Killing Lockstep

Baker Botts Releases New Merit-Based Compensation Levels

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Back in November, Baker Botts told us that they would be moving away from a lockstep associate compensation system and instituting a new merit-based system. Yesterday the firm released the base salary levels for its new four-tiered system. Here’s the statement from the firm regarding the basic changes:

The next phase of a talent management program — moving from a lockstep to levels format to track associate progress at the firm — was announced today by Baker Botts Managing Partner Walt Smith. This new format is the latest enhancement of a multi-year plan to better manage associate development at all experience levels.

“Implementing this program will allow us to remain competitive in our efforts to recruit and retain the best and brightest lawyers,” Smith said. “Importantly, it will help us foster an environment that emphasizes the attributes we believe are essential to our firm’s culture.”…

The compensation aspects of the program will be effective August 1, 2010. Base annual salary for entry-level lawyers will remain at $160,000.

The firm wouldn’t officially release the salary levels for more senior associates, but tipsters gave us the inside scoop…

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Akin Gump Back to $160K: Another Merit-Based Plan Offers Market-Level Base Salaries

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It started with DLA Piper. After offering recession salaries to associates for a while under the guise of merit-based compensation, DLA relented earlier this month and restored the $160K base salary scale to its associates. Yesterday, WilmerHale announced that while it too is going forward with a merit-based compensation plan, it will be offering base salaries along the established $160K scale.

It seems that this little experiment of using merit-based compensation to undercut the market for base associate salaries is dying a quiet death. Today we have news that Akin Gump’s 2011 compensation model will once again include base salaries that match the market and are not tied to performance.

And even better, a tipster reports that all Akin Gump offices will be put on the New York market, $160K scale — which should represent a significant bump in salary for some associates…

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WilmerHale Brings Clarity to Its Merit-Based Compensation Program

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The heady days of the “mutual assured destruction” approach to associate compensation by Biglaw firms are behind us. But some associates would still like to see how they are doing in comparison to their colleagues at other firms. A tipster recently wrote us:

Can you do a post requesting commenters to post grade schedules a la greedyassociates back in the day showing salary per year. This would make comparisons easier. I’ll start:

Sheppard Mullin
1st year 145K
2nd 160
3rd 170
4th 185
5th 210
6th 225
then it gets vague with a range from 240-265K.

Some of this information is available in the firm profiles on the Above the Law Career Center. But as good greedy Sheppard-ite must know, comparing salaries is much more complicated these days due to some firms instituting merit-based compensation models.

WilmerHale is one of those firms. Yesterday, Wilmer released its projected salary structure for 2011. We’ll see if it’s a merit-based market leader…

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Nationwide Pay Raise Watch: Pillsbury Winthrop

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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?

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A Peek Inside the Winston & Strawn Black Box
And 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….

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And additional info on stealth layoffs.“

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Clifford Chance: Cancels Hours Requirement for Bonuses in London, But No Change in NYC

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This morning, the Lawyer reported that Clifford Chance was changing the requirements for associate bonuses in London:

Clifford Chance is set for a radical overhaul of its associate bonus system, with the maximum award now open only to senior associates and payments no longer based primarily on hours worked….

A spokesperson for ­Clifford Chance said: “While billable and investment hours continue to be ­important, the bonus will not be directly linked to achieving a target number of hours. We’ll weigh a ­number of factors to ensure a balanced and flexible bonus scheme.”

Dear Lord, it looks like the American epidemic of moving towards merit-based compensation just hopped a transatlantic flight.

But don’t worry Clifford Chance New Yorkers, your bonus requirements will not be affected by the changes in London…

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Nationwide Salary Watch: Morgan Lewis Raises Salaries

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We have good news for Morgan, Lewis & Bockius associates. Salary information is in and most people are getting raises. True-up raises at that. The class of 2008 pulled the short straw, but everybody else seems relatively happy. A tipster reports:

Please post that yesterday MLB essentially unfroze salaries (most ’08 grades only went up to 165 though) but otherwise made everyone whole, retroactive January 1, 2010.

The double-bump raise for veteran associates comes a couple of months after MLB announced big time raises for a select few associates — while most of the firm’s associates were left to wait and wonder. In January, we reported this message from Morgan Lewis Chairman, Francis M. Milone:

After considering all of these factors, we awarded base salary increases of up to $25,000 and incentive bonuses of up to $35,000 to our highest performing associates. As I advised in my November video presentation, we did not reduce associate base salaries.

