BradyToMoss wrote:For starters, Wilmer froze salaries. Call it what you want, but that's a pay-cut.
Freeze = making the same as you are now. Cut = making less than you are now. Freeze =/= cut, especially in an environment with basically zero inflation. It sucks to not get a raise you were expecting, but that is not the same as a pay cut which is what happened at a lot of other firms.
BradyToMoss wrote:This argument about killing lockstep to benefit high value associates (or to shift benefits from lower performing associates to others) is a joke. These moves are being made to reduce the overall amount of compensation, thus increasing PPP. PPP is lagging everywhere, and partners are scrambling to figure out how to maintain the astronomical raises in pay they enjoyed in the previous decade. This "move to merit" happening at the same time as an economic crisis is no mere coincidence.
I didn't say killing lockstep would necessarily benefit high value associates relative to where they are now, rather just that they should be paid more than the lower value associates. A system that pays everyone the same based on tenure is inherently flawed.
Based on the economics you described above, the partners have to either reduce PPP or reduce their associate compensation. Which is the best way to reduce the associate compensation pool:
a) Reduce associate headcount, causing many of the better ones to lateral to avoid lay off risk and also hurting recruiting.
b) Keep lockstep and reduce pay for all associates, causing many of the better ones to flee for more money elsewhere and also hurting recruiting.
c) Do what they are doing and hopefully be able to pay their better associates enough to keep them and still be able to tell recruits they pay $160k.
BradyToMoss wrote: As their memo to associates explained, they envision that over time performing bonuses will make up a larger percentage of associate compensation. As with other firms that have been making this move, they talk about the numerous and vague considerations that will come into play in determining bonuses.
So now you have associates receiving varying levels of base salary, bonuses fulfilling a large portion of that salary, and greatly increase discretion in allocating bonuses. Wilmer partners have indicated their strong aversion to publishing the distribution of bonuses. Even more telling, you'll see very few (if any) current associates hailing this as good news. These moves away from lock-step have been met with hostility by associates, and viewed as a sign of weakness by insiders and outsiders of the firms.
This is how consulting firms and banks pay their people and it seems to work for them. Aligning pay more closely with economic contribution and moving it away from tenure makes a lot of sense from the stand point of running a business. Change is hard, and no doubt this is being driven by economic concerns. Ultimately, it is the right business decision for a lot of firms and the direction that a large part of the industry will go.
BradyToMoss wrote: Is merit based pay necessarily bad? No. Are economic circumstances forcing a reduction in average compensation? Quite possibly. But at any rate, these moves away from lock-step have been initiated primarily (if not solely) to reduce associate compenation. Why else would they initiate a policy that has received bad press and caused associates to voice their displeasure at other firms who have initiated similar policies? The vast majority of associates at these firms will be making less than they would under lock-step, especially a few years from now, and VERY few will be making more.
Agreed, but more of the associates might also have jobs under this system where their pay can more accurately reflect the economic value they are bringing to the firm. Firms are under a lot of pressure to reduce hourly rates, there is less work for them to do, and many customers have been taking a harder line about paying for 1st and 2nd year associates. I certainly don’t think these moves will benefit most associates (nor are they designed to), but I do think they are the right business decisions.