAT and apply to law school, my findings would have been astounding to me. $135k? That’s nuts! The extra $25k is just gravy on top.

I am a bright guy. After struggling to find myself through the first couple years of college, I aced my remaining classes in a very difficult major. I didn’t study at all for the LSAT, but got a good enough score to go to any school which I applied to. I went to the highest-ranked T1 which offered me a full scholarship. In retrospect, despite all this, the *only* way I was going to be making $160k+ 3 years out of undergrad was to go to law school and head to biglaw.

Today’s announcement from SSD is fantastic news for me. No longer is SSD “up or out,” it’s “up or not.” I predicted with precision which of the senior associates from my office would be laid off in the last round of cuts from Orrick. All of these laid-off attorneys were wonderful people and remarkably capable attorneys. They just weren’t partner material (although one of them clearly thought he was). (I KNOW THEY WEREN'T PARTNER MATERIAL NOT BECAUSE I AM SOME PRETEND-I-KNOW-IT-ALL-SA, BUT BECAUSE THEY GOT LAID OFF. FIRMS DON'T LAY OFF PEOPLE WHO ARE PARTNER MATERIAL.) If these attorneys had been shunted onto the non-partner track or kept as associates or managing associates, they probably would not have been laid off. Instead, junior attorneys making the same rate as these senior associates, but with less experience and equally dim prospects for partnership, would have been laid off in their stead.

Like I said before, the *only* way I was going to be making $160k+ 3 years out of undergrad was to go to law school and head to biglaw. I would be content to make $160k plus the occasional bonus, adjusted for inflation, for the next 20 years. SSD’s new non-lockstep awesomeness will let me do that, all the while allowing me to take a shot and see if I am biglaw partner material. I have no idea what’s not to like here.

I have been poor my entire life. Increased income causes increased happiness, but only to a point. The marginal utility of increased income past a first-year associate’s salary decreases remarkably sharply. I know now that when I show up at SSD, I merely need to keep my head down and put my hard work and hours in for a few years. After that, the firm will find a place for me. That place may be as a partner, or it may be making comparatively little money to my peers at other firms. I don’t give a shit. I will be making more money than I ever could have hoped to otherwise.

SSD’s move today will attract clients. No longer will clients be be paying to train attorneys, but the government and competitors will. That’s right. Today’s announcement couples nicely with a strategy of increasing lateral hires coupled with somewhat fewer organic partners. This is great news for those already on the boat, like me.

So many comment posters here seem to me to be coming from bizarro entitlement world. Newsflash. A good percentage of biglaw attorneys are the first upper middle-class people in their families, like me. We’re just as bright as the rest of our colleagues, but not so damned money-grubbing. A biglaw firm could do well hiring an increased ratio of these attorneys.

Law firms have been immune from credible lawsuits of discrimination by associates because of lockstep compensation. Many talented women and minorities leave firms after a few years because they are assigned document review and given shitty assignments in comparison to their white male peers. Firms simply look the other way and simply recruit more women and minorities without really caring about the problem that drives women and minorities to leave in the first place. Women and minorities go quietly because they have no real way of challenging the status quo until now. Breaking away with lockstep will expose discrimination earlier in real ways that will establish a harm that can be proven in court. This will be a boom for labor and employment lawyers who will be able to reap awards from this foolish hasty decision. These partners don't get the real consequences until they will be faced with class actions and the like.

In two or three years when the economy recovers these firms will only be able to attract TTT grads

99 - your statement implies that they're getting something other than TTT grads now. . .

1o1

97-that post is absolutely hilarious. It's evident you haven't really practiced yet. Your eyes are as wide as the moon.

SSD has become an ATL regular. Two to three rounds of layoffs, salary freeze, salary cut, and now end of lockstep. Ick.

the problem with "up or not" and keeping around all the "nots" because they are good workers means many many fewer new hires fresh out of law school, and since law firms seem to work hand in glove with law schools,
it doesn't seem possible - most will still be forced out one way or the other within the same time frame.
It also means only the very few will make what everyone is making now, and it's doubtful the rationale will be in any way concrete.

I agree with the comments on this thread about "Big Law" really being a cost-sharing arrangement among lots of small groups of lawyers who have thrown their lot together.

The two metaphors that I've used with non-lawyers and junior associates to explain this are: (1) venture capital incubators and (2) sea sponges. VC incubators let folks share cubes, roofs, HVAC, etc., but no one would think everyone under that roof was pulling on the same oar. Sea sponges appear to be large animals, but actually consist of lots of single-cell organisms that have banded together out of mutual self-interest, as its easier to survive together than not. (*)

This is not a point that is easy to grasp from the outside (i.e., law student) or from a low-level on the ladder (i.e., junior associate).