According to the firm, the decision to give true-up raises to mostly everybody is in keeping with MLB’s new merit-based strategy …

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Inside the Bingham McCutchen Bonus

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Bingham McCutchen new logo Abovethelaw Above the Law blog.jpgWhen you step into the killing lockstep zone, your bonus disappears into a black box. A while back, we reported that Bingham McCutchen adopted a lockstep-merit hybrid approach to associate compensation. Base salary would still be lockstep, but the bonus would be merit-based.

When we reported on the Bingham bonus, we noted that the firm intended to pay bonuses generally on the Cravath scale to its associates, based on a number of merit-based factors instead of hours.

But now our tipsters are telling us that some Bingham associates received much less than a Cravath-level payout:

A peek inside the black box, bonuses are generally well below the Cravath scale. The only associates receiving bonuses in the vicinity of the Cravath scale are those that exceeded the 2,100 hour minimum by a few hundred hours. Even bonuses in those instances were barely above the Cravath scale. Amazing considering JayZ just told the Boston Globe that the firm “had our best year ever.” Guess we know where all that money went. Morale is definitely at an all-time low. I would be shocked to see any associates making much of an effort to bill above the 2,100 hour minimum in 2010. I think “why bother” has become the most uttered phrase around the halls of Bingham over the last week.

“JayZ” refers to Bingham Chairman Jay S. Zimmerman, not the talented Mr. Shawn Carter.

But I suppose you could put Zimmerman’s positive outlook about the firm into a rap song …

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

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Winston Strawn LLP logo Above the Law blog.jpgFriday brought good news and bad news for Winston & Strawn associates.

The good news is that the double salary freeze, which has apparently resulted in first- through third-year associates at Winston all earning $160,000, may be thawing. Managing partner Thomas Fitzgerald sent a memo — this time to its intended recipients — indicating that raises are on the way.

The bad news is that Winston associates don’t know how much of a raise they’ll be getting — and the most they can hope for is a salary that matches the market. The memorandum contains the standard $160K salary scale — 160-170-185-210-230-250-265-280 — but states that “[s]alary levels in each associate class will range up to the maximum base compensation levels set forth” in the memo (emphases added).

The Winston associates we’ve heard from are upset. They’re unhappy not just about the move away from lockstep, but over the firm’s failure to set forth in detail how salaries will be determined. Most of the other firms that have abandoned lockstep have set forth elaborate systems for evaluating associates to determine their compensation and advancement. The Winston memo simply states: “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.”

This is a “black box” approach to compensation. It’s used by other big firms — e.g., Jones Day — but it’s a significant departure from Winston’s historical practice. It’s not what Winston associates signed up for when they joined the firm.

But then again, thanks to the Great Recession, lots of Biglaw associates aren’t getting what they expected when they joined their firms. And if associates aren’t happy, with compensation or any other aspect of their employment, their firms will tell them: you’re free to leave. In the words of an unemployed woman quoted in this weekend’s New York Times, “There are no bad jobs now. Any job is a good job.”

There’s a little more bad news about Winston associate salaries. Find out what it is, and read the full Winston & Strawn memo, after the jump.

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Bingham McCutchen: Lockstep Base Pay, Merit Bonuses — It’s a Hybrid Plan That Seems to be Working

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Bingham McCutchen new logo Abovethelaw Above the Law blog.jpgMaybe Toyota should take a lesson from Bingham McCutchen: don’t try to cut corners when producing a hybrid.

Back in October, Bingham announced that it would be adopting a new “merit-lockstep” hybrid approach to associate compensation. The plan came with the stamp of approval from Bingham partners and associates. And a majority of Above the Law readers also approved of Bingham’s hybrid approach.

Today, Bingham rolled out its hybrid system. The firm is providing true-up, lockstep raises for people who hit 1900 hours. The double bump extends nationally, across all of Bingham’s offices. People who hit 1500 hours will only be getting a single class bump in salary. We understand that only a small percentage of Bingham associates were low enough on hours to be affected by this stratification.

At the low end, people who billed fewer than 1500 hours will have their salaries frozen again.

On the bright side, all of the people who are frozen will have their hours reevaluated in June. If they’re on pace, they’ll get their money.

The Bingham McCutchen lockstep base pay structure is clear and straightforward (see chart after the jump). For bonuses, welcome to the black box that is merit-based compensation.

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