Just as Am Law 100 firms don’t all compete for the same set of client assignments, they don’t all compete for the same pool of associates. Thus, just as they don’t all charge the same billing rates, they shouldn’t all pay associates on the same comp scale. Instead of one-size-fits-all associate comp, Am Law 100 firms should break into distinct segments by comp scale, just as they break into different segments by billing rate. One-size-fits-all associate comp forces mid-tier firms to billing rates that clients balk at paying, thereby weakening the industry’s long-term health. It is also an unseemly gift to partners of the most profitable firms and an uncalled-for penalty on partners of middle and lower profitability firms.
There were signs this week that this much-needed segmentation may be emerging. First, we had a public statement of sound judgement from a middle-profitability Am Law 100 firm. The executive chairman of Greenberg Traurig (GT) argued that the economy was lulling law firm leaders to sleep, and cautioned against across-the-board salary increases. This sets a marker for a firewall on the ongoing salary contagion. GT ranks 56th by profit per equity partner (PPP) among the 2017 Am Law 200, close to the 45th through 55th PPP zone I’d identified last week as a sensible break point on increases.
