As we recently mentioned, 2012 was a banner year for O’Melveny & Myers, in terms of legal work performed and the resulting financial rewards. According to Am Law, “the firm set new records in profits per partner and revenue per lawyer, with the former surging 19.4 percent, to $2.06 million, and the latter rising nearly 10 percent, to $1.1 million.”
O’Melveny’s gross revenue grew by 5.1 percent, to $818.5 million. It’s great to see a law firm with top-line growth. Many firms these days can’t grow total revenue or revenue per lawyer; they just try to cut expenses, resorting to layoffs and similar tactics, to improve profits per partner.
Did OMM’s improved PPP trickle down to associates, in the form of bonuses? Here’s what sources report….
Last year, we heard some complaints about associate bonuses at O’Melveny. This year, people seem happier. Perhaps the squeaky wheels got oiled?
Here are the basic facts, as we’ve been told by our sources (the firm declined to comment to us on its bonuses):
- Bonuses just got paid out, with the last paycheck of February. Salary increases also kicked in at that time, with increases retroactive to January 1.
- In terms of eligibility, “people still informally use 1950 billable hours as the marker of when you become eligible for a bonus. They have adjusted that number down in the past if a group was slow or for other similar reasons.”
- The “base” bonus is on the Cravath scale, with “significant bumps above that based on hours and performance/quality of work” (although with an emphasis on the hours).
- “They told us that 75 percent of people got bonuses, and 68 percent of bonuses received were above Cravath.”
And here are some reactions from tipsters:
- “Overall the bonuses seem to be fairly generous from what I’ve been hearing thus far…. [P]eople seem pretty happy with their bonuses, especially people that worked higher hours. The firm gave decent bumps for people that billed higher hours this year, much more so than in years past.”
- “Generally, everyone seems very pleased.”
- “There have been a few grumblings about people expecting somewhat higher bonuses because the firm did so well this year, but not much along those lines.”
- “Nearly everyone I know in litigation did significantly better than they would have on a Cravath scale — one friend got double Cravath, and many got 50 percent over Cravath. Only very low billers did worse — although the low-billers skew heavily towards the corporate/transactions side, so some of my friends on that side are a little bitter. Realistically, though, the only alternative seems to be to fire more people on that side; the work just isn’t there, and the firm seems to have made a conscious decision not to further shrink the head count.”
The firm lost 4 percent of its lawyers in 2012, which seems consistent with natural attrition (or at least no mass layoffs, maybe slight thinning of the herd at best).
On the whole, OMM associates were pleased with their bonus numbers. What made them less happy:
Information-wise, they’re telling people less than ever. No data at all on averages, medians, hours level at which people got an increase, etc. No bonus memo. [E]veryone is very happy with the numbers…. [but] I did hear some grumbling afterwards about the lack of transparency.
From a different tipster:
The firm used to hand out memos explaining what the base was, what the bumps were, and even how many people from each year fell into what bucket. They have moved away from that and now there is no transparency. This is under the guise of not wanting us to feel in competition with each other.
Well, if the firm wants to avoid competition among associates, it could just adopt a Cravath-style lockstep system. Individualized bonuses coupled with a lack of transparency sound like a recipe for undercompensating people. Underpaying people isn’t what O’Melveny did this year, but it’s certainly possible in such a system. (Of course, the flip side to that argument is that you can simply leave if you don’t like what you find inside your black box. Holla, Jones Day.)
Transparency about bonuses is good, but big bonuses are even better. Congratulations to O’Melveny on both its great results in 2012 and its generosity to the associates who contributed to that success.