Killing Lockstep

Salary Cuts.jpgBack in June, Dorsey & Whitney laid off 55 people and announced that it was cutting associate salaries by 10 percent. At the time, our sources reported that the decisions were made in reaction to the firm’s revenue numbers from May:

Management got May’s figures last night, and apparently, the situation was quite dire. The prognostications for the future months also did not hold to budget and they decided something relatively drastic needed to be done.

A tipster reports that Dorsey is cutting salaries again. And this time the cut is even more drastic:

Per an email from Marianne Short, the firm is slashing associate salaries firmwide. Could be up to 25-30% for midlevel / senior associates.

The firm contends that salary cuts will not get up to the levels reported by the tipster. But Dorsey is one of the firms that has decided to abandon lockstep compensation. Could that result in 25 percent reductions to base pay?
Additional details and a statement from the firm, after the jump.

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Bingham logo.jpgWe’ve devoted a lot of coverage to the few firms that are moving away from a lockstep compensation system. One consistent theme has been that the move away from lockstep appears to be an attempt to reduce overall associate compensation.
Not so at Bingham McCutchen. The firm just released its new compensation plan. Calling it a hybrid approach, Bingham is keeping lockstep compensation for base compensation but make bonuses heavily merit based. Our sources tell us that while nothing has yet been finalized, the firm’s intention is to hold the line on base compensation.

“Merit Lockstep” Base Salary Structure
After significant review, we have decided to modify our current associate base compensation lockstep structure slightly, moving to what we are calling a “merit lockstep” approach. We intend to retain a salary class level system. All salary class levels will remain subject, as always, to future market changes as well as our own internal determinations.

I’ve been critical of firms that announce they are moving to a merit-based system, without actually explaining what merit-based means. But at Bingham the firm seems to have a concrete plan for its new merit bonuses.
Details and a reader poll after the jump.

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DLA Piper logo.jpgIt’s the first Monday in October. There is a chill in the air, the Yankees and Red Sox are gearing up for the post-season (while the Mets mercifully go away), and the hearts and minds of Biglaw associates turn to their year-end bonuses.
Some have predicted a “no bonus” season, courtesy of the Great Recession. But DLA Piper has given Above the Law the first concrete bonus information of the season, and bonuses will be paid.
Associates at DLA Piper were informed on Friday that while this year’s bonus won’t meet last year’s half-Skadden levels, the firm will be paying bonuses this year. Sources report that DLA’s bonus will come in between $5,000 and $50,000. A tipster reported the news this way:

I’m just finishing up my first full calendar year at DLA. I’ve got a job, I’ve got a bonus. I’ve got all my life to live, I’ve got all my love to give. I WILL SURVIVE.

DLA won’t make a final decision until January. But as of now, we have a market floor for bonuses, and it is greater than zero! That is pretty awesome.
Other good news from DLA Piper after the jump.

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Salary Cuts.jpgThe myth that IP boutiques would be immune from the recession has already been debunked. Today, a few more intellectual property lawyers came back down to earth with the rest of the legal industry.
Above the Law has obtained an internal memo from the IP firm Townsend and Townsend and Crew. The firm is cutting salaries:

All- After much deliberation and consideration of the various issues involved, including the thoughtful input of the associates, the Policy Committee has made the decision to restructure associate compensation for 2010 as follows:
1) The associate pay scale for 2010 will be adjusted so that starting salaries for first year associates will be $145,000.
2) The remaining scale will be:
Level 2: $ 160,000
Level 3: $ 170,000
Level 4: $ 185,000
Level 5: $ 210,000
Level 6: $ 225,000
Level 7: $ 240,000

But don’t get too attached to that lockstep system, Townsend associates. After the jump, we see that Townsend wants to join the cool kids hanging out behind the gym lighting lockstep on fire.

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Dorsey Whitney logo.JPGDorsey & Whitney’s managing partner, Marianne D. Short, was making the rounds in the Minneapolis office yesterday, talking to associates there about the future of the firm.
That future might be one without lockstep compensation. A source reports:

[T]he firm [suggested] it was restructuring our compensation. They did not give us any specific details. But, it seems likely that this will result in another large pay cut for associates. While hazy on the details, Dorsey management indicated that the restructuring will be something like this: we will be given a base pay rate which will be below market (whatever that means these days, but regardless, likely well below what we are currently making after our 10% pay cut), which will be supplemented by a ‘bonus’ if we make our hours to bring compensation up to market.

