What’s Your Firm’s Associate Compensation Model & Should You Change It?

Working as a first-year associate in a law firm used to be simple–painful, but simple. There was lengthy, tedious document review and paying your dues (literally and figuratively).

But today, the job has become much more complicated. Firms are dissatisfied with the traditional compensation model for younger associates and are looking to leverage more out of each one. Numerous law firms have completely thrown out the old hierarchical, lockstep model of associates and replaced it instead with a merit-based one.

Keeping your head down and listening to what the name partners tell you is no longer enough. Associates are now evaluated on going above and beyond, on “delivering legal excellence,” “driving client value” and “building a practice,” in the words of Seyfarth’s merit-based pay system.

“It takes the process off of autopilot, so we’re really dependent upon getting feedback from partners,” Laura Saklad, the chief lawyer development officer for Orrick Herrington & Sutcliffe LLP, one of the first firms to ditch former lockstep models for associate pay, said to Law360.

“We have found that moving away from an automatic advancement system has actually created a greater buy-in among the partners for the need to give really substantive answers.”

Although this system of constant evaluation may seem stressful to associates, law firm managers believe merit-based pay not only improves performance and productivity, it also helps increase communication between associate levels.

“We’re putting a lot of energy into ensuring that we have a strong mentoring program in place and that mentoring conversations are happening in between reviews so associates are getting clear messages about where there are skill gaps and how to fill them,” Saklad said to Law360.

With these types of compensation systems, it’s impossible to simply dismiss a performance review or to forget to follow-up in a matter. Associates must make the grade in order to make the pay. This requires diligently listening to areas where your performance is weak and then making concerted efforts to improve those skills.

Although there appear to be many benefits to such a system, what are its downsides?

First, it certainly encourages competition, not comraderie among same-level associates. Second, it’s a more difficult system for larger firms. Finally, it may reward favoritism. Should an associate receive a lackluster review beause he or she has a less dynamic personality? Is there such a thing as a completely objective evaluator, and if not, should pay really be tied to such a subjective measure?

Reed Smith, the large Pittsburgh-based law firm, announced a similar restructuring of its policies with regard to associate performance and promotion, stating:

“The firm has revamped its associate model, doing away with associate classes based strictly on entry date in favor of three associate groups that will have formal training from the time they enter the firm until they are ready to be considered for partnership. . . . The goal of the program is to provide a road map for associates detailing the specific skills required at each of the newly created levels–junior, midlevel, and senior associates. Associates won’t be able to move to the next tier until they have met those requirements. Compensation will be tied to those competencies by 2011 as well.”

Changes in traditional associate compensation models are here to stay. The question is, in the land of billable hours and time constraints, do these law firms have the capabilities to successfully implement such large-scale, high-stakes training programs?

A lot is being blamed on the economic crisis. Will new associates ever be as profitable for the firm as they were before the economic downturn? The answer is yes. But, to return to pre-crisis levels of profitability, law firms need to adapt to the current situation. It involves new technology, new tools, new management, and new ways of motivating your employees.

Revamping the Associate Model for Max Profitability: Leveraging New Lawyers for Higher Per Partner Profits is an information-packed webinar that examines the strategic and financial implications of the changing associate model, and what law firms should do to stay competitive and profitable in this rapidly shifting environment.

Attend Wedesday, September 3, 2014, from 2pm to 3:15pm EST and explore current associate management trends, new compensation systems, and other key aspects of associate management that impact your firm’s bottom line:

  • Where we are today and what has changed
  • Emerging economic models and how they affect associate profitability
  • New profitability drivers for 2014 and beyond
  • Trends and changes to the associate management process
  • Real-life firm examples of how to monitor associate’s progress and performance
  • Best practices for handling the first two years
  • Methods to make the associate evaluation process matter more
  • Why versatility matters when it comes to associate advancement and how to build it in to your programs
  • Common associate communication snafus and how to fix them

Trust experts like The Center for Competitive Management when you’re looking to upgrade your law firm management style. 

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