Wilmer Hale cutting lockstep...the times are a changing... Forum

[kurama20]

http://amlawdaily.typepad.com/amlawdail ... aries.html

Breaking: Wilmer Freezes Salaries, Breaks Lockstep

Posted by Zach Lowe

Wilmer Cutler Pickering Hale and Dorr is unveiling a new compensation system designed to break away from lockstep, encourage alternative career paths, and shift a larger chunk of lawyers' pay from their base salary to their bonus, according to firm higher-ups.

The new system, unveiled today after two years of planning, will be phased in through 2012, according to William Lee, the firm's co-managing partner, and Carol Clayton, the firm's assistant managing partner. The crux of the change involves dividing non-partners into several tiers and linking each of those tiers to a set base salary, Lee and Clayton say. Within those tiers, pay will vary greatly depending on individual bonuses. Those bonuses will be merit-based and will not be linked to seniority or billable hours. The goal is to pay top performers in each tier more than they would make under Wilmer's current lockstep system, Lee says.

The non-partner tiers would include junior associates, senior associates, counsel and special counsel. The firm has not set base salaries for those tiers, but the firm expects those base salaries "will remain competitive with salaries at the best firms," Lee says.

Still, step one of the process is to freeze all associate salaries for 2010 at 2009 levels, with the exception of second-year associates. The firm is keeping first-year salaries at $160,000 and will pay second-years $165,000 to differentiate them from first-years. For those associates affected by the freeze, the change means third-years will earn $170,000, fourth-years make $185,000, and fifth-years will bring in $210,000, according to a memo the firm is distributing today.

The second step involves what Clayton terms a "compression" of salaries. The goal is to have everyone within a tier earning the same base salary by 2012, Clayton says. By 2012, an excellent third-year associate in the "senior associate" tier should earn the same base pay as a sixth-year associate in the same tier, Clayton says. This naturally involves holding the more experienced associate's salary steady (or close to it) between now and 2012 while raising the less experienced lawyer's salary up to the more senior lawyer's level, Clayton says.

It is possible that older associates will see very little increase in pay over the next two to three years as Wilmer phases in the tiered system. But the firm's goal is to implement the system without cutting anyone's salary, Lee and Clayton say. "We don't want to see anyone take a reduction," Clayton says.

Again. Wilmer has not settled on the base salary for each tier. But one thing is for sure, the firm says: That base salary will comprise a smaller chunk of a lawyer's total compensation under the new system. The internal memo puts it this way: "A larger percentage of each lawyer's total compensation will be built into the annual performance bonus," the memo says. "This system obviously will result in greater differentiation in compensation, allowing our strongest performers to earn more than they could at peer firms that, like WilmerHale, peg their compensation at or near the top of the market."

Lee and Clayton stress that the firm began planning for this before the scope of the recession became apparent, and that the change in pay structure is one prong of a broader overhaul in the firm's philosophy. Moving away from a simple associate-equity partner structure and adding more job titles recognizes that some high-quality lawyers may want a different career path, Lee says. The firm recently introduced the title of senior partner, intended for older partners who want to spend part of their time on something other than their normal corporate work, Lee says. Equity partners choosing that route (including one set to leave a full-time practice for a part-time job as a graduate school instructor, Lee says) will be subject to a new compensation arrangement crafted with the firm. (Lee would not say whether every partner who chooses the "senior partner" title would give up their equity in the firm.)

Beyond that, the move away from lockstep and billable-dependent bonuses reflects the firm's own shift away from a model defined by the billable hour, Lee and Clayton say. At least 60 percent of Lee's own work is billed in a form other than by the hour, and the firm recognizes the need to wade even more deeply into alternative fees. Moving away from billables means that the firm has to come up with new standards for evaluating its associates. The firm is putting in place an intensive new mentoring system to inform associates about the process and make sure a single partner keeps a close watch on each associate's development, Lee and Clayton say.

"The three pillars of law practice--the partner-associate model, lockstep and the billable hour--we decided about two years ago that all of that had to change," Lee says.

