Associate Salaries, Biglaw, Boutique Law Firms, Small Law Firms

Beyond Biglaw: What Do The Pay Raises Mean For Boutique Firms?

Columnist Gaston Kroub, Biglaw partner turned boutique firm founder, offers his thoughts on the recent law firm pay hike.

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Beyond BiglawThe market leaders have spoken. Hardworking associates, primarily those fortunate to work for the top (most profitable) slice of the legal market, are getting a raise. Considering the huge inflation in profits per partner that the firms handing out these raises have generally enjoyed, it was not an unexpected move. In fact, the extreme profitability gains — for both top Biglaw and boutique firms — since the last time the market rate for associates was set kind of compelled this adjustment. As expected, this news is getting a lot of attention, and deservedly so (driven in no small part by these pages). But it is worth keeping in mind that the actual benefits of this round of pay raises are actually limited to a very small subset of the legal market.

As a former Biglaw partner and current owner of a boutique law firm, I watch the reaction to this news with interest. While we don’t (yet) find ourselves competing with Biglaw for talent, we definitely market and consider ourselves as a Biglaw equivalent in terms of quality. In fact, nearly every one of our contested matters since we founded our firm has found us going up against either a Biglaw (whether IP-specific or general practice) firm or a boutique firm like ours founded by Biglaw refugees.

So when the time comes for us to consider adding (now more expensive) talent to our ranks, we will be faced with a stark decision. Do we decide to compete with Biglaw and other boutiques based on an ability to meet or exceed market rates? Or do we try and sell prospective associates on the quality of the work and prospects for advancement, even if the pay is less than what they would be making on the new Cravath scale? That is a decision for another day for our firm, but I do not envy those firms, of any size, who find themselves forced to respond immediately to the latest show of strength from a market leader.

In the meantime, there are a few thing that associates, whether they are in Biglaw or otherwise, need to remember about these salary raises. Most importantly, smart associates need to make sound financial decisions with the newfound money. Whether it is paying down debt, so that they can exit Biglaw sooner, or just adding to whatever savings they have accumulated. Rushing out to buy yourself the Rolex you had promised yourself when you made partner is probably not a good idea. Better to save what you can of the raise, and if possible, give some charity to a worthy cause or person as well. Or actually make partner, if possible.

That might be harder than ever, and this salary raise will likely serve in the long run to make associate jobs less stable, especially since there has been very little reporting on client reaction to these moves. Sure, we may hear some lip service from a general counsel at some large company on how they applaud the generosity of firms, and welcome the firms they work with having the ability to attract and retain top talent. But those platitudes generally take a darker turn, especially in private discussion between that same general counsel and their relationship partner, if and when firms who raised salaries decide to try and recoup some of that money by raising rates. Make no mistake. Someone needs to pay for these raises, and many firms will have a hard time resisting the opportunity to pass those costs to their clients. We will see how well-received this move will be then.

Likewise, smart associates will consider doing something to immediately demonstrate their commitment to the firm. Whether that is volunteering for an extra assignment, or even sending a thank you note to the executive committee with a short description of how the raise will impact your family for the better, it is important to show some gratitude. Yes, partners are rich, and the firms that led this charge by and large have the richest partners around. But that does not mean that basic decency does not apply, or that associates were somehow entitled to make more money. Now is the time to demonstrate some class and humility, irrespective of how much you actually deserved the raise. I know the vast majority of those associates who have received one, actually do deserve one. Showing some renewed commitment to your firm in exchange is the right approach.

It is also important to maintain some humility. The reason that firms have gone along with these raises — or announced them in the first place — had little to do with the individual identities of their current associates. For firms, these moves are very much also about marketing, and projecting an image of success to clients, peer firms, and outside talent. With respect to the latter, the focus is more on retaining or attracting experienced talent than making the firm more attractive to incoming junior associates. I don’t think firms are worried about their ability to attract top law students, or think a salary raise was necessary to get those students interviewing for first-year positions. In contrast, anytime firms can make the divide between in-house pay packages and what they are offering greater, maybe they can hold on to their most profitable associates for a little while longer. If the extra money helps keep those profitable associates motivated to keep hitting (or increasing) their billing targets, all the better. While everyone can celebrate the decision of their firm to match these raises, they should also remember that the decision was not about them in particular. It is a healthier perspective than displaying any arrogance about these raises.

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Ultimately, I think these raises have very little to say about the long-term viability of the current Biglaw business model. Sure, if you are at a firm that did not match (or should not match), there may be cause for concern. But even if you are at Cravath, the fundamental challenges of the Biglaw lifestyle were not really addressed by this round of raises. For one, no one will be expected to work less hard as a result of these raises. We all know the opposite is more likely true. It comes down to this. If you are happy practicing law, especially law at the highest level of difficulty and sophistication, this raise will just be the sprinkles on top of your delicious ice cream cone of professional contentment. If you hate being a lawyer, especially a Biglaw one, all these raises will do is potentially grease the skids for your eventual exit. Spreading the wealth doesn’t guarantee happiness after all.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique. The firm’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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