Wednesday, February 15, 2006

Big Firm Salaries Going Up (Again)

Apparently the increase of many big firm starting associate salaries to $135,ooo wasn't enough. Now some firms have raised the stakes with a move to $145,000. The Wall Street Journal's Law Blog has a detailed scoop on the subject.

This is such bad news. First year associates already can't earn their pay. It's impossible. Their billing rates are too high, so their collection percentages are low. And there's this thing called mentoring which has gone by the wayside (see my previous posts on this here and here), so associates have to learn by the "sink or swim" method. Quality training and learning involves achieving a balance between being quick on the uptake (a fair expectation for high paid associates) and allowing associates to engage in sometimes time-intensive learning that cannot be billed but makes them better lawyers. That does not happen at many firms, although some do emphasize learning, much to their credit.

This latest pay hike will just make the vicious cycle worse if it ripples through the private law firm community. Higher pay will mean more pressure on associates. More pressure will mean less leeway to make mistakes. Less leeway means more pressure. And so on. Where does it end?


Anonymous said...

Well, in The Winner Take All Society, there is no natural limit to this. Certainly not rationality. (There's a great book by that title, btw, which sheds a lot of light on all this.)

Besides, your argument about new associates not being profitable in the first year is sort of like GM or Ford saying that they can't afford the equipment to make hybrids because it wouldn't pay off in the first year or two. The question for these firms is whether they can afford _not_ to keep up, given how they package and sell whatever it is they do.

That's because, for these firms, new lawyer salaries are like prices at Tiffany or Sotheby's or Neiman-Marcus: the more it's overpriced, the better it sells. The end customer has no real good way to judge the quality of the firm, much less the quality of its hires except by credentials and salaries. A lot of folks simply decide that, well then, I'll just use price as a proxy for quality. I want the best, and the best must be the most costly.

Thus, if your whole schtick as a firm is telling people that your lawyers are so smart that they found Kirkegaard too simplistic then how do you show that to the world? Easy--pay them the most, no matter what.

Hence, among the firms in this race, you can think of all this as a big advertising expense (and corresponding defensive advertising expenditures by the competitors being dragged along).

It's the lawyer equivalent of the massive outlays on corporate icons: "He's got a weiner-mobile? She's got a balloon? They've got a suite of skyboxes and their name on the stadium? What have we got? OK, we'll get a blimp."

Thus, the big salaries help contribute to firm profits even when, in theory, the new associates are losing money, because those inflated salaries let the firm trumpet its "commitment to excellence," and hey, they have nice suits too.

Seems like Harr's line from A Civil Action applies here (something about litigation being an insane race to outspend the other side, where the first party to come to his senses loses).

With luck, this will create an opportunity for some bold firm to announce that it was not following the herd and then do an Avis thing on the rest ("We're #2, We Try Harder")---but herd animals don't like that lonely feeling.

I think the most likely candidate would be a group of women who form a partnership that pays associates something in the range of sanity and then runs ads showing a ruler broken at 6" with the caption that reads

"At _________, ______ & _____, we judge quality by results, not by size."

But until something like that (or, more likely, a crushing economic meltdown as our entire debt-fueled house of cards collapses), there's no inherent reason to think $175k is any different than $145k or that $200k doesn't follow ...

Anonymous said...

Here's something that might address the problem:

A legislator in Michigan proposes to eliminate the stranglehold that law schools have over entry into the profession.
House Bill 5680 (2006)

Sponsors LaMar Lemmons III - (primary)
LaMar Lemmons, Jr., Leon Drolet, George Cushingberry, Jr., Joel Sheltrown

Categories Occupations, attorneys; Occupations, individual licensing and regulation; Courts, supreme court

Occupations; attorneys; requirement for law school as eligibility for state bar exam; eliminate. Amends sec. 943 of 1961 PA 236 (MCL 600.943) & repeals sec. 940 of 1961 PA 236 (MCL 600.940).