Whether the new tiered system succeeds in developing better associates will depend, in part, on whether firms prioritize associate development, says Bruce MacEwen, president of the online publication Adam Smith, Esq. and an informal advisor to Wilmer as the firm developed its plan. MacEwen says there is a school of thought--one to which he does not subscribe--that argues the move away from lockstep at some firms is a thinly-veiled way to cut costs. He does not believe that to be the case at Wilmer, he says. "The way the firms actually implement this will separate the men from the boys," MacEwen says. "The proof will be in the pudding. The firms that short-change the training will be exposed as poseurs down the road."

[kurama20]

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[Anonymous User]

Wilmer CuTTTler Pickering Hale & Dorr

[kurama20]

Wilmer CuTTTler Pickering Hale & Dorr

No LocksTTTep.

[oneforship]

Interesting stuff. I don't think it's necessarily a bad thing, although I'm sure the 5th and 6th year associates at Wilmer probably aren't fans.

[kurama20]

Interesting stuff. I don't think it's necessarily a bad thing, although I'm sure the 5th and 6th year associates at Wilmer probably aren't fans.

I honestly think that in the next 10 years this will be the rule rather than the exception. The uber elite firms that aren't very large may stick to lockstep ( Wachtell, Williams and Connolly, Munger etc.) but I think your run of the mill biglaw firms will all switch to a pure performance based system.

[oneforship]

Interesting stuff. I don't think it's necessarily a bad thing, although I'm sure the 5th and 6th year associates at Wilmer probably aren't fans.

I honestly think that in the next 10 years this will be the rule rather than the exception. The uber elite firms that aren't very large may stick to lockstep ( Wachtell, Williams and Connolly, Munger etc.) but I think your run of the mill biglaw firms will all switch to a pure performance based system.

That's fine by me. I'm confident in my ability to perform well.

[kurama20]

Interesting stuff. I don't think it's necessarily a bad thing, although I'm sure the 5th and 6th year associates at Wilmer probably aren't fans.

I honestly think that in the next 10 years this will be the rule rather than the exception. The uber elite firms that aren't very large may stick to lockstep ( Wachtell, Williams and Connolly, Munger etc.) but I think your run of the mill biglaw firms will all switch to a pure performance based system.

That's fine by me. I'm confident in my ability to perform well.

So were most of the people at Lehman!

[pany1985]

So was HITLER

[underdawg]

very interesting...will be keeping an eye on them and orrick

the other "no lockstep" firms are just cutting salaries. orrick/wilmer might be doing something else

[BradyToMoss]

very interesting...will be keeping an eye on them and orrick

the other "no lockstep" firms are just cutting salaries. orrick/wilmer might be doing something else

Not true at all. The firms can try and hide their actions all they want, but the simple fact is that the new systems in place at Orrick and Wilmer will result in a reduction in overall associate compensation. The move by WilmerHale away from lockstep is pretty alarming, IMO. They're a big player in D.C., and undoubtedly one of the top two firms in Boston. I'd expect many other firms in the v50 to follow their lead at some point in the near future.

[kurama20]

very interesting...will be keeping an eye on them and orrick

the other "no lockstep" firms are just cutting salaries. orrick/wilmer might be doing something else

Not true at all. The firms can try and hide their actions all they want, but the simple fact is that the new systems in place at Orrick and Wilmer will result in a reduction in overall associate compensation. The move by WilmerHale away from lockstep is pretty alarming, IMO. They're a big player in D.C., and undoubtedly one of the top two firms in Boston. I'd expect many other firms in the v50 to follow their lead at some point in the near future.

TITCR don't let the smoke and mirrors fool you. They are cutting/freezing salaries. This is going to have a heavy impact on their ability to recruit as selectively as they once did (strong preference for HYS).

[Kohinoor]

Interesting stuff. I don't think it's necessarily a bad thing, although I'm sure the 5th and 6th year associates at Wilmer probably aren't fans.

