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Saturday, March 22, 2008

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Rodrigo González Fernández
DIPLOMADO EN RSE DE LA ONU
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Renato Sánchez 3586
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Hard Economics & Associate Lockstep

Hard Economics & Associate Lockstep

No question is posed to me more frequently these days than, "What does this economic environment mean for law firms?"

To which the only sensible answer is, "It's way too soon to predict anything for sure, but each firm's own situation is sure to differ."    Indeed, it's true that we've seen layoffs at Cadwalader, Clifford Chance, Thacher Profitt, and as of yesterday Thelen Reid, as noted on the WSJ Law Blog.  Yet I've also had conversations with managing partners who tell me that the first quarter of 2008 is shaping up to be as strong as any last year.  So what's going on?

I've written about this environment before, and recently, as in:

If I had to summarize where I stand, I'll reiterate that at this stage in the cycle I remain a "worried optimist."

But since loudly and confidently declaring one's economic predictions is essentially a mug's game (as the joke has it, "you could lay all the economists in the world end to end and they wouldn't reach a conclusion"), the real question is, What should you do?

I have a thought:  Let's re-examine associate lockstep.

Again, this is not the first time I've written about this; in "Fealty to Anachronisms," I reported last June on Howrey's ditching associate lockstep.  But it's time to revisit the issue.

To begin, it helps to step back and take a deep breath before we ask probing questions about a custom we take so very much for granted—one which has been ingrained as a core element of the "Cravath System" dating back to the turn of the prior century.

But if you look at our industry's practice of compensating associates from the perspective of corporate America—or even from the perspective of the putative "man in the street"—I'm put in mind of nothing so much as the New York Times music critic reviewing an early Verdi opera with an especially preposterous plot:  "If I tried to explain to you why Ernani kills himself, we'd be here all week and at the end you wouldn't believe me anyway."

Isn't that about right?  How on earth is it that we've brainwashed ourselves to believe  associate lockstep makes sense?

I submit that in no other business does compensation turn almost solely on year of graduation or year of admission to the profession.  Are we right and the rest of the for-profit economy wrong?  If you're with me at least to this point, now is the opportunity of an economic cycle to re-examine this hoary tradition.

The moment's propitious because, regardless of one's views of the health of our revenue streams going forward, savvy attention to cost is always a virtue, and given the recent spike in associate salary "going rates," real money is at stake.  (I might add that clients appear irrationally anything but exuberant about the associate salary spike.  This may make zero sense economically but it seems to clients to make great sense psychologically.  Ignore it at your peril.)

How then might you wean your firm away from associate lockstep?  Start by taking a page from the playbook of firms, such as Howrey and notably Latham, that have done it already.  Some ideas:

  • Create "bands" rather than "years," and group associates past the first or second year into perhaps three such bands of seniority.
  • Within each band, which would have a minimum, median, and maximum salary range, determine the place of individual associates based on 360° assessments.
  • Permit, indeed encourage, deviations from seniority; that is, after all, what this is all about.  Why not have a third-year who's a superstar earn more than a fifth-year who's hanging on by their fingernails? 
  • Deviations from seniority achieve a number of salubrious objectives:
    • They tell the truth to associates about how the firm views their performance;
    • The associate's costs begin to more roughly approximate their value to clients;
    • The firm can more wisely target its scarce salary and bonus dollars to those it wants to keep, now divorced from the artificial constraints of lockstep year-by-year compensation;
    • Billing partners are liberated from the awkward conversations with clients about associates' increased rates; if a client notes that a particular associate's rate has gone up, it's not because another year has ticked over on the calendar, but rather it's because the firm has decided that associate's performance—and value to the client—has increased.

Perilous times are often the most conducive to change.  As a managing partner said to me, "Change is easiest when the house is on fire."  Don't wait for the house to be on fire. 

But explore creative alternatives to business as usual.  Your partners, and your associates, will thank you for it.

Posted by Bruce at 5:55 PM | Permalink | Comments (0) | TrackBack (0)
Posted to Compensation | Cultural Considerations | Finance | Practice Group Management | Strategy
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Consulten, opinen y escriban
Saludos
Rodrigo González Fernández
DIPLOMADO EN RSE DE LA ONU
www.Consultajuridicachile.blogspot.com
www.lobbyingchile.blogspot.com
www.el-observatorio-politico.blogspot.com
www.biocombustibles.blogspot.com
Renato Sánchez 3586
teléfono: 5839786
e-mail rogofe47@mi.cl
Santiago-Chile
 
Soliciten nuestros cursos de capacitación en RESPONSABILIDAD SOCIAL EMPRESARIAL – LOBBY – BIOCOMBUSTIBLES    y asesorías a nivel internacional y están disponibles  para OTEC Y OTIC en Chile

The Impact of Children on Lawyer Productivity

The Impact of Children on Lawyer Productivity

Having children impacts lawyer productivity in different ways depending on gender, concludes a recent investigation by the British Psychological Society, reported here. After studying the schedules and billing records of 670 lawyers in Alberta, Canada, researchers Jean Wallace and Marisa Young found that when women lawyers have children, their productivity (or at least hours worked) decreases. The decrease occurs because female lawyers with children usually have to juggle professional and domestic responsibilities. By contrast, male lawyers with children were found to be more productive than their childless male counterparts, which according to the study " is consistent the dominant cultural view of men as breadwinners, such that those with greater family responsibilities put in more hours to earn more money." At the same time, male lawyers with children were more likely to have a partner who did not work and could assume responsibility for household duties.

The study also examined the impact of "family friendly" work practices on productivity. Interestingly, the researchers concluded that flexible hours negatively impacted the productivity of male staff, but not female staff. 

So which category of lawyers is most productive? That would be childless female lawyers, whose productivity exceeds that of their childless male counterparts and male and female lawyers with children. 

My biggest gripe with the study is that it uses hours as a proxy for productivity.  But as we all know, hours billed don't necessarily correlate to efficiency; indeed, longer hours may signal less productivity, not more. I'd be curious to see, for example, whether women lawyers manage to complete tasks more quickly precisely because they have less time. If that's the case (and I suspect it is), perhaps having children makes them productive, not less.

Sphere: Related Content

Posted by Carolyn Elefant on March 21, 2008 at 02:12 PM | Permalink

Consulten, opinen y escriban
Saludos
Rodrigo González Fernández
DIPLOMADO EN RSE DE LA ONU
www.Consultajuridicachile.blogspot.com
www.lobbyingchile.blogspot.com
www.el-observatorio-politico.blogspot.com
www.biocombustibles.blogspot.com
Renato Sánchez 3586
teléfono: 5839786
e-mail rogofe47@mi.cl
Santiago-Chile
 
Soliciten nuestros cursos de capacitación en RESPONSABILIDAD SOCIAL EMPRESARIAL – LOBBY – BIOCOMBUSTIBLES    y asesorías a nivel internacional y están disponibles  para OTEC Y OTIC en Chile