Alright, slow down. While it does appear that Short broached the subject with associates in Dorsey’s Minneapolis office, it appears that there are still a lot of evaluations and reviews that will have to take place at Dorsey before any final decision is made. It is premature to speculate about what kind of new base salary the firm might offer.
But it does look like the firm is considering a new system. We have statements from the firm and more from our tipsters, after the jump.

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Squire Sanders logo.JPGYesterday, we reported that Orrick has decided to end lockstep compensation in 2010. Today, the Orrick effect claims its first soul. Above the Law has learned that Squire Sanders & Dempsey also intends to do away with lockstep compensation in 2010. They just aren’t quite sure what they will replace it with.
But why let the details of the new system stay the execution of the old system? Yesterday, SSD associates received this email from the firm:

As you will recall, when we addressed the issue of associate compensation adjustments earlier this year, we indicated that a re-thinking of our approach, generally, to associate compensation would also be in order and that we would focus more broadly on supportive associate growth and development underlying compensation decisions. We are pleased to report to you that efforts in this direction are well underway.
To provide an overview of this important initiative, we are sharing with you the enclosed memorandum summarizing our efforts to date and projected next steps. In doing so, we would appreciate your respecting the confidential nature of this internal memorandum. As emphasized in the memorandum, this initiative will be, and needs to be, a collaborative effort. We welcome your comments and suggestions, and your participation as we move forward.

Above the Law has also obtained the “enclosed memorandum.” It’s heavy on the ills of lockstep, light on the benefits of the new compensation regime.
More details after the jump.

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Orrick logo.JPGBiglaw firms have been talking about moving away from lockstep since the start of the recession. Orrick’s Managing Partner, Ralph Baxter, has been talking about it since before the recession.
Next year, Orrick will be doing it. Instead of a lockstep system, the firm will introduce three different levels for associates. Here is the how the firm describes the change in its official press release:

Orrick will replace the automatic lockstep advancement model for its partner track associates with a model that allows associates to advance at a pace that reflects their developing skill set.
The firm will have three levels of associates – Associate, Managing Associate, and Senior Associate – with well-defined performance criteria for advancement from one level to the next and with corresponding compensation levels. To implement this program, the firm is enhancing its associate training, mentoring, and feedback systems.
“The traditional associate lockstep staffing and compensation model is based upon out-dated assumptions,” said Laura Saklad, Orrick’s Chief Lawyer Development Officer. “Our new Talent Model recognizes that not all associates advance at the same pace, tenure is not a proxy for advancing skill, and clients should not bear the cost of training associates. In the end, our goal is to deploy the right lawyer or professional for the right task at the right cost. ”

The three classes apply only to “partner track” associates. What are non-partner track associates going to get? More details and an opportunity to provide some instant feedback via a reader poll, after the jump.

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Salary Cuts.jpgWelcome to the future. Like Drinker Biddle did in May, Howrey is changing the nature of the first and second year associate experience. The firm is moving to more of an apprenticeship model. New Howrey associates will receive an emphasis on training and take a significant reduction in salary.
The memo from Howrey explains some of the top-line goals of the new program — called the “Tier 1 Associate Program.”

Participants in Howrey’s Tier 1 Program will spend only one-third of their time during the first year on client billable work to permit them to devote the remainder of their time to pro bono representations and a wide range of training programs, including the firm’s signature professional development experience – the Howrey Academies. In Year One, associates will work with Howrey’s full-time, in-house writing instructor, be assigned to trial teams, and take advantage of other programs offered by Howrey’s award-winning professional development team. They will dedicate approximately one-third of their time to pro bono and public interest matters, which will afford them the opportunity to develop the advocacy skills and in court experience that are central to Howrey’s practice. The emphasis on training will continue into Year Two, with client secondments, judicial externships, and other advanced development opportunities added to the curriculum. Billable hours in the second year will be capped at roughly half of total hours.

That is the good, here is the salary information:

The Tier 1 program will be limited to a select number of associates each year. Compensation during the first two years will be adjusted to reflect the nature of the program and the dramatically reduced billable hours expectations. In addition to an annual salary of $100,000, first year participants will receive $25,000 upon acceptance of their job offer to help defray their law school loans or third year law school expenses. In their second year at the firm, participants will receive an annual salary of $125,000 and a $25,000 bonus upon successful completion of the program and entry into Tier 2 of Howrey’s associate development program. Higher compensation may be offered to candidates with special qualifications, such as advanced technical degrees or clerkships.

At least Howrey is trying. More details and the full memo and a reader poll after the jump.

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