Associate Salaries, Salary Cuts

Who Elected Altman Weil the God of Associate Compensation?

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Have you noticed that whenever there is a story about the long-term future of associate salaries, there is always a quote from somebody at Altman Weil, the law firm consultancy? And have you noticed that their quotes are often advocating deep cuts in associate pay?
The latest example of this curious phenomenon appears in the Fulton County Daily Report:

Altman Weil’s Oct. 27 program, called “Leverage, Lockstep and the Changing Associate Model,” was for law firm clients.
Altman’s James D. Cotterman, who advises firms on compensation, said associate pay did not drop enough in the recent round of cuts at the nation’s big law firms, which included Atlanta’s largest firms.
Cutting pay from $160,000 to $145,000 was only “about half of what was needed,” said Cotterman. The starting salary at big firms in New York, Washington and Los Angeles was $160,000 before the pay reductions that started last spring.
Cotterman said a $15,000 cut does not make a significant difference in “changing the value equation to clients.”
“They probably should have set pay back a decade, to 1998. That’s what I was expecting,” he said. “This story may not be over yet.”

I don’t see James D. Cotterman advocating that profits per partner go back to 1998 levels. I wonder why?


Altman Weil argues that associate salaries have to be cut because clients don’t want to pay for training junior associates:

In-house counsel are resisting paying high hourly rates to give first- and second-year associates on-the-job training on their matters, Cotterman noted. In response, a number of firms are instituting apprenticeship programs, which are a typical model in public accounting firms, he said.
It costs firms money to have associates spend more time training instead of billing. But the 10 percent reduction in associate pay that has played out at the nation’s large law firms is not sufficient to cover the increased training costs, Cotterman said.

But how much are clients truly paying to “train” junior associates, considering how much of the time of junior associates gets written off? As for the comparison to accounting firms — covered by our sibling site, Going Concern — how many Big Four employees carry six-figure sums of educational debt?
And aren’t junior associates just a small piece of the puzzle? We’ve heard a lot about the high rates for first- and second-year associates that clients (we are told) no longer want to pay. But what about the rates of fourth- and fifth-year associates doing the work of first-year attorneys? What about the billing rates of partners, some of whom are hoarding work that really should be done by associates? Are clients falling over themselves to pay those bills?
While we are on the subject of who should pay for associate training, can we please stop calling reviewing a box of documents “training”? It’s not training, it’s not education, it is work. Work, you know, is something that people generally expect to be paid for. First- and second-year associates are working; firms don’t keep them around as a benevolent courtesy. It’s up to law firm partners and their clients to determine what to charge for that work.
Obviously, big changes are coming to the Biglaw business model. But is deflating associate salaries back to 1998 levels even a useful suggestion? I know that the Yankees just won another World Series, but that doesn’t make it 1998 all over again.
Experts: Lower Associate Pay Is Here to Stay [Fulton County Daily Report]
Associate Pay May Need to Return to 1998 Levels, Consultant Says [ABA Journal]
Earlier: Prior ATL coverage of salary cuts

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