Facing up to harsh reality

The heady pay increases assistants have enjoyed in recent years are a thing of the past, Legal Week's 2008 Assistants Survey reveals. Indeed, many lawyers who lack the security of partnership status are more likely to be concerned about holding on to their jobs than complaining about compensation, experts say.Data from the survey, combined with the observations of management consultants and recruiters, paints a less than sunny picture of a profession buffeted by the economic downturn that has affected UK and global markets.While few law firms are actively wielding the axe, many are taking a hard look at their bottom lines and staffing needs. If the situation worsens, redundancies could intensify. The scope for alternative career paths may be reduced. And getting a foot in the door is becoming harder.Furthermore, many firms are being forced to rethink the big picture, according to Nick Jarrett-Kerr, a London-based management consultant with Kerma Partners and former chief executive partner of Bevan Ashford. "If an assistant with five to seven years' experience leaves, that person is likely to be replaced with someone less experienced and cheaper," says Jarrett-Kerr. "When people leave, it is an opportunity to think strategically. Do you want to replace them at all, and do you need to replace them at the same level?" In these circumstances, it is perhaps not surprising that Legal Week's survey shows assistants' salaries are generally rising only modestly - a finding corroborated by the observations of Watkins and other experts interviewed. The survey was conducted in August. Responses were provided by 55 law firms, ranging in size from those with 100 or fewer assistants to Eversheds, with more than a thousand. Respondents included a mixture of City, regional and London offices of US firms. Average pay for 2007-08 started at £62,495 for newly-qualified lawyers (NQs) - up slightly from the 2007 figure of £61,247 - reaching £80,596 for those with three years' post-qualification experience (PQEs) - up from £76,695. According to some recruitment firms, the climate of modest pay rises has allowed several mid-sized firms to play catch-up with the big boys - taking the opportunity to narrow the salary gap by offering above-average percentage raises to their assistants. This trend is borne out in the survey data, with Withers, Stephenson Harwood, Berwin Leighton Paisner and Clyde & Co heading a group of mid-market firms that have made significant salary increases during the last year. At Withers, for example, salaries for NQs shot up 20% from £48,000 to £58,000. Pay for assistants with one year's PQE jumped 13% from £54,000 to £61,000. Those with two or three years' PQE also enjoyed boosts of 10.3% and 7.2% respectively. Pay rises in the regions were fairly small: Burges Salmon's increase of around £2,000 at each PQE level was fairly typical. As a result, the pay gap between the City and the regions remains as wide as ever, with non-London assistant salaries - typically in the £40,000 to £60,000 bracket - dwarfed by standard Square Mile rates.Chargeable hours targets moved up slightly to an average of just over 1,440 hours per year. Cadwalader Wickersham & Taft was the outlier with a formal target of 1,900 hours a year. The lowest target was 1,100 hours. "A lot of firms have been nudging their chargeable hours targets, but the actual numbers achieved have probably been lower because there is less work," comments Tony Williams, the principal of Jomati, a management consultancy, and former managing partner of Clifford Chance. "Assistants are being paid more, and firms want more out of them."Firms are paying more attention to time-capture techniques and culture, Jarrett-Kerr says. "Assistants are not necessarily working more, but they are recording it better. Firms are getting better at matching their capture to their volume." Chargeable hours continue to be a fundamental consideration in the award of bonuses in most firms, the survey shows, along with the firm's financial performance. In 13 firms, those were the only factors taken into account. An additional eight reported bonuses are based solely on financial performance, while one said they are entirely discretionary. The remaining 33 used a combination of financial performance, chargeable hours and other performance measures to determine bonuses. After the big pay increases of 2006 and 2007, firms are trying to put more take-home pay at risk in the form of bonuses, said Philip Hough, senior consultant in the London office of Watson Wyatt, an international consulting firm. This method also avoids the consequences of permanent pay hikes such as higher pension and other benefits costs. Hough favors tying bonuses to performance measures beyond chargeable hours. "The most successful organisations are those that have a combination of base pay and performance pay, and a good performance measurement system standing behind it, because they can explain to their employees what they want in terms of