enlighten me - but how does this make sense Forum

[Anonymous User]

to a lot of you I am asking a rather dumb question ...i admit I am utterly clueless

so, big firms pay 160K to their new york associates. they pay perhaps a little less to their associates in smaller offices with lower col.

nevertheless, the most important deals/transactions go to the New York office (or SF/LA for that matter), which means that the people at these offices actually generate far higher revenues. I would also assume that people in NY work harder.

How do firms justify paying high salaries to associates in different offices?

[nonprofit-prophet]

to a lot of you I am asking a rather dumb question ...i admit I am utterly clueless

so, big firms pay 160K to their new york associates. they pay perhaps a little less to their associates in smaller offices with lower col.

nevertheless, the most important deals/transactions go to the New York office (or SF/LA for that matter), which means that the people at these offices actually generate far higher revenues. I would also assume that people in NY work harder.

How do firms justify paying high salaries to associates in different offices?

2 things. First, the most important deal doesn't always "go" to the NY office. Second, a deal that is less than "most important" can still generate a ton of revenue for a firm.

[Anonymous User]

thanks..

Hmmm I thought NY offices generally generate more revenues than other offices, though.

[attractive_NUisance]

There is a big difference between total revenue per office (where NYC is likely top of most firms offices but also has the highest expenses and headcount) and revenue per lawyer per office where every office is often very similar. Non-NYC lawyers generally make more in real after-tax and living expenses compensation (See http://www.nalp.org/buying_power_index_class_of_2010 ) but they have to live with the shame of not being at the "center of the universe" in NYC.

[nonprofit-prophet]

thanks..

Hmmm I thought NY offices generally generate more revenues than other offices, though.

Again, more revenue doesn't mean satellite offices don't generate enough revenue to substantiate market salaries. Also, you're making blanket generalizations. Each firm will be different. A firm headquartered in LA, TX, or Chicago probably has higher revenues outside of NYC. It also depends on the practice group that drives firm revenues.

[Anonymous User]

NYC pay really should be 180k not 160k.

[rayiner]

Salaries are like any other prices--they are determined by supply and demand, not cost or revenue. The price of associate labor is determined based on the competition with other law firms. Skadden Chicago pays $160k because that's how much Sidley and Kirkland pay. If Skadden wants to hire top associates in Chicago, they'll pay the same.

How much revenue a Chicago associate versus a New York associate generates is irrelevant to the salary of the associate--the market sets the salary. What it's relevant to is Skadden's decision to hire an extra associate in NY versus Chicago. If Skadden has all the associates it needs in NY, it will hire more in Chicago. It's irrelevant if those associates generate less revenue than ones in NY--it's still revenue that the firm would not otherwise have.

[Anonymous User]

thanks..

Hmmm I thought NY offices generally generate more revenues than other offices, though.

Not true. Actually, some firms in 2009 were hit really bad by the recession and their NY offices were kept alive by offices in other cities that had strong practice areas that were not hit as hard.