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When Greenberg Traurig and Carlton Fields recently announced they had modestly raised salaries for entry-level associates in their South Florida offices, eyebrows went up at other Florida firms. But not salaries. In a national economy that continues to hobble along, large South Florida law offices, rather than raising pay, are intensifying their scrutiny of associate performance, demanding profitability from new lawyers sooner, and taking advantage of a buyer’s job market to fill their rosters with their pick of top candidates, law firm leaders say. Edwin Torres, hiring partner at Steel Hector & Davis, said his 200-lawyer firm saw an increase in attorney productivity that paid for the salary increases it gave its 80 associates in 2000. But now, it’s keeping entry-level compensation steady at $90,000 in base pay and a $15,000 bonus, plus a discretionary bonus above that. At Hollywood, Fla.-based Becker & Poliakoff, with 105 lawyers statewide, hiring partner Alan Becker said entry-level base salaries for associates, which shot up nearly 25 percent in 2000, have “receded” about 10 percent to the mid-70s. “You’re not going to make money on a first-year associate anyway,” Becker said. “So it’s a matter of how much you’re willing to lose.” Mike Segal, managing partner of Broad and Cassel’s Miami office, said that his office started a new system last year under which associates, to be eligible for discretionary bonuses, have to show a certain amount of collection from their work. Associates are expected to prod the partners for whom they work to make sure bills are going out and being paid promptly. Experts say it’s all part of heightened pay and performance pressure on young lawyers at major law firms across the country. “Associates have to be more productive earlier in their careers in order to economically justify their existence,” said Ward Bower, a principal at the consulting firm Altman Weil Inc. of Newtown, Pa. “Evaluations are more stringent and firms are quicker to pull the trigger.” That’s why some managing partners found the associate pay increases at Greenberg Traurig and Carlton Fields so startling, though there were special circumstances behind the moves at the two firms. As one managing partner bluntly put it: “They’re out of their f—ing minds.” UNWILLING TO LOWER SALARIES What a change. Barely three years ago, the technology boom and a buzzing economy sparked a wage war among firms vying for attorneys to fill the demand. Associate salaries skyrocketed. It started in California, where associates were jumping ship to join high-paying dot-com companies. Then it swept across the nation. In 2000, salaries for entry-level associates in South Florida leaped by as much as $35,000 at a shot, to $105,000 at leading firms including White & Case, Holland & Knight, Akerman Senterfitt and Bilzin Sumberg Baena Price & Axelrod. A year later, the associates’ clout collapsed. A severe slowdown in the economy brought layoffs and pay-raise freezes. Attorneys in general corporate work, securities litigation and mergers and acquisition were particularly hard hit. Some overextended firms closed, including 77-year-old San Francisco institution Brobeck Phleger & Harrison, and 100-year-old Los Angeles firm Lyon & Lyon. In South Florida, Atlanta-based Kilpatrick Stockton closed its Miami office, and Fort Lauderdale’s struggling Atlas Pearlman merged with Adorno & Yoss of Miami. Broad and Cassel’s Segal said his firm resorted to layoffs, as did Holland & Knight, though other firms contacted for this story said they had not. As a result, nationally and to some extent locally, a glut of experienced attorneys flooded the market, along with a fresh crop of law school graduates. But even law firms that laid off lawyers have stuck with the six-figure associate salaries. “Firms are unwilling to officially lower the salary levels of their associates,” said Evan Jowers, head of the Miami office of the national lawyer recruiting company BCG Attorney Search Inc. “Lowering your salaries is a drastic, formal move that signals to the public — your clients, your potential clients, law students — that there’s a problem at the firm. And a firm can’t afford to do that.” BUCKING THE TIDE Despite the buyer’s market, 816-lawyer Greenberg recently nudged its base entry-level salaries up by $2,500 to $97,500, bringing total compensation including bonuses to $110,000 to $120,000 for first-years. The firm’s revenues rose significantly in 2002, so it had no problem with a 2.5 percent increase in beginners’ pay. Matthew Gorson, Greenberg’s managing partner for the Southeast and its Miami office, said his firm upped pay to attract top candidates from the best law schools. The other law firm that has bucked the tide by boosting pay is Tampa-based Carlton Fields, which has pursued an aggressive growth plan since it entered the Miami market with a 17-lawyer office six years ago. Today, the 210-lawyer firm has 65 lawyers in Miami, with plans for more. “We have goals to grow even though the economy hasn’t,” said Miami managing shareholder Charles M. Rosenberg. Carlton Fields’ recent salary jump in its Miami and West Palm Beach offices — from the $80,000 to $85,000 range for first-years to a $93,000 base plus $7,000 in bonuses — was aimed at moving the firm closer to the top-salary tier, allowing