Associate Salaries, Killing Lockstep, Layoffs

A Peek Inside the Winston & Strawn Black BoxAnd additional info on stealth layoffs.

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Life outside of lockstep is like Forrest Gump’s box of chocolates: you never know what you’re going to get. A lockstep system for compensating and promoting associates has its drawbacks, to be sure. But at least it offers the virtues of transparency and predictability.

Earlier this week, we covered the arguably amorphous definition of “merit” at WilmerHale, one of several leading law firms to abandon lockstep. Today we turn our attention to Winston & Strawn, another prominent firm that has moved to a more “merit-based” system of compensation.

Back in February, we described Winston’s compensation scheme not as a box of chocolates — that would be sweet and delicious! — but as a black box. Among associates, nobody really knows what anyone else is making. As stated in the firm memo, “Individual associate salaries will be determined on a case by case basis based on seniority, performance and productivity factors and will be communicated separately to each associate.”

We now have a better sense of what’s going on at Winston, thanks to the recent release of individualized salary info (and some comparing of notes among Winston associates). And not everyone is happy….

In the words of one Winston tipster:

Their “black box” excuse for a new “merit system” appears to be just a pretext for screwing associates out of market salaries while still being able to claim to the public that, on paper, Winston has raised to market.

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Actually, has Winston even raised to market on paper? If we look at the relevant piece of paper, namely, their base compensation memo, we learn that salaries will range “up to” a salary schedule that looks like the market (in New York at least). Any lawyer worth $160,000, of course, should be able to understand the plain meaning of this language: you can earn “up to” — but not more than, and probably less than — the market salary.

What does it take to get the full market salary? Here is our understanding of the Winston scheme, as cobbled together from our sources. There are three levels in each class year, and they appear to operate as follows:

  • Level 1 requires an associate to bill 2000 hours or more AND to receive the “predominant” grade relative to his or her class on the substantive review. Associates in this level appear to receive the full market salary (the maximum base compensation listed in the memo).
  • Level 2 requires an associate to bill between 1850 and 2000 hours and to receive the “predominant” grade relative to his or her class on the substantive review. This appears to warrant a partial raise, but not a full raise to market.
  • Level 3 is where everyone else winds up — i.e., if an associate bills less than 1850 hours OR does not receive the “predominant” grade relative to his or her class on the substantive review. Associates in Level 3 get NO raise at all and still receive the same base salary as last year.

So getting the “predominant” grade seems quite important in the Winston scheme. But, much like “merit” at WilmerHale, it is not clearly defined.

Junior associates are graded on a pass/fail system. In an associate’s third year, a 1-to-6 rating system kicks in, with 6 as the highest score. Sixes are exceedingly difficult to get. “Even senior associates universally recognized for billing high hours, excellent work product, and bringing in clients rarely get a 6,” according to one source. (If you want to make partner, though, you need at least two years with 6 ratings.)

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What about the other numerical ratings? We understand that a 5 is similar to an A- or B+ on a report card, and a 4 is like a B or B-. A rating below a 4 puts you in firing territory. (For more on that, see infra.)

How are the ratings determined? Substantive grades are based on a review of an associate’s work by the partners for whom she works. So far, so good. But then those reviews are “re-reviewed” by a firm committee composed of partners who probably don’t even know the associate (or even, for that matter, the partners reviewing that associate).

“The committee’s final decision is what governs,” a tipster tells us. “So even if the partner you work for loves you and gives you a 6, the committee can reduce it to whatever they want.”

This gives rise to a problem that merit-based systems will have to grapple with: amplifying the negative effect of office politics. Take two associates who do equally good work. One is at Winston’s power center in Chicago, and another is in a satellite office. What is to prevent the evaluation committee from discounting good reviews of an associate from a partner in a distant office whom they don’t know, while giving extra weight to reviews from a partner in Chicago whom they see in the halls and lunch with regularly?

To be sure, office politics will always come into play in the setting of a large law firm. Deciding whom to promote to partner, for example, has always turned on political issues like the power of one’s partner mentors or practice groups.

One potential drawback to “merit-based” systems, however, is that they potentially increase the importance of office politics. In other words, ironically enough, “merit-based” systems may end up privileging considerations other than merit.

(Yes, we know the counter-argument: being good at office politics is a form of “merit,” at least in the shark tank of Biglaw….)

It’s one thing to leave your raise or bonus at the mercy of internal power struggles between partners. But what about your job itself? Political considerations also come into play when a firm has to pick layoff victims.

With respect to Winston & Strawn, we last wrote about stealth layoffs there in October 2009. We understand that they continued to thin the ranks at least through the end of 2009 or early 2010. (We don’t know what they’ve been up to more recently in 2010.)

A lawyer who used to work at one of the firm’s smaller offices reports:

Throughout my time, they laid off associates and income partners one or two at a time, probably to avoid your website. Overall, however, the impact has been enormous….

The staff layoffs have been even more dramatic. By the time I left, over half of the offices/cubicles were empty and the hallways were barren. They had to change their double-sided mailing list to one side….

They don’t technically give out severance. Rather, they let you stay three months on payroll so you can tell prospective employers you’re still employed. At the end of the three months, each person “voluntarily resigns.”

It’s a bit of doublespeak to describe a layoff as a “voluntary resignation.” But, in fairness to Winston, lots of other law firms have employed this tactic. See, e.g., the case of Shinyung Oh.

Have information about Winston that you’re willing to share? Just email us (subject line: “Winston and Strawn”). Thanks.

Earlier: Winston & Strawn Kills Lockstep and Adopts a ‘Black Box’ Compensation System

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