When you join "Big Law", you've actually been hired by a (very) small business person in a highly entrepreneurial environment. In some ways, it's like you've been hired by the local 4-man dry cleaning shop because they expect / have / or hope for increased business. Albeit with a larger starting salary.

So, when one strikes a "WORKERS UNITE" tone, it's sort of asinine. Or, to put it differently, the academic exercise of striking a "WORKERS UNITE" tone may not be asinine, as an intellectual matter, but will be poorly received by the person actually cutting your paycheck (i.e., the head of your 4-man dry cleaning shop).

As a final comment, the issue of firms being "black listed" by students from "top" schools is a non-issue. I think that's nonsense. Law degrees, or top law school admittance, are pretty damn easy to get compared to the actual practice of law. I went to a top-10 ranked law school, but I actively favor hiring very high-performing grads from lower-ranked schools. New grads from top-10 schools put too much faith in USNWR. You may have paid your tuition in the expectation of getting X dollars a year, but that doesn't mean that your degree will automatically make you that valuable. If you're a law student reading this online during class, look at the clowns around you and ask, "Would I pay any of them $350 an hour to do anything?" Can YOU do anything in an hour worth that amount of money?

(*) I'm not sure whether the "single cell" thing about sea sponges is actually true, but heard that on a documentary program at some point. I choose to disregard the (potential) inaccuracy when using the metaphor because it serves the point so well.

WilmerHale wants to kill lockstep too, but they're still trying to figure out how to evaluate performance equally since performance ratings may vary based on the particular partner who gives them.

102,

97's post is a shtick. The same thing was posted in a thread about Orrick ending lockstep.

102 - sounds like DLA. Eek.

Moving away from lockstep will also mean the end of promissory estoppel as the legal ground for salary disputes.

I've heard from a reliable source that McDermott is thinking along similar lines re: associate compensation. Though it will hurt many of us short-term, I think it will be a good way of distinguishing the star associates and the CP that mentioned it to me said that the very top associates (billing and quality)will fare better under the new model than we did even 2 years ago.

I've heard from a reliable source that McDermott is thinking along similar lines re: associate compensation. Though it will hurt many of us short-term, I think it will be a good way of distinguishing the star associates and the CP that mentioned it to me said that the very top associates (billing and quality)will fare better under the new model than we did even 2 years ago.

33 needs to pull her head out of her arse

7 and others who have expressed similar comments are absolutely right. Those who try to defend this kind of system are absolutely wrong.

Firms that roll out these kinds of pay systems essentially try to turn an associate's ego against himself/herself.

Partner: Look at it this way: if you're a top performer, you could get paid more than you would under lockstep. So, stop asking so many questions about why we changed the pay system. You don't want people thinking you're not a top performer, do you?

Associate: No, I am a top performer.

Partner: Sure you are.

At the end of the year, that associate will fare no better then he/she would have under lockstep. Many associates will be paid much less than their peers at lockstep firms.

Firms that have to do this are basically admitting that they are no longer in the market for top-tier talent. When they have to discriminate within their own talent pool to determine who will be compensated at the market rate, firms are basically admitting that they are in financial distress. Welcome to the land of commodity work (exclusively). End of story.

For those who think otherwise: Keep thinking that way and tell us how it works out for you at the end of the year. When you're informed that you are an underperformer, I hope it doesn't come as a surprise. You're now officially on notice that you're in for quite the screw job.

95 - I think you and I should talk. I agree 100% with you and have the same idea - I've never been a partner at a firm, but intend to be a principal in a new firm - my firm - I'm a biglaw person who has practiced for a long time and atter studying the market have realized that aspiring to biglaw partnership is a bit masochistic when in this day and age an experienced lawyer can cut out the middle-man and just have a smaller, more cost-efficient practice, do good work and make more money all while charging the client much less. This isn't ground-breaking, so why does it sound ground-breaking to so many people who hear about it? Why is it so "revolutionary and dangerous" to so many people? Why do so few attorneys (including so many laid-off and unemployed ones) not do or think of this? When told about this option, why don't they jump all over it? Boy, I have no idea. The only thing I can think of is, people don't want to have to go out and get their own business. People want their paycheck. Even if that paycheck will be much smaller than their profit would be if they were creative.

97 - you sound smart and ahead of the curve, and too sophisticated to be just a law student.