In Latest Crack in Lockstep Model, Pillsbury Reduces Pay Based on Productivity

Pillsbury Reduces Pay Based on Productivity

Amanda Royal

The Recorder

Pillsbury Winthrop Shaw Pittman said Tuesday it has temporarily reduced pay for some associates and counsel based on productivity levels, the latest sign that big firms are questioning their traditional compensation models.

The firm would not say how many of its 200 associates were affected, or how much their pay was reduced. The cuts were first reported on the blog Above the Law, which pegged them between 10 percent and 20 percent, which firm spokeswoman Sandi Sonnenfeld said was "not entirely correct."

The firm has not decided yet how its 2010 compensation will work, Sonnenfeld said. In 2009, Pillsbury will continue to offer bonuses and may pay the attorneys more if productivity returns during the year.

"We believe that this flexible approach is appropriate for our firm, especially for those attorneys in our busier practice areas," said partner Jeffrey Grill, chairman of Pillsbury's attorney development committee, in a statement issued by the firm.

Pillsbury's changes are limited to 2009, but other firms like Howrey and Orrick, Herrington & Sutcliffe have fully embraced the idea of moving away from a lockstep pay scale to one based more on merit. Sonnenschein Nath & Rosenthal also has said it has plans to move to merit-based pay next year.

The lockstep associate pay and bonus structure found at most big firms has been criticized for creating an incentive to overbill and for its focus on quantity instead of quality. Firms that are implementing merit-based pay said they are doing it to encourage more efficiency so they can charge clients lower rates.

Howrey was one of the first Am Law 100 firms to move to a merit-based system. Associates pushed back when the plan was first announced in 2007, but after a few more discussions with associates, the firm implemented the new structure at the beginning of this year.

At the time, Chairman Robert Ruyak said the move was not a response to rising associate salaries but rather client demands for experienced and qualified attorneys.

Orrick is planning a move to a new compensation system based not on hours worked, but overall competency and workload.

That plan will include multiple tiers of attorneys and is slated to take effect in early 2010. The details are still being hammered out, but Chairman Ralph Baxter Jr. told Recorder affiliate The American Lawyer this month that revamped associate salaries will be the first step in the reinvention of the law firm.

"We think there's a paradigm shift," Baxter said. "We believe what we are doing now will be the order of the day."

Pillsbury's salary cuts come after more than a dozen firms in the Am Law 100 adjusted compensation. But those firms have said they lowered salaries in response to market forces, and have not indicated a new philosophy about compensation in general.

"We are already consulting with our associates and others regarding what our 2010 compensation program might look like," Sonnenfeld wrote in an e-mail, adding the decision will be based on what's best for Pillsbury and its clients, not what other firms are doing.

"We are indeed wrestling with all these issues very carefully -- thinking about both the short and long-term ramifications of each decision we make," she wrote.