Killing Lockstep, Sonnenschein, Staff Layoffs

Sonnenschein: Staff Layoffs and New Associate Compensation Model Potpourri

Sonnenschein logo.jpgLast month, we asked you if it was better to be laid off before the holidays, so you could adjust your holiday spending accordingly, or after the holidays, so you could bank the extra paychecks. Above the Law readers were pretty evenly split on the question: 50.8% would rather be laid off before, 49.2% wanted to hang onto their jobs through the holiday season.
Based on that poll, we can expect half of the people Sonnenschein laid off on Friday to be relatively happy with the news. The other half writes emails to Above the Law. Like this person:

Sonnenschein Nath Rosenthal laid off staff on Friday (14 days before Christmas)!

Sonnenschein confirmed the staff layoffs in a statement to Above the Law:

After an extensive and careful review of operations and staffing across the firm, we have decided to undertake a selective reduction in non-legal personnel. We have done everything possible to minimize the dislocation such a transition will make – not only on those leaving the firm, but for all our remaining employees. That includes consideration of tenure of service and other factors in determining severance and compensation continuation for those departing.
This reduction furthers our ongoing effort to right-size our workforce to best meet client needs and to achieve an appropriate attorney-staff balance.
Our restaffing will not in any way diminish our work product, business operations or our ability to deliver the highest quality service to our clients. Indeed, the firm will continue to make strategic investments in talent and professional resources. We have implemented these changes mindful that many of our clients have had to make similar adjustments in their workforce over the past 18 months.
We have great respect for all of those staff who will be moving on and are grateful for their service to Sonnenschein.
Elliott Portnoy, Chairman
David Schadler, Chief Operating Officer

No associates were affected by the staff cuts at Sonnenschein on Friday.
We can’t say the same for the next bit of news. Completely unrelated to the staff cuts, the firm has unveiled its new, non-lockstep compensation model. Let’s check it out after the jump.

Back in May, we reported that Sonnenschein intended to ditch lockstep compensation for a merit- based model. At the time, Sonnenschein managing partner Elliott Portnoy laid out his grand vision:

Long before the current economic upheaval that has gripped our clients and profession, survey after survey consistently confirmed a common theme: law firm associates have become increasingly unhappy in their work. Indeed, an entire industry has arisen in the blogosphere, where websites detail — often hour by hour — concerns from associate lawyers around the country and in firms of all sizes and stripes.
And yet, despite these warnings, the fundamentals of how most law firms recruit, develop, and compensate their associate lawyers have remained largely unchanged for too long — to the detriment of the current structure’s sustainability and, more importantly, to the professional reward and promise of our Associates.

Today is the roll-out of Portnoy’s and Sonnenschein’s new approach to associate compensation. Am Law Daily reports:

Like Orrick, Herrington & Sutcliffe, Sonnenschein’s plan, which the firm is announcing today and will roll out in early 2010, will involve a three-tier system in which associates will advance once they meet various merit-based criteria. The firm did not immediately release base salary figures for associates in each tier. Bonuses for individual associates will be tied to the same criteria instead of being linked “almost exclusively to billable hours,” as under the old system, the firm said. The system is designed so that “high-performing associates will be able to earn above-market compensation faster than they would have under the old model,” the firm said.

Numbers or it didn’t happen!
Seriously, it’s a little weak to roll out a new compensation plan without telling people how much they will be compensated. Will the firm follow Orrick’s structure, or the less lucrative DLA Piper plan?
Despite not revealing the actual numbers, Sonnenschein still contends that this will be great for associates. From the firm’s press release:

The three-tiered associate scale also favors a more meritorious bonus system. Compared to the old scheme, in which bonuses were tied almost exclusively to billable hours, associates will be able to earn bonuses based on how well they exceed the parameters assigned to their particular level, which will be reviewed closely by a mix of supervising partners, counsel and other senior associates.
Importantly, associates who have their eye on partner will no longer be bound by a strict timetable for eligibility. Rather than having to advance in lockstep with an entire class of peers, associates will be able to move through the levels according to their own individual paces. To elevate from associate to managing associate and then again to senior managing associate, an attorney will exhibit consistent command of the skills that define a particular level, while demonstrating traits that comprise the next level up the ladder.

Possibly making partner early? That’s interesting. Yesterday, we published a series of internal documents suggesting that Simpson Thacher & Bartlett was proactively trying to avoid making new partners. Remember, we just learned what partners are thinking at STB:

We are going to need to continue to be extremely circumspect in making new partners, and we need to continue to have partners take advantage of our very attractive retirement benefits that commence at age 55. In an environment in which net income is falling and the point is falling, point dilution compounds the negative impact.

In light of that, are we really supposed to believe that one of the “benefits” of this system will be that Sonnenschein can turn associates into partners more quickly? Really? Is Sonnenschein immune from “point dilution” in a way that STB is not?
Now that more than a couple of firms are “officially” scrapping lockstep for 2010, it’s time for another reader poll. Back in October, we asked if you would rather have lockstep or a merit-lockstep hybrid that Bingham McCutchen will be going with. Only 25% of you voted for traditional lockstep.
But what about lockstep versus these three-tier merit approaches? Which one do you prefer?
It’s not an idle question. The legal economy is slowly starting to rebound. You might have the choice to leave one of these merit-based firms, or lateral to one these firms, sooner than you think.

Sonnenschein Latest to Ditch Lockstep [Am Law Daily]
Earlier: Nationwide Layoff Watch: Faegre & Benson Gobbled Up Some Associates for Thanksgiving
Nationwide Salary Cut Watch: Sonnenschein Has Had Enough of Lockstep
Bingham McCutchen’s New ‘Merit-Lockstep’ Hybrid

(hidden for your protection)

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