it to compete for top law school graduates against the leading South Florida firms. “We wanted to meet the market in Southeast Florida,” said Tampa-based managing shareholder Tom Snow. “We were at the low end.” The firm also hiked salaries for its other associate levels, but retained discretion over how it handles raises for individual lawyers. Snow said no one moves automatically from one pay range to the next solely based on years of experience. Someone deemed an “extraordinary” performer, he said, may be jumped up a step to the same level as an associate with more experience, while a more veteran associate who is not meeting expectations might not get a raise from one year to the next. Even associates at the same level may not get the same pay, Snow said. An increasing range of salaries exists at each step. “The concept is that the spread in the range grows broader as someone has more experience,” Snow said. DEMANDING MORE A number of South Florida firms, feeling squeezed between the higher associate salary structure and the sagging economy, are demanding more of associates. Some have increased their billable hours requirements. “If they want to be paid like their buddies at the firm across the street, they’re going to have to work like their buddies at those firms,” said Paul Singerman, co-chief executive officer of Fort Lauderdale-based Berger Singerman, with 43 lawyers. Singerman, however, said his firm’s annual billable hours requirement for associates remains the same — 1,900 to 2,000 hours — as it was before 2000. In 2000, Akerman Senterfitt tied its increases to a billable hours jump from a minimum of 1,800 to 2,000 hours. At the time it raised associate salaries, Bilzin Sumberg instituted a billable hours requirement for bonuses. Currently, Bilzin offers bonuses at 2,100 hours and 2,200 hours. “In order to justify the additional bonus, a certain number of hours needed to be worked, as a strict matter of economics,” said John C. Sumberg, managing partner of the 75-lawyer firm. One managing partner who didn’t want to be identified said the need for increased billable hours in conjunction with the nearly 25 percent associate salary increases in 2000 is basic economics. “In today’s world, 1,800 hours is marginal,” he said. “If your whole firm does 1,800 hours, it’s going to be tight at these numbers. Whereas, at 30 percent lower salaries, it worked.” Tampa-based Holland & Knight has addressed the issue in a different way — by eliminating billable hours bonuses. Early last year, after the economic downturn hit, Holland cut 170 staffers and 60 lawyers, and froze associate pay. Holland leaders said the pay freeze was put in place to allow the firm to revamp its entire associate compensation structure and evaluate all expenses at the firm. Now, according to Rob Rhodes, co-chair of the associate evaluation committee, the firm is back up to pre-layoff attorney levels, at about 1,250 lawyers, including 490 associates. It has kept its entry-level salary in its South Florida offices at $105,000, including base pay of $95,000, a $5,000 bonus and a $5,000 signing bonus paid out in two parts over two years. But, after conducting a comprehensive review in 2002, it restructured its compensation system. Rhodes said part of the reorganization involved introducing a tiered salary structure for associates in their third year and beyond. That is designed to reward associates for extraordinary performance. Under the new system, every associate still has the possibility of earning a discretionary bonus. But high performers get a base salary of $10,000 to $15,000 more than their less productive peers. While Rhodes insists that high performance is not measured by billable hours, he does say a “high level of financial productivity is a key factor.” To determine who has earned the higher base salary, the firm looks at “all the criteria associated with good lawyering,” including quality of work, a commitment to bar activities and to the community, and “extraordinary contributions on a consistent basis.” Other firms have put an increased emphasis on associates’ performance and contributions to the bottom line. In 2000, 360-lawyer Akerman Senterfitt boosted entry-level salaries in its South Florida offices to the $105,000 top rung, plus discretionary bonuses. Along with it came a jump in what was expected of them, from 1,800 billable hours to a minimum of 2,000 hours. Sixth-year associates saw their compensation rise to $147,500. “To make any economic sense at all, we needed to increase the billable hours requirement,” said Akerman chairman J. Thomas Cardwell. “Our belief is that life is a trade. If we’re going to pay you this amount, you’re going to have to work 2,000 hours.” In conjunction with the increased pay and performance pressure, associate performance reviews have taken on increased importance, especially at firms that beefed up their ranks to handle the bustling workload during the days of the booming economy and find themselves overstaffed today. “They don’t need as many associates as they thought they may have needed two or three years ago, so that puts those third- and fourth-year associates in an awkward position,” said law firm consultant Bower. “As a result, [the firms] are going to have to be stringent in their evaluations and cut the string earlier than they might have otherwise.” Paul Singerman