In 2016, Cravath, Swaine & Moore raised base salaries for first-year associates to $180,000. Quickly, many law firms (large and midsize alike) followed. In 2017, the dust seemed to settle. But, this summer, when Milbank, Tweed, Hadley & McCloy increased base first-year associate pay to $190,000, a new round of “salary wars” ensued. Pay raises bring immediate celebration for associates, but unintended consequences follow, and the sustainability of an ever-shifting market seems questionable. Firms ought to consider the impact these pay increases have on clients and associates, while also considering other benefits that might create more sustainable careers and more invested associates.
The Benefits of Pay Raises
Increases in pay put more money in associates’ pockets and, in turn, associate satisfaction rises. This alone supports the decision to continue investing in associates monetarily. As firms grow in size and profitability, partners often reap the most immediate reward, and firms should seek ways to spread the wealth down the corporate ladder. Firms should not underestimate the importance of associate morale. Happy associates become more invested in the firm and more invested in their labor, in turn creating higher quality work and improving a firm’s bottom line.
Another benefit to salary increases is that firms stay competitive during the hiring process and in retention of talent. Recruitment and retention are integral parts of firm life, and associates pay close attention to how their firm compares in these areas. The loss of a competitive edge in recruitment can impact associate morale, leading associates to look elsewhere and, in turn, impacting a firm’s retention of young talent. Regular pay raises allow firms to remain competitive while boosting associate confidence that they are at the right firm. Matching pay hikes is simply good branding.
Talking about salary, raises and bonuses can be taboo in an office environment. Associates should not shy away from questioning their firm’s pay scale and bonus structure. In fact, in this era, when one law firm’s decision to raise associate base pay impacts firms across the country, associates—and firms—should consider why these raises are not happening more often. And why these pay increases do not occur in reaction to actual market forces, such as inflation, cost of living, cost of law school, increasing student debt, billable rates and increased hours requirements. Firms also should spend time talking to their associates about compensation. Open lines of communication will ensure that associates’ voices are heard and that firms move with intention, rather than as a reaction to trends.
Although side effects to these sporadic pay increases exist—and are discussed below—associates should continue to critically analyze their firms’ response to the cycle of associate pay raises. And firms should remain open to adjusting pay—and other benefits—in order to address associate value and stability, while also considering the greater long-term impact that more holistic training and purposeful investment might have on associates, clients and firms generally.
Disgruntled Clients and Pressured Associates
By now it is a common theme discussed at attorney gatherings: Clients increasingly seek alternative fee arrangements, discounts and other ways to cut costs. Many clients view associate work as on-the-job training. Clients may question where these pay increases comes from and why they are necessary. One of the most immediate effects of an increase in associate salaries is the subsequent corresponding increase in associates’ billable rates. While the salary wars theoretically help ensure that the top firms hire the best associates, clients do not want to pay exorbitant billable rates—rates that often are equivalent to or higher than those of a junior partner at another firm. These clients might begin to push back.
As rates increase, clients might begin to expect an equal bump in the quality of work. Without an obvious improvement in the quality of work provided by associates, clients might stop paying for junior associate time. When that happens, critical on-the-job training opportunities for junior lawyers diminish. One creative solution is for firms to offer seconding associates to clients—or other organizations—so that associates receive actual on-the-job training.
As rates increase, clients may look elsewhere for legal work, even creating more fulsome in-house teams. Since 2007, many corporate clients have taken their legal work in-house as a way to lower legal fees. Higher associate salaries threaten to push more and more companies to take their work in-house, leaving firms no other option but to let go of associates they cannot maintain.
As clients look away, the pressure to perform increases and the quality of work becomes even more valuable. Associates often need to work more hours—facing the consequence of written-off work while also working under higher pressure, which increases the likelihood of mistakes. In these environments, mistakes are not only frowned upon but lead to partners removing associates from matters, impacting an associate’s bottom line and mental health.
The first years of practice are when most attorneys make mistakes that turn into valuable lessons. New lawyers typically produce high-quality work at a slower pace than more seasoned associates and junior partners. Although large firms have traditionally held their associates to a higher standard, the salary increases place additional pressure on associates to deliver quality work at the expense of learning skills in a lower-pressure environment.
The pressure to perform from clients turns into pressure from supervisory partners, and mistakes that would be a natural part of the learning curve are more highly scrutinized. Associates, in turn, receive less experience, work on fewer large cases and experience a decrease in the diversity and substance of professional opportunities.
The pressures associates—and all attorneys—face should not be faced in silence and do not have to be inevitable. If firms begin to see a rise in pressure among their associates, they might consider some of the strategies addressed in this board’s prior editorial on mental health. Firms also might consider alternative benefits, such as those discussed below.
Creative Perks and More Invested Associates
In addition to increasing pay—or sometimes in place of monetary incentives—some firms have begun looking at associate training more holistically. After all, many associates will pay their dues in Big Law—to pay off debt and hone their skills—and then leave for in-house, government, consulting or other legal (or nonlegal) careers. Firms can and should start looking at this as an opportunity to create well-rounded and highly skilled professionals who, if they remain at the firm, become valuable partners, and, if they leave, think highly of their firms and create relationships between the firm and their new employer. These creative perks might include:
- Revisiting the bonus structure and process to ensure that associates feel valued for their hard work and high quality efforts;
- Partnering with business schools to provide industry and financial training;
- Hiring a director for career counseling and planning to more explicitly focus on career development and continuing education opportunities;
- Focusing on and creating associate work-life initiatives, such as consistent and direct feedback or reverse mentoring—wherein young lawyers partner with senior attorneys to provide insight and training on technology initiatives or life as an associate in this era;
- Creating more intentional systems for providing consistent and continuous feedback;
- Granting billable credit for business development and innovation efforts;
- Shortening the partner track;
- Hosting corporate deal clinics;
- Formalizing a ramp-up policy after extended absences;
- Sponsoring sabbaticals at the firm’s offices in other cities; or
- Encouraging associates to work remotely or telecommute.
In the era of crippling student debt and an increasing cost of living (across the country, not just in the salary-driving big cities), regular salary increases can improve associate morale and stability. Firms should be careful, though, not to use these somewhat regular (and often expected) increases in pay as a temporary bandage masking deeper, more fundamental concerns—especially as younger attorneys become increasingly open to the idea of a more flexible, well-rounded practice and career path. Holistic training and career development, coupled with increased pay and other benefits, will increase associates’ investment in both their careers and their firms, and should satisfy client concerns about their subsidizing associate training. After all, it is the clients who will ultimately reap the benefits of a better-trained and more-invested associate workforce.
The views expressed here are personal to the authors and do not represent the opinions of their employers.
Board Members: Aaron Swerdlow, Alex Tarnow, Andrea Guzman, Andrew Warner, Anusia Gillespie, Aydin Bonabi, Bess Hinson, Blair Kaminsky, Brianna Howard, Brooke Anthony, Emily Stedman, Emma Walsh, Garrett Ordower, Geoffrey Young, Heather Souder Choi, Holly Dolejsi, Jennifer Yashar, Jessica Tuchinsky, Ji Hye You, Josh Sussberg, Kevin Morse, Kyle Sheahen, Lauren Doyle, Martina Tyreus Hufnal, Mauricio Espana, Nicole Gutierrez, Peter Buckley, Quynh Vu, Rakesh Kilaru, Reggie Schafer, Sakina Rasheed Foster, Sara Harris, Shishene Jing, Tamara Bruno, Tim Fitzmaurice, Timothy Perla, Todd Koretzky, Travis Lenkner, Trisha Rich and Wyley Proctor.
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