Orrick's New Compensation Structure

At an all associates meeting today, Orrick, Herrington & Sutcliffe revealed its much talked about new associate compensation structure. Starting in 2010, Orrick will be moving away from lockstep in a big way.
Essentially, Orrick has separated associates into three classes: associates, managing associates, and senior associates. Advancement from one level to another will be based on merit — not time served at the firm.
The biggest news is that starting salaries are going to remain at the $160K level. Orrick wants to recruit and compete for top talent. The firm isn’t using the move away from lockstep as an excuse to cut first year pay.
And the firm will still pay the prevailing market bonus. In fact, the firm will pay the market bonus, plus a little extra to its highest performing associates. The goal appears to be giving their superstar associates a big reward for good work, instead of reducing costs on the back of associate compensation.
Check out the new salary structure chart from Orrick after the jump.


Thankfully, Orrick put its new complicated salary structure into chart form:

While the chart is about the associate compensation model for 2010, the bonus information will also apply to 2009. Associates have already been sorted into the tiers noted above. They should expect to receive their personalized bonus announcements based on the criteria above.
When the bonus announcements go out, let us know if there are any Orrick associates out there that actually get anything more than the prevailing market rate.
As you can see, the salary differences among the senior associate tier is quite large. A 15% bump on top of the prevailing senior associate bonus is quite a chunk of change.
We asked Orrick to give us some further clarification on the what it is doing with the top level associates. Here’s a statement from the firm:

We believe it is appropriate for a greater percent of an associate’s total compensation to be available in the form of a discretionary bonus as they become more senior. This is consistent with the increasingly important role that senior associates play in client relationships and in supervising and leading more junior colleagues, and the ability to distinguish oneself, that these roles present.

If you are going to kill lockstep, this seems like a fair way to do it. The base salary isn’t really taking a hit, and the merit bonus is in addition to wherever the market ends up. That’s a big difference from other anti-lockstep plans that slash base salaries and throw the entire bonus into the subjective category of merit.
What do you think? Should Orrick be the blueprint for how to end lockstep compensation?
Earlier: Orrick Ends Lockstep

Sponsored