Associate Salaries, Killing Lockstep

WilmerHale Joins the Killing Lockstep Party

Wilmer Hale logo.JPGThe Day That Lockstep Died
(to the tune of “American Pie”)
My, my, pushin’ lockstep aside,
They say merit — do they mean it? ‘Cause my raise has run dry.
But top-tier firms are not inclined to comply:
Sayin’, we’re not sure if this s**t will fly; we’re not sure if this s**t will fly.

What started out as a trickle is turning into a flood. Orrick and DLA Piper have already announced new associate compensation models for 2010 — and now WimerHale wants in on the action. The firm announced the change in a memo to all of its associates:

The Firm has decided to transition to a merit-based compensation program for associates and counsel in our U.S. offices. This afternoon we will hold local office meetings to discuss the details with you followed by an open forum for questions. Shortly you will receive a calendar invitation for this meeting, but first we wanted to provide you with background on the plan, the timing, and our thought process.

Before we lay out the details of the new model, it is important to recognize that this step is one that falls within a much larger framework. As you have heard us say before, whether at the State of the Firm address or in smaller group settings, the traditional structure and method of doing business for law firms is changing and needs to change.

The plan will be phased in through 2012 — but why wait until 2012 to address labor costs, when you can freeze associates’ salaries for 2010? Today’s WilmerHale announcement includes the news that the firm will be freezing associate salaries (except for second-year associates, who will be bumped up to $165K).
Additional details on the new compensation scheme and the full memo, after the jump.


WilmerHale is calling its new compensation structure the “Career Advancement Program,” or “CAP.” Like Orrick and DLA, the firm will be breaking its associates out into various tiers:

Under our merit-based compensation model, we will have a total compensation package for all Associates, Senior Associates and Counsel that reflects individual skill level, is highly competitive, and rewards the value of an individual lawyer’s overall contributions each year. The transition to the new system will occur over two to three years and will be implemented in all of our U.S. offices. We have not decided whether or when to introduce a similar system in our offices outside the U.S. The compensation package will continue to consist of base salary and the annual performance bonus. Both the base salary and annual bonus component will reflect CAP’s focus on the individual lawyer.

Many lawyers were liberal arts majors in college, so they should be comfortable with the array of soft and nebulous factors that will now determine how much they get paid:

With respect to the annual performance bonuses, we currently envision that over time, and beginning in 2010, a larger percentage of each lawyer’s total compensation will be built into the annual performance bonus. Bonus determinations will be based on firm performance, quality of substantive work, quality of client service, efficiency, productivity, teamwork, collegiality and other “citizenship” factors. The bonus system will align well with our clients’ focus on value delivered, rather than simply hours billed. This system obviously will result in greater differentiation in compensation, allowing our strongest performers to earn more than they could at peer firms that, like WilmerHale, peg their compensation at or near the top of the market.

Wait a minute, is WilmerHale seriously saying that it’ll pay people who are nice — sorry, “collegial” — more than they will pay assholes who simply keep their heads down while pumping out the hours? Really? That sounds kind of awesome.
It also sounds kind of terrible for associates who aren’t connected with the right people in the firm to get the “collegial citizen” bonus bump.
We should expect more and more firms to take this new non-lockstep model out for a spin. If you don’t like it, I guess you’ll just have to get a job at Davis Polk or S&C or some other top NYC firm that seems quite comfortable paying people based on years of experience instead of a more subjective assessment of such factors as “efficiency, productivity, [and] teamwork.”
Read the full Wilmer memo below.
WILMERHALE — MEMO — ASSOCIATE COMPENSATION MODEL
Date: December 15, 2009
To: U.S. Associates, Senior Associates, Counsel, and Special Counsel
From: William F. Lee, William J. Perlstein
Re: Transition to Merit-Based Compensation
The Firm has decided to transition to a merit-based compensation program for associates and counsel in our U.S. offices. This afternoon we will hold local office meetings to discuss the details with you followed by an open forum for questions. Shortly you will receive a calendar invitation for this meeting, but first we wanted to provide you with background on the plan, the timing, and our thought process.
Before we lay out the details of the new model, it is important to recognize that this step is one that falls within a much larger framework. As you have heard us say before, whether at the State of the Firm address or in smaller group settings, the traditional structure and method of doing business for law firms is changing and needs to change. We acknowledge that all of the following are simply no longer going to work:
* The traditional law firm structure of associates and partners;
* The traditional lockstep model of compensation; and
* The traditional method of strictly billing by the hour.
Each of these three considerations implicate at a fundamental level how we organize ourselves, how we are compensated, and how we build relationships with our clients. Recognizing these imperatives, we convened our Structure Task Force about two years ago to recommend a long-range talent management strategy. Since then we have implemented our Career Advancement Program (CAP), which includes a more flexible career path structure, a robust mentoring program, and a competency-based approach to professional development. We have also aggressively pursued alternative fee arrangements. The step we are announcing today will align our attorney compensation system with CAP’s focus on the individual attorney and with our clients’ focus on the value of the services we deliver to them.
Under our merit-based compensation model, we will have a total compensation package for all Associates, Senior Associates and Counsel that reflects individual skill level, is highly competitive, and rewards the value of an individual lawyer’s overall contributions each year. The transition to the new system will occur over two to three years and will be implemented in all of our U.S. offices. We have not decided whether or when to introduce a similar system in our offices outside the U.S. The compensation package will continue to consist of base salary and the annual performance bonus. Both the base salary and annual bonus component will reflect CAP’s focus on the individual lawyer.
With respect to base salaries, we envision that each attorney’s base salary ultimately will be linked to his or her level in our career path structure (Associate, Senior Associate, Counsel, Special Counsel) and that the attorney’s level in turn will be based on the attainment of the competencies under development as part of CAP. The first step in this process will be resetting our base compensation scale in 2010. Except for second year associates, whose compensation will increase by $5,000, we will hold Associate, Senior Associate and Counsel base compensation at 2009 levels. First years will start at $160,000.
Our salary scale in 2010 will be as follows:

Class

2010 Base Compensation Levels
1st Years: 160,000
2nd Years: 165,000
3rd Years: 170,000
4th Years: 185,000
5th Years: 210,000
With respect to the annual performance bonuses, we currently envision that over time, and beginning in 2010, a larger percentage of each lawyer’s total compensation will be built into the annual performance bonus. Bonus determinations will be based on firm performance, quality of substantive work, quality of client service, efficiency, productivity, teamwork, collegiality and other “citizenship” factors. The bonus system will align well with our clients’ focus on value delivered, rather than simply hours billed. This system obviously will result in greater differentiation in compensation, allowing our strongest performers to earn more than they could at peer firms that, like WilmerHale, peg their compensation at or near the top of the market.
There will be no change to the bonus program for work performed during 2009 and 2009 bonus determinations and payments will be made in January of 2010. We have not yet decided on the 2009 bonus levels.
Our overall objective in moving to merit-based compensation is to motivate and reward strong performance at all levels. Linking base salaries to career levels will incentivize individual lawyer’s ownership of their own professional development, and better align compensation with individual skill level. Our new bonus program will recognize and reward lawyers for the qualities and contributions that both we and our clients value most. As you know, we began having discussions with associates and counsel regarding a merit-based compensation concept about 18 months ago. At that time many of you told us that it would be important to strengthen our mentoring, feedback and evaluation processes before modifying our compensation program. Now that the essential building blocks of CAP are falling into place, we will be well-positioned to support the smooth, effective, and fair implementation of a merit-based plan next year.
We know that this individualized approach to compensation will be more time-intensive and demanding than a lockstep program. The phase-in approach discussed above will allow us to improve and fine-tune our processes as we gain experience with the new program, ensuring that we consistently make fair and accurate assessments that will give you confidence in the system. The phase-in is also designed to avoid any reduction in a lawyer’s base salary as we build a larger percentage of total compensation into the bonus component over the next two to three years.
We also know that work remains to be done in fully implementing CAP. Currently, we are developing competencies in order to clarify and articulate more clearly our expectations at each career level. As we shared with you last month, Associates, Senior Associates and Counsel will participate in interviews and focus groups as we develop the competencies. Work on competencies will be complete in March 2010 and we will hold education sessions on them in advance of the Spring evaluation process. We will also reflect the competencies in the evaluations.
Our Firm’s reputation is founded on the excellence of our lawyers. We remain committed to recruiting exceptional lawyers, investing in their career development, and compensating them commensurate with their contributions and the market. We appreciate your many contributions to the Firm and look forward to working with you in the coming year.
Bill and Bill

78 comments
(hidden for your protection)

comments sponsored by

Show all comments

Our Sites

  • Above the Law
  • How Appealing
  • ATL Redline
  • Breaking Defense
  • Breaking Energy
  • Breaking Gov
  • Dealbreaker
  • Fashonista
  •