Being a survivor graduate of a big law firm, a link Yves Smith posted today caught my eye, "‘Medieval’ U.S. Law Firm Pay Structure Buckles". Apparently, it was medieval for law firms to pay every associate in the same class the same salary.* You know, like seniority pay among unions is "medieval." It's much better to pay associates on "merit." Now, what's "merit," you ask?
Associates are evaluated based on how many hours they bill, feedback from partners and client satisfaction
In other words, to get the raise you got this year, next year you need to work more hours. No, strike that, you need to BILL more hours. If corporations really think this is going to reduce their legal fees, they're insane. This is not about ending the "medieval guild in the American legal profession", it's about continuing to ensure it's profitability for the top 1-2%. It's making sure the workers** and not the owners take the haircut.
Because if you pay people for billing more hours, they will bill more hours. Whether they work more hours is another matter. Whether they do better legal work is another matter. It's a system that rewards associates and firms who pad hours and do unnecessary legal work because that's how partners make their money and this is about ensuring that the partners continue to make money. It's not about rewarding excellence or any kind of normal standard for "merit." Having worked at a firm, believe me when I tell you it's not a coincidence that billable hours was listed first and client satisfaction last on that list. The last one is a PR cover (partner feedback in my experience is pretty much a synonym for billable hours). Inefficient, over-billing associates will be paid more. Quite the definition of merit.