The Thirty Years’ Associates Salaries War
Bruce MacEwen, Adam Smith, Esq.
Put these trends together, as reported by this month’s issue of The
American Lawyer, and what do you get?
- Midlevel associates, despite their pay jump since 2006, aren’t
satisfied with with their compensation;
- New York City salary levels have
penetrated every major market across the
- The annual midlevel associate survey “shows
associates eyeing the door;”
- Howrey is continuing its revolutionary efforts to end
I suggest you get what could be the beginning of cataclysmic cracks in the
associate compensation/promotion/professional development model.
Shall we start with the easy stuff?
According to The Paycheck Report,
“Finally, everyone’s being paid like a New York lawyer. Thanks to an informal wage freeze in the country’s largest market, midlevels in other major cities caught up to the salaries of their New York counterparts this year, although they still lag behind in bonuses.[…]
“Even though New York salaries were flat, the data shows healthy pay increases elsewhere, as non-New York medians caught up with those in New York–$185,000 for third-years, $210,000 for fourth-years, and $230,000 for fifth-years. For midlevels outside of New York, those are one-year increases of 9 percent, 11 percent, and 10 percent, respectively. Nationally, median bonuses increased 17 percent for third-years, 21 percent for fourth-years, and 14 percent for fifth-years.”
Next, we have the report from the front lines that even associates in firms receiving “going rate” salaries aren’t satisfied if they don’t receive going rate bonuses. You may be asking yourself whether the notion of a “going rate bonus” isn’t an oxymoron, and I would be the first to agree with you.
At risk of revealing how far back my memory goes, and worse, at risk of appearing a curmudgeon, I do recall the days when bonuses were individually determined based on–quelle horreur–individual performance. But that was then and this is now. This says it all: “‘Compensation is too low for the New York office’ notes one Blank Rome associate. ‘The bonus is not a market bonus, even if the salary is a market salary,’ says another.” As they say hereabouts: “Deal!” (Not as in, “you’re on,” but as in, “deal with it.”)
The issue is not one of pay for performance, but one of comparative envy. And, to a large extent, of shocking law student ignorance about the differences between firms in training, culture, professional development, opportunities for partnership, strength of the alumni network, value of the firm’s “pedigree” for future options, chances to spend some time in an overseas office, and so many other things that are critically important to one’s future career.
So it comes down to money: “Students can’t easily differentiate between prospective employers, so they rely too much on pay as an indicator of prestige. Competitive and clueless, students are “the most uneducated consumers of law firm life and what it really means to practice,” says a Simpson Thacher & Bartlett midlevel.”
But associates may actually be the most brutally honest realists about what’s going on. If their careers in BigLaw are destined to be “nasty, brutish, and short,” they may be being perfectly rational. We all know that the odds of equity partnership are asymptotically approaching zero:
“We’re like pro athletes,” says a Jenner & Block midlevel. “Only a few will make equity partner, and [most] will have a limited amount of time at a big firm.” In that scenario, the growing paycheck becomes a substitute for an enduring career with a single firm.”
In other words, you can buy allegiance–temporarily, and I hate to call it loyalty–by paying salaries that are arbitrarily and capriciously set by a “going rate” market that changes in unpredictable and unforeseeable epileptic seizures, but don’t kid your associates that they’re anything other than hired brain meat, the vast majority of whom will burn out from career-ending morale injuries. This is the problem:
“[T]he message from management was, ‘We’re just doing [the raise] because the market is doing it,'” recalls another Jenner [& Block] associate. “They’re not raising because they value us. We’re just the collective beneficiary because the firm needs to keep up in the market. It’s a back-handed compliment.”
OK, I put it harshly, but is this any way to sustain and grow a superb, world-class professional services firm?
And what ever happened to the old dream of making partner after serving your years at Parris Island boot camp?
Maybe that doesn’t hold the delayed-gratification appeal it used to, either. Start with the twin facts that: (a) partnership is not the tenured position it used to be, with de-equitizations rampant; and (b) partners work only marginally lower hours than associates, and have more non-billable hour responsibilities, so, in the famous joke, the achievement is seen as “a pie-eating contest where the reward is more pie.”