of Berger Singerman agreed. “Some of those firms that don’t want to use the term layoffs are using somewhat disingenuous standards for performance reviews, or increased expectations, to fire people,” he said. “If the billable hours aren’t [sufficient] for, let’s say, the 100 attorneys they have, then they have to get rid of 20 or so. No one is going to admit that.” Holland’s Rhodes expresses some misgivings about the intensified pressure. “We are being forced to expect performance earlier in their career, and economic viability much earlier than historically,” he said. “I personally think that’s unfortunate.” Other law firm leaders, however, insist their performance standards remained unchanged. “It is absolutely not true that our reviews are more stringent,” John Sumberg said. “The bonus is more expressly tied to that [billable hours] than it was, that’s all.” “I’ve read it. I’ve heard it. It’s not happening here,” said Carl Schuster, managing director of Fort Lauderdale-based Ruden McClosky Smith Schuster & Russell, with 175 lawyers. “I don’t think we’re harder on our associates, or less, as a result of the salary increases.” Some law firm leaders note that besides the higher associate pay dating from 2000, there are other economic factors behind the increased emphasis on associate productivity. Among other things, soaring malpractice insurance premiums and rising costs for employee health and retirement benefits are straining law firm finances. New York-based White & Case was one of the first to raise associate salaries into the six figures in Florida, bumping entry-level salaries to $105,000 in its 85-lawyer Miami office, thereby helping set off the local wage race. The firm’s managing partner in Miami, Victor Alvarez, contends that although “clearly there’s a fallout” from the salary hikes, they can’t be blamed for all the current pressure on associates or firms. “I just don’t think it’s as directly related to compensation,” he said. “It’s a more competitive marketplace.” To control malpractice insurance and benefit costs, Mike Segal said he’s considering hiring attorneys as independent contractors on an as-needed basis at Broad and Cassel — without providing liability coverage or benefits to them. The idea has already caught on with managing partners in New York, California and Washington, D.C., as a way to keep costs down and remain flexible in dealing with peaks and lulls in demand. HIRING CAUTIOUSLY Despite the continuing sluggish economy, several major South Florida firms ay they’re doing well enough to hire new associates. Local firms have been less hard hit than those in New York and California, which were more reliant on high technology, initial public offerings, and mergers and acquisitions. Also, South Florida law firm leaders report that their firms currently are prospering in the areas of bankruptcy, real estate and government. With so many out-of-work attorneys from other parts of the country looking for jobs, South Florida firms are enjoying a buyer’s market. “In certain practice areas, three years ago I was hard-pressed to find any qualified candidates,” said Alan Becker of Becker & Poliakoff. “Now there’s a steady stream of applicants.” On top of that, current market conditions are helping to keep defections down. Associates with jobs want to keep them. “The mindset changed dramatically,” said Greenberg Traurig chief executive Cesar Alvarez. “People are now realizing how important job security is.” Nevertheless, the desire to boost partner profits is causing some firms to shy away from hiring entry-level lawyers and shift toward more experienced associates. “It’s difficult to get a first-year associate to be profitable for you when you’re paying $85,000 a year and a $25,000 bonus,” Schuster said. “We have drawn the conclusion that we may be better off hiring second-, third- and fourth-year associates rather than right out of law school. They can hit the ground running.” To get a quicker return on their associates, some firms also are placing more emphasis on training and mentoring programs. Carlton Fields is one firm that has stressed this. “Every associate at the firm has a mentor, no matter what level they are,” said Elizabeth Bergen Zabak, recruiting and training director at Carlton Fields in Tampa. “They have someone who really is there to assist them in their professional development as they move through the firm.” The increased pay and performance expectations for associates “puts the onus on us to train them and bring them along better,” said White & Case’s Alvarez. “There’s less and less time for them to grow up. If there’s anything I think is negative about the increased expectations is that we don’t have the luxury of letting them grow up in the firms.” Bilzin Sumberg was among those that boosted pay for its first-year associates in 2000, to about $90,000 in base pay plus a $15,000 bonus. It recently hired four associates and is seeking four more. But Bilzin Sumberg aims to stand pat on those pay levels. John Sumberg said there’s no market pressure in South Florida today to provoke a wage war like the one that raged three years ago. Still, Sumberg knows from experience that when it comes to salaries, what goes up sooner or later goes up again. “There will be an increase when the economy comes back,” he said.

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