Back in February, we wrote about various compensation developments over at Pillsbury Winthrop. At the time, the firm said it was considering moving away from a lockstep model in favor of a more performance-based compensation system.

The firm has not yet killed killed lockstep — a move that has historically generated mixed to negative reviews from associates at other firms. Instead, it has done something that has proven much more popular.

Last month, the Pillsbury dough boy baked up some delicious-smelling pay raises. Nothin’ says lovin’ like money from the oven!

So, what are the details?

The announcement was actually made last month. (Sorry for the delay in reporting; this is why we need as much help as possible from you, our sources — send tips to [email protected]).

Explains a Pillsbury tipster:

On April 9, in a memo to all associates, Pillsbury announced that it increased 2010 associate salaries from the plan it previously announced in February. Pillsbury elected to increase the salary scale in DC, Northern Virginia, and its California offices (other than Sacramento) to the NY salary scale ($160K to $280K). In addition, the Houston and Sacramento salary scale was also increased ($145K to $260K). Even better — changes are retroactive to January 1.

There is a catch. You do have to hit your hours:

Placement in your salary class is dependent on meeting billable hour targets (generally 1950) in 2009 or during the six months ended March 31, 2010. Billable hours includes up to 100 pro bono hours (or more with advance approval), internal legal and, for first years, up to 175 training hours.

One method for moving away from a pure lockstep system towards a more performance-based model is to emphasize bonuses, and to tailor them to each individual attorney. How did Pillsbury handle bonuses last year?

The memo also included summary data on 2009 bonuses. Highest bonus to any associate or counsel firmwide was $85,000. Average bonus payment was $26,000. 43% of associates received some form of bonus. NY associates received Cravath scale bonuses if they billed over 1900 hours. Associates in other offices received hours and merit bonuses.

This seems reasonable enough. But not everyone is giggling “hee hee” over at Pillsbury. Says a second source:

[Last] Tuesday, Pillsbury Winthrop Shaw Pittman LLP sent out an “internal communication” to associates and counsel about a recent partner retreat, full of happy talk about client service and how well things are going for the partnership. Meanwhile, an April 9 memo with new salary schedules was marked confidential, and included a stern warning to associates and counsel not to leak the memo. This warning must have scared the masses, since news of the salary increases has not appeared on ATL yet.

This tipster won’t leak the April 9 confidential memo or the May 11 communication (not marked confidential), but wonders why Pillsbury’s partnership doesn’t want the world to know about salary increases [in selected offices] of more than 10% for 1st-year associates, about 6% for 2nd-year associates, over 13% for 4th-year associates, and about 8% for senior associates? This tipster feels uncomfortable working at a firm that tells me to pretend everything is fine, [but] tells me to keep secrets about simple issues like salaries.

This source offers some speculation on the secrecy:

Maybe Pillsbury’s partnership doesn’t want a public discussion of how the Pillsbury dough machine really “services” clients and associates.

Based on this tipster’s experiences, and reports from other associates, Pillsbury has a typical BigLaw salary/billing rate/promotion scheme rigged to maximize profits on the backs of clients and associates. In 2009, Pillsbury froze associate salaries and hiked billing rates to clients, and was very proud that profits per partner stayed about the same.

This was not a new approach, according to our source:

The system has worked like this for years: if an associate doesn’t make all their hours for a year, Pillsbury automatically freezes their salary for the next year, but still hikes the associate’s billing rate for their clients. Pillsbury now punishes associates who are low on hours by decreasing their pay during the year. Associates with the misfortune to be both efficient and honest about their hours can be repeatedly held back from advancement and lockstep salary increases, while their billing rates soar to partner-level rates. Of course, Pillsbury does not feel the pain — high billing rates mean the firm still makes a profit on associates who are well below their quota of billable hours.

This scheme only measures hours and not quality of work, so senior associates who are providing partner-level services directly to clients at partner-level billing rates, pulling in 4-5 times their salary in fees for the firm, often struggle just to advance from the first senior associate level to the second, and have no hope of making partner. Pillsbury’s dismal promotion numbers tell the story.

Would this be a sustainable business model if the clients really knew what was going on? The happy talk might have to become honest talk.

That’s an interesting question. Do clients care whether, for example, the attorney being billed out to them as a fifth-year associate is actually being paid like a fourth-year? If you’re an in-house lawyer with thoughts on this subject, feel free to opine in the comments, or email us.

We reached out to Pillsbury for comment this morning, but they have not gotten back to us. If they do, we will update this post.

Earlier: Pillsbury: Raises, Bonuses, and Other Sundries


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