behaviour, delivery and contributions to the firm," he says. Performance measures may include quality of work, mentoring, client interaction, business development, seminars given and other factors.All the respondents in the survey conduct appraisals of their assistants, either once or twice a year. Formal mentoring programmes exist at 38 firms. Jomati's Williams argues appraisal should be a continuing process. For example, there is an opportunity to comment on performance each time an assistant completes a project. Reviews of partners by assistants - so-called 360-degree reviews - are conducted in 35 respondent firms. Jarrett-Kerr notes that 36 degree reviews are easier to do in bigger firms - and assistants are likely to be more honest because there is less chance they can be identified. "The capacity for self-deception of some lawyers is quite high, and to have some empirical survey evidence that they are not regarded as good delegators, for example, can be quite helpful," he adds.Alternative in-firm career paths are offered at 37 firms, and four said they are considering their introduction. Except for Burges Salmon, which pioneered a programme 10 years ago, and SJ Berwin, which has a five-year track record, all firms introduced them within the last two years.Alternative career paths are generally viewed as a way to give people who may never make partnership appropriate recognition and a degree of seniority. They also suit lawyers who don't want the hassles or the risk of partnership, or the capital outlay involved.Legal Week's survey revealed a variety of titles for these positions, including legal director, counsel, senior associate, associate director, special counsel, of counsel, senior lawyer, director and professional support lawyer (PSL).The split among males and females in these positions seemed to depend on firm culture. In many firms, the division was fairly even. In others, the positions were held overwhelmingly by women."All these titles have the purpose of giving people the feeling their career is moving forward and keeping them happy where they are in the waiting area for equity partnership. For some, it will be a long-term car park," Jarrett-Kerr said.He noted these positions can create a problem for firms in how to satisfy client expectations. A less sophisticated client may feel slighted if assigned a lawyer who is not a partner. But Jarrett-Kerr says a sophisticated client, such as the general counsel of a big corporation, may be happy to work with a qualified non-partner who is a highly specialised technical lawyer, not a rainmaker.On the other hand, he wonders whether the current economic climate might discourage some lawyers from pursuing the alternative path. "If you enter a world where things are not so secure, it may be that people will revert back and seek the security of a long-term contract such as partnership," he says.Firms may also question the business model as the economy sours, Williams points out. He notes that these positions are relatively expensive, and says the senior group below partner is likely to be squeezed over the next year or so. "Firms will be looking very hard at the business case if there is less work around. They may push work down to less expensive and younger associates," he cautioned - especially if the margin the firm is making on their work is quite small.One reason for the growth in alternative career positions is that achieving equity partnership is getting much harder, Jarrett-Kerr notes. He said the average time is gradually getting longer and is generally much higher than seven years. Partnership might be hard to achieve, but most firms reported at least a few internal promotions to that coveted status. The 28 associates made up at Allen & Overy was the highest amount of any firm surveyed, followed by the 19 promoted at Hammonds. At the other end of the spectrum, Ince & Co made just two internal partner promotions and Dickinson Dees only one. In terms of external recruitment, Simmons & Simmons leads the pack, with 13 partner level hires of assistants from other firms. Pinsent Masons and Eversheds were just behind them with 11 external hires each. Whatever bloodletting may be about to occur, reported attrition rates this year remained stable within most firms, Legal Week's survey showed. However, 14 firms chose not to respond to this question - up from eight last year. Attrition rates of 12% to 15% are considered healthy. Two firms, Dechert and Cobbetts, reported attrition rates of more than 25%. Unsurprisingly, conveyancing is considered the most endangered branch of the profession. Transactional law is also experiencing difficulties. Corporate law is holding up, but firms can be much more selective. Recruiters predict the market for NQs to be even more difficult next year. The consensus view is that the branches of the profession best suited to riding out the turbulent times ahead are employment law, litigation, taxation an

September 24, 2008 at 08:03 PM

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