Buchanan Ingersoll & Rooney CEO John A. Barbour, who took over this month from longtime CEO Thomas L. VanKirk, held a meeting with associates Thursday afternoon to announce that the firm is making cuts in associate compensation, in response to the recession.
In a statement provided to The Legal Intelligencer, Barbour said the firm reduced associate compensation at a rate of between 5 percent and 10 percent per year.
"Certain associates may receive a higher or lesser reduction based on individual circumstances," he said in the statement. "This decision was not an easy one, but we feel that it is in the best interest of the firm and our clients to maintain the quality of service our clients have come to expect while keeping our rates at competitive levels."
Barbour said in an interview that counsel positions were also cut by 5 percent. He said the circumstances under which associates' compensation will be cut will be determined on an individual basis and will be based on such factors as billable hours, profitability and quality of work. He said the cuts will be effective July 1 and all individual decisions will be made by then.
While he wasn't sure of the exact starting salary since the specific cuts have not yet been made, Barbour confirmed through a spokeswoman that starting salaries would be about $108,000 or $110,000. The firm's starting salaries range from $120,000 to $135,000 at its Pennsylvania offices.
Buchanan Ingersoll is also moving to a monthly payroll system rather than paying its attorneys twice a month, a switch that's expected to save time and money. Barbour said through the spokeswoman that was the system used at Klett Rooney Lieber & Schorling, the firm Barbour led before it merged with Buchanan Ingersoll.
The decision to make salary cuts was materially because of an interest in keeping billable rates at a level acceptable to clients, Barbour said. Clients aren't accepting of rate increases and often ask for rate reductions in the current economic climate, he said.
"There is very little large work that's going out and being paid at regular rates," he said.
While the discussion of whether to cut compensation had been ongoing among management, the official decision was made last week -- on Barbour's first day at the helm of the firm. He said he didn't want to wait to make such a decision.
While Barbour said it is never pleasant to cut people's compensation, he added, "I don't worry about the decisions we make nearly as much as I worry about what I should be doing that I'm not thinking about doing."
He said the profession is different than it has been in the 30 years he has been practicing and it's his job to keep the firm ahead of the curve in terms of what is best for clients and its attorneys.
To that end, Barbour said he is still interested in growth opportunities and is focusing on markets between New York and Washington, D.C. The firm just added a group of government contract lawyers in the nation's capital -- a practice Barbour said he thinks will be hot in the next few years. He said he is also interested in adding intellectual property lawyers.
However, as Buchanan Ingersoll continues to look for growth opportunities, it is cutting back in other areas. The firm has let go fewer than 15 staff members firmwide in the past several weeks to reach a more desirable attorney-to-staff ratio. The firm's headcount consists of about 470 lawyers, compared with the 483 it reported for the end of the 2008 fiscal year. Buchanan Ingersoll has seen a number of departures by partners and government relations professionals in the last two years. Some left on their own and others were asked to leave as part of the performance review process, the firm has said.
Barbour said he has charged the firm's executive director, Nolan Kurtz, with ensuring the firm runs as efficiently as possible. There is no set number of cuts to that end, and Barbour said the process is ongoing.
When asked whether the firm cut corporate and banking associates this week, making some of them contract lawyers, Barbour said he didn't want to comment.
This isn't the first time Buchanan Ingersoll has made adjustments to its staff makeup. The firm has laid off between 50 and 55 staff members through two rounds of cuts since last year. It cut 25 administrative positions in November and made an additional 25 to 30 administrative cuts in March 2009.
Like many other firms, Buchanan Ingersoll has also delayed the start date for its incoming first-year associates from September 2009 to February 2010, the start of the firm's fiscal year. The firm's summer program was shortened from 10 weeks to seven weeks and was cut from 23 summer associates firmwide to 10.
Buchanan Ingersoll's decision to cut associate compensation moves it into a small but growing club of firms that have re-examined what they pay their most junior attorneys. Only Drinker Biddle & Reath, Reed Smith, DLA Piper and Ballard Spahr Andrews & Ingersoll locally have made changes to the pay structure for associates. Many other firms have frozen associate salaries and several have adjusted partner pay structures as well.
Drinker Biddle focused only on first-year associates, cutting compensation from $145,000 to $105,000 in Philadelphia and other offices for the first six months that the first-years are with the firm. The goal is to reduce the number of hours the class bills in favor of a training program aimed at making the associates more valuable to clients.
Ballard Spahr created a three-tier associate compensation model after dropping its compensation for all associate classes in favor of a merit-based compensation system. The starting rate for the first three years will be $125,000. First-year associates had previously made $145,000 in Philadelphia. The next tier will make $135,000 and the following group will be bumped up to $148,000, according to a memo published this month by the legal blog Above the Law.
Reed Smith made an across-the-board associate salary cut of 10 percent, effective July 1. The cuts only affected the U.S. offices. DLA Piper initially cut some salaries by upwards of 20 percent, but after some internal backlash, decided instead on an across-the-board cut of 10 percent.