This sums up the change in the mindset:
When Arnold & Porter’s director of professional development, Caren Ulrich Stacy, started working in law firm recruiting in the mid-’90s, she says there was one question that she could count on hearing from every incoming associate, be it a new law school recruit or a potential lateral hire: How long does it take to make partner here? But today, Ulrich Stacy says, it goes largely unasked. “I’ve maybe had that question once in the past five years,” she says.
It seems not to be a mask for insecurity. Associates still report (70+%) that they’re “on partnership track,” and even in today’s straitened economy fewer than a quarter say their hours are lower, while fully a third say their hours have increased.
So if it’s not insecurity, it’s what?
Lack of desire: They may not want partnership.
For one thing, they see some junior partners working even more ferocious hours than their own. “There have been times when I have been watching a movie late at night that I’ve gotten an e-mail from a partner,” says a Latham and Watkins third-year … Adds a midlevel [at another firm]l: “When you see how many hours [junior partners] put in, you realize there really is no end to it.”
Yet isn’t there more to life as an associate, and as a partner, than grinding out the hours? The happy news is yes. And there may be hope that those firms willing to work on what that “more” is may be able to put together career paths that make financial, emotional, and professional sense for associates and financial and client-service sense for the firms.
Here are some clues:
“The professional development programs are all well and good,” says one Arnold & Porter midlevel. “But in terms of learning the craft, you can’t beat learning through a real-life experience and working on client matters.”
“I wanted a place that would treat me like an adult, as opposed to a place that would hold my hand for three or four years before letting me do anything of substance,” says one Gibson Dunn midlevel.
Howrey chief professional development officer Heather Bock adds that the pitch to this generation of associates has to include more than just a prospect of partnership. The question Bock asks herself: “What is it that we can offer these high achievers that will appeal to them?” One of Howrey’s answers is to offer a two-to-three-day intensive academy each year of an associate’s career. (The firm ranks in the top third of the survey overall, and in the top 10 in terms of training.) “We try to make it a very high-impact experience,” Bock says. “It’s very rare for them to come and listen to hours of PowerPoint presentations.”
Arnold & Porter even employs two career counselors–former lawyers both–who help associates navigate internally within the firm or even help them plot an exit strategy; and it’s all confidential. What do these efforts have in common?
- Treating associates as autonomous adults, not fungible factors of production.
- Giving them the rope to hang themselves, if hang themselves they will.
- Taking “professional development” seriously. It’s not about videotapes and PowerPoints.
Take this thought experiment a step further, and broaden it out from one firm to BigLaw in general.
What do associates want?
Essentially, they want two things, in varying mixtures: Money and training.
We’re actually very strong, and extraordinarily undifferentiated, at the first, and wildly variable on the second, from firm to firm, department to department, and even partner to partner.
Here’s the thought: What if firms chose to position themselves along a two-dimensionally differentiated spectrum from exceptional pay and minimal training to exceptional training and below-market pay?
Wouldn’t associates be able to make informed choices about where they wanted to begin their careers, based on their own needs, goals, and aspirations?
Now imagine adding other dimensions to these two simplistic ones:
- Higher or lower partner:associate leverage.
- More or less pro bono work.
- Clarity (this is a challenge to communicate to law students) about whether your firm is focused on corporate, finance, and transactional work, or on litigation and dispute resolution.
- Clarity (again, a challenge) over whether your firm is regional, national, or truly international, and the opportunities (or lack thereof) for, say, spending three years in Hong Kong or moving to the EU for an extended tour.
Associates are complaining that high salaries don’t equate to career satisfaction. Is this any surprise? Recall the “back-handed compliment” remark?
Imagine differentiating your firm on dimensions that truly matter, and which you can communicate as:
- distinctive to your firm; and
- beneficial to potential associates.
And start thinking about what those dimensions might be pretty soon. Because when the next jump in first-year salaries comes–and it will be to $200,000, I predict–you may want to have other, truly meaningful, differentiators in mind. Other than going to $210,000, that is.