question about law compensation Forum

[let/them/eat/cake]

^ I'm assuming I'm supposed to be reading this with my sarcasm radar on?

If not, holy shiznit. If so, real numbers please?

look what you did. you've created a gunner.

[cahesu]

V. interesting thread. Question: if you were in charge of running a firm, how would you design your compensation structure for associates and partners?

[Anonymous User]

Merit-based can be good or bad. If merit-based was instigated in light of the economic crisis... bad. No transparency... basically the firm's excuse to screw some people over.

Some firms have been merit-based since the get-go. I believe in it. It's not necessarily eat-what-you-kill. It's, "you get paid for your work." I believe in that. Why should an associate who billed 1900 last year get the same as an associate who billed 2400? Just doesn't make sense.

And don't forget, lockstep associate compensation is just another way for a firm to act cheaply. Think about it: they don't have to compensate better their harder workers. This is why I dislike Davis Polk. I think they're the worst market follower, and they're lockstep all the way through. Their guys bill like crazy, but associates at other firms will make more and have similar exit-options, just maybe not as much prestige. My best friend there calls "prestige" the easiest way to get law students to do your bidding without having to spend more money on them. I agree.

(Anonymous because I don't want my views on this to be associated with my screen-name)

[steve_nash]

^ I'm assuming I'm supposed to be reading this with my sarcasm radar on?

If not, holy shiznit. If so, real numbers please?

Yes, sarcasm.

[Tsispilos]

i hope i end up with an eat-what-you-kill system, what firms are best known for that? I'm interviewing with Kirkland, Sidley, Skadden, Jones Day, Paul Weiss, Arnold Porter, and K&L Gates - which one of those is "eat what you kill" ?

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[profs<3mycomments]

FWIW, I think 95% of associates would prefer lockstep to merit based, even the gunners. Merit-based systems have caused problems for firms and the term "merit-based" is almost always accompanied by finger quotes.

Anyone know what's wrong with the pay scales on careercenter? Many of them go (in as ending order by year) 160 145 145 185 etc. That can't be right.

Edit: "ascending"

[Kochel]

Junior associates, especially, prefer lockstep, because it corrects for the vagaries in work assignments and allows everyone to climb the learning curve without penalty. After the first few years, however, lockstep shouldn't be necessary, as the best associates will have separated themselves by their work product.

For similar reasons, firms like lockstep because it mitigates the risk of discrimination suits that might otherwise arise out of an uneven work assignment process.

[cahesu]

I would imagine that if I were in it for the money or the exit options, I would prefer lockstep. This would give me the highest amount of compensation with the least work required.

If I were shooting for partner, however, I would be hoping for merit-based compensation: I might as well be compensated for all the extra hours I'm billing.

Recognizing that most associates never make it to partner, I can understand why most associates would prefer a lockstep system.

[Anonymous User]

what % of associates make partner? how to tell? again - OP here, know close to nothing about law pay, entered law school because i liked "law" - one of the dumb ones I guess - keep me anonymous for I am i.g.n.o.r.a.n.t.

[Anonymous User]

Quick reply: my dad was a partner at a big law firm, so i have some first hand insight here (not like it came up at dinner, but since im going into the biz i figured i mne as well ask, lol).

first, lockstep is totally different for associates than for partners. every large law firm* has a lockstep salary system and then either lockstep bonuses or tiers of lockstep bonuses based on hours worked. there is some variation, but not much.

what a firm does for its associates, however, bears little relation to partner compensation - except in so much as broad firm principles might be mirrored. partners split all of the profits at a law firm. how? great question. but you have complex and nuanced payment structures from clients to the firm - hourly, divided amongst practice groups and partners, retainers, contingencies, fixed price work, etc. you cant just say 'man awesome partner x brought in 5 mil lets give him 5 mil'. a partner might be the one for whom a huge client stays with the firm, but the firm might have so much work that its farmed out to three dozen associates and partners over two offices. a partner might be an equity partner because he used to be a member of the us senate, because he brought in a Fortune 500 client, or because his motion practice is so impenetrably brilliant that he wins 80% of his cases on summary judgement. what is merit?

the important thing is that for associates, merit = hours. thats it. obviously crapp work x 3,500 hours will get you shown the door, and there may be leeway for brilliant work and 2200 hours if you were also out 3 months on maternity leave. but really as an assocaite your a billable machine.

much more complex for partners.

when people refer to eat what you kill in partner compensation, they mean a heavy basis in some kind of dark arts calculation above. but the ignorant 0ls talking about how they'd prefer MERIT based compensation because it doesn't promote LAZINESS neglect 1) the extraordinary odds and difficulty of making partners (doods are strivers, laziness won't be an issue) and 2) the intense difficulty of measuring 'merit' in the work partenrs at law firms do, particularly given the decades that could separate the equity partners.

to get specific again, my dad noted that there was a compensation committee that divided the pie. if somebody wanted to they were free to look in the 'black book' that kept overall compensation numbers and ask about the way it was calculated. it was widely known that doing so would result in a deduction of pay the next year.

also keep in mind that they aren't kidding around when they call it a partnership. firm wants to expand? they'll need capital. where do they get it? loans - and the firm's equity, which si what the partners would be splitting. firm gets nailed for malpractice? guess who foots the tab - partners. obviously loans and insurance mitigate the day to day impact of these kinds of financial events, but true equity partners often see income fluctuation - possibly dramatic income fluctuation - based on the inevitable business cycles that the fixed compensation structures of the associate ranks never have to deal with. many firms even require you to 'buy in' to partnership to help raise capitol, and many firms have mandatory partner retirement ages.

it's complicated. much more so than people seem to be making it out to be itt.

*im sure there are exceptions. bite me. some have flirted with 'merit based' but it has both been a minority and a trend that is reversing itself.