July 31, 2008 11:33 PM

In-House: The 2008 Associates Survey

Posted by Aric Press

We publish the results of our annual midlevel associates survey this month, and the ironies are there for the taking. Consider:

-Few associates plan on staying forever, but most have no desire to leave at the moment. It's hard to moan that you want to be paid like an investment banker after Citi took a hatchet to its workforce and Bear Stearns stopped hiring, period. Those risk-averse tendencies that led to law school aren't looking so bad this season.

-For all the talk of layoffs, or, failing that, harsher performance reviews, most asso­ciates report confidence in keeping their jobs. There was no Cadwalader effect: our survey was in the field between the firm's two big layoffs. On a 1-to-5 scale, our 7,259 respondents averaged a 3.79 on the question of whether they'd still be at the firm in two years. That's the highest score in six years. Only 10.6 percent expressed concern about getting laid off. Associates in Chicago (13.3 percent) and Philadelphia (12.9 percent) were the most worried; associates in Dallas (6 percent) and Houston (7 percent) were the least. The energy boom pays dividends.

-The wage increases aren't as painful as the partner moaning would have suggested. The Am Law 200 firms, in their rush to bid for talent, added about $1 billion in wage overhead last year. That's a serious number but still just a bit more than 1 percent of the total gross. Of course, the timing isn't great; its impact is being felt as demand slows and firms are worrying about collecting from clients on rate increases that would, in a good year, more than cover the salary hikes. In fact, as sad managing partners have noted quietly, a faithful indicator of an impending downturn is a rush to jack up associates' pay.

-The generous and perhaps overdue associate salary hikes of the last two years didn't buy the firms anything distinctive. What's striking from our paycheck report, which we will post Monday, August 4, was the uniformity we found, both within and among the firms. It's as though The Am Law 200 denies its self-image as the ultimate meritocracy. Actually, when you look at the pay--both wages and bonuses--The Am Law 200 operates as a lockstep civil service: You're a fourth-year, we're going to pay you like a G-12.

I don't doubt that all the associates are able; I do doubt that all are willing. Surely they don't all make equal contributions to their enterprises. Yet they're rewarded as though they do. Why? It makes a rough sense to start new lawyers at the same level, but it defies experience to think that all will progress or perform at the same rate.

In our magazine this month we include two arguments for change. One comes from Howrey, which after fiddling with its system for a couple years is about to launch a pay-for-competency-rather-than-seniority program. The other is from the sidelines, where Dan DiPietro, the Citibanker to many firms, makes his modest proposal to start paying for performance, not longevity. These are compelling arguments, and there are really only two contrary ones worth considering. The first says that law firms are really kibbutzim with nicer conference rooms. The second says that it's difficult to run such a system. We concede the latter point but remind you that that's why it's called "managing." Maybe these law firm leader jobs aren't as easy as the rest of the partners think.

The good thing about rethinking lockstep is that once a firm decides to make this change, it won't take long to make it effective. Start with next year's entering class, and within half a decade there will be hardly any associates left who remember the old civil service regime. By then, the economy will have turned, and firms, instead of complaining that associates are staying too long, will be back to worrying over their high attrition rates. One way or another, the associate retention issue never goes away.

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