X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Seeking reality? Forget meditation and just try asking an entrepreneur trying to stay alive and raise money, or a major corporation that relied on fancy accounting to move its stock price. Try asking a player in an emerging market or foreign country showing no sign of “emerging,” or an investor in any of these endeavors, especially those playing with their retirement money. In 2002, these folks and more have only too keen an appreciation of today’s business realities. The times of razzle dazzle, expensive, “cutting edge” marketing and advertising campaigns aimed at customers, investors and/or big business, are over. We are getting back to the old-fashioned formula for success: the best services and products at a fair price every time, in a business that is reasonably profitable. And we have come to understand that this age-old successful business model needs to be delivered today, not that fictional date deep in the future when the world, and especially the services and products your customers really want, change sufficiently to appreciate (and buy!) the “new” business you came up with. That always struck many of us as counter-intuitive anyway, but hey, what did we know? I have had the unique opportunity to provide commentary on associate compensation as part of this New York Law Journal special report for the last several years. In 2000, we were focused on how to motivate associates to remain committed to the practice of law at our law firms in the face of dot-com option packages. (Have you seen the movie about Kozmo.com’s rise and fall yet? It’s a great piece that seems about a world so very long ago). We also worried about the compensation packages being offered by the firms riding the tech wave that bore no relationship to value. Last year, we learned for sure what many of us suspected. The Internet was another important channel for information, communication and sales, and other tech innovators would enhance existing businesses. However, these players were not likely creating new business models in and of themselves that would drive the kind of profitability necessary for our tech and other clients to justify their lofty projections and stock prices. More relevant to this audience, associate compensation systems tailored to these times no longer worked once the spigot of high fees and/or expected high value of stock taken in lieu of fees was turned off. Firms that had not been sufficiently nimble or attentive or structured for any kind of market had no choice but to scramble, with significant associate layoffs and other radical compensation and cost shifts. Today, our clients are focused on hard-core realities. They are restructuring (in or out of court), litigating and dealing with government opportunities and regulation, worried about conflicts of interest (both real and perceived). They are urgently positioning themselves for the changed world and are concerned about their overhead and the payment of outside providers like law firms, often trying to do less outsourcing of legal services. This climate is enough to challenge the best and most intelligent of law firm leaders. Of course, these same leaders, as well as the lawyers in their firms, are still recovering from the unprecedented challenge of last year, caused by the destruction of the Twin Towers, tragic loss of life and subsequent city and world events. Now add to that a recession and the moves made by desperate short-term thinkers over the last five to 10 years, and you see a number of overcrowded and overheated legal markets, both foreign and domestic, leaving many firms carrying too many people and expensive compensation packages, capital expenditures and long-term leases. And all these folks are out there fighting with each other for what is for now a smaller demand for legal services, at least in some important disciplines. WHERE ARE WE LEFT TODAY? So when one looks at these harsh realities, what is to be seen? For a general counsel looking for a bargain in his or her fee arrangements with outside counsel, where price is all that matters for the particular services involved, things look pretty good. For many law firm managers and lawyers, who just finished implementing, becoming a casualty of or simply reading about the latest mass layoff by another former high-flying firm, uncertainty, fear and, indeed, panic and depression could evolve. But for long-term thinkers, who were never part of the pack mentality and actively manage their affairs in the best interests of their clients, lawyers and firms, during good times as well as bad, I submit we are seeing the best opportunities for the enhancement of our clients, our firms and our individual careers that have existed over at least the last 10 years. If we allow ourselves to become frozen by uncertainty, fear or short-term greed, or think only as individuals instead of firms that truly partner with their clients, these opportunities will be lost on us. Who, then, will be the winners in grasping these opportunities, and how will all of this impact associate compensation? The winners will be the firms and lawyers that are focused and have the burning desire to achieve their goals, as well as the ability to act nimbly and courageously. Firms that are bogged down in tradition, selfishness, process, inward focus and other wasteful activities will not have a chance. Lawyers in those firms who “get it” ought to be moving to better-positioned firms, keeping long-term goals as their priority. The winners will be the firms that most quickly understand what our clients want, as they always have: business-oriented, fairly priced, trustworthy, non-conflicted, high-integrity, high-quality lawyers who are their partners in every kind of market. And more than ever, our clients want added value in the form of access. Access to industry knowledge and key relationships, financial resources, government opportunities and freedom from undue governmental interference. Access to efficient solutions to their practical problems, not pie-in-the-sky academic perfection that adds no value and creates skyrocketing bills. Firms that can deliver these things, and lawyers who by their quality, nature, training, relationships, dedication and desire can help firms do so, will not only survive, they will thrive in this environment and will be faced with more opportunities than they know what to do with. THE COMPENSATION QUANDARY From the perspective of associate compensation, firms that became rigidly attached to systems that rewarded the cherished “billable hour” and not much else probably need to change and change now. Time is not your friend. While it is harder to measure with precision, associates need to be rewarded for the value they deliver to the firm and its clients. This means lockstep compensation connected only to billable hours, if it ever made sense, makes no sense now. At every level of an organization, lawyers and staff need to understand: � that they are key to the success of the whole; � that making the whole pie bigger and sweeter will create a better slice for everyone; � that big bonuses and higher compensation cannot be “automatic;” and � that high-quality, exceptional performance, hard work, practical and efficient client solutions and absolute integrity are the keys to success of the firm, and the keys to greater compensation for its lawyers and staff members. Of course, absent special circumstances, hours of and dollars collected for associates cannot help but be significant indicators of an associate’s dedication and performance, but these can no longer be the only measures. Our law firms, and especially their clients, deserve better. There is no doubt that a law firm committed to true recognition of, and compensation for, added value will face greater procedural challenges and more time-consuming processes. It is, however, equally true that, due to this intense focus on value and performance, well-run firms and excellent lawyers will have tremendous opportunities to distinguish themselves. And the truly deserving lawyers, along with their well-managed law firms and thoughtful clients, will be celebrating what is a breath of fresh air for so many of us — a return to reality. Richard A. Rosenbaum is the managing shareholder of Greenberg Traurig’s New York office and the national operating shareholder for the firm’s Northeast region.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.