I honestly think that in the next 10 years this will be the rule rather than the exception. The uber elite firms that aren't very large may stick to lockstep ( Wachtell, Williams and Connolly, Munger etc.) but I think your run of the mill biglaw firms will all switch to a pure performance based system.

That's fine by me. I'm confident in my ability to perform well.

I hope you're equally confident in the ability of the partners to not pigeonhole you into shitty assignments which then get you shitty reviews which then get you shitty pay!

[bahama]

It's not that suprising they are changing to the model pretty much every other company in every other industry uses. Welcome to the 21st century.

Other than BigLaw, unionized places, and the U.S. Gov't who has a salary structure as rigid as lockstep?

[j2d3]

This sounds like a great idea to me. (I'm not being sarcastic or anything). It makes more sense to compensate people this way.

[pany1985]

The rub is of course that the switch to this model probably equals pay cuts for everyone, or nearly everyone

[oneforship]

I hope you're equally confident in the ability of the partners to not pigeonhole you into shitty assignments which then get you shitty reviews which then get you shitty pay!

You do realize we're still talking about well into 6 figures immediately after graduation, right? I wouldn't exactly call it "shitty pay".

That said, of course you can get pigeonholed, but I'm not sure how you're getting from shitty assignments to shitty reviews, unless you're assuming that due to shitty assignment that the performance is sub-par as well.

Obviously this model isn't as lucrative on the surface, but it sure makes a hell of a lot more sense from a business standpoint. You pay your top performers accordingly, and subpar performers shouldn't be getting the same compensation. If you're a good lawyer, the firm has incentive to keep you there, and they will pay you according to that incentive. It's up to the lawyer to make themselves valuable---and this was true even in lockstep, especially with all the firm layoffs of the last year.

[bahama]

The rub is of course that the switch to this model probably equals pay cuts for everyone, or nearly everyone

I don't know, they made it a point to say no one is taking a cut. Unless you are saying most people will get smaller raises than they would have under the old system, but I wouldn't exactly call that a pay cut.

Lock step mainly benefits the below avg performing associates because it gives everyone the same raise. It seems to me it would be better to reward the top performers rather than the bottom. Of course the top folks will do better in the long run b/c they have better partnership and exit opportunities, but why not pay them more in the meantime like every other professional services business does?

I suppose you could argue that paying people different amounts will lead to smaller overall pay because what others are making is less transparent making it harder to know if you are being paid fairly. But this would require the firms to be able to keep pay info secret which they have been unable to do in the past.

[BradyToMoss]

The rub is of course that the switch to this model probably equals pay cuts for everyone, or nearly everyone

I don't know, they made it a point to say no one is taking a cut. Unless you are saying most people will get smaller raises than they would have under the old system, but I wouldn't exactly call that a pay cut.

Lock step mainly benefits the below avg performing associates because it gives everyone the same raise. It seems to me it would be better to reward the top performers rather than the bottom. Of course the top folks will do better in the long run b/c they have better partnership and exit opportunities, but why not pay them more in the meantime like every other professional services business does?

I suppose you could argue that paying people different amounts will lead to smaller overall pay because what others are making is less transparent making it harder to know if you are being paid fairly. But this would require the firms to be able to keep pay info secret which they have been unable to do in the past.

For starters, Wilmer froze salaries. Call it what you want, but that's a pay-cut.

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.

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.

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 compensation. 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.

[oneforship]

The rub is of course that the switch to this model probably equals pay cuts for everyone, or nearly everyone

I don't know, they made it a point to say no one is taking a cut. Unless you are saying most people will get smaller raises than they would have under the old system, but I wouldn't exactly call that a pay cut.

Lock step mainly benefits the below avg performing associates because it gives everyone the same raise. It seems to me it would be better to reward the top performers rather than the bottom. Of course the top folks will do better in the long run b/c they have better partnership and exit opportunities, but why not pay them more in the meantime like every other professional services business does?

I suppose you could argue that paying people different amounts will lead to smaller overall pay because what others are making is less transparent making it harder to know if you are being paid fairly. But this would require the firms to be able to keep pay info secret which they have been unable to do in the past.

For starters, Wilmer froze salaries. Call it what you want, but that's a pay-cut.

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.

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.

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 compensation. 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.

I think it's pretty obvious that associates would be irritated that they are no longer guaranteed the lock-step raises that they once were, regardless of their performance as long as they were able to keep their job.

I think it's also pretty obvious that the underlying reason is to increase PPP.

Neither of those are sufficient to say it's a bad move.

[kurama20]

The rub is of course that the switch to this model probably equals pay cuts for everyone, or nearly everyone

I don't know, they made it a point to say no one is taking a cut. Unless you are saying most people will get smaller raises than they would have under the old system, but I wouldn't exactly call that a pay cut.

Lock step mainly benefits the below avg performing associates because it gives everyone the same raise. It seems to me it would be better to reward the top performers rather than the bottom. Of course the top folks will do better in the long run b/c they have better partnership and exit opportunities, but why not pay them more in the meantime like every other professional services business does?

I suppose you could argue that paying people different amounts will lead to smaller overall pay because what others are making is less transparent making it harder to know if you are being paid fairly. But this would require the firms to be able to keep pay info secret which they have been unable to do in the past.

For starters, Wilmer froze salaries. Call it what you want, but that's a pay-cut.

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.

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.

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 compensation. 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.

Again TITCR. Anyone who doesn't realize this are being naive. Of course at it's core the idea of performance based comp is a good thing, but that's not what this is being done for and it's not what it will come out to. Like Bradymoss is saying very very few people are actually going to get these higher performance based bonuses. On top of that this system allows the partners to make a lot more money and allows them to arbitrarily decide to freeze an associates salaries for essentially an infinite amount of time. Wow being an associate for WH really sucks now, you probably were never going to make partner in the first place, and now you won't even get a raise for the few years you last as an associate. Wilmer CuTTTTTTLer Hale.

[BradyToMoss]

I think it's pretty obvious that associates would be irritated that they are no longer guaranteed the lock-step raises that they once were, regardless of their performance as long as they were able to keep their job.

I think it's also pretty obvious that the underlying reason is to increase PPP.

Neither of those are sufficient to say it's a bad move.

My comments were directed at the post I quoted, not your comments. They also had nothing to do with whether the move away from lock-step is a "bad move". Keep up.


And I'm thrilled that you're confident in your ability to perform well, and apparently not phased by these moves that are clearly signaling that firms continue to struggle. But the fact is you don't know how you'll perform re: your peers, just as you can't know coming into law school how you'll perform against your peers. I think I would worry about actually taking care of the latter first, and getting one of these firm jobs before spewing off about how this reduction in pay for most associates is not a concern for you.

[oneforship]

I think it's pretty obvious that associates would be irritated that they are no longer guaranteed the lock-step raises that they once were, regardless of their performance as long as they were able to keep their job.

I think it's also pretty obvious that the underlying reason is to increase PPP.

Neither of those are sufficient to say it's a bad move.

My comments were directed at the post I quoted, not your comments. They also had nothing to do with whether the move away from lock-step is a "bad move". Keep up.

And I'm thrilled that you're confident in your ability to perform well, and apparently not phased by these moves that are clearly signaling that firms continue to struggle. But the fact is you don't know how you'll perform re: your peers, just as you can't know coming into law school how you'll perform against your peers. I think I would worry about actually taking care of the latter first, and getting one of these firm jobs before spewing off about how this reduction in pay for most associates is not a concern for you.

Oh. My apologies. Well, since I'm not attending law school yet or working as a lawyer I guess I shouldn't have an opinion. My bad.

[underdawg]

well orrick partners write articles on amlaw trashing other firms for being too impersonal. so i would think they might be doing more than just cutting salaries. might

[James Bond]

Maybe I'm just drinking the kool-ade, but it kinda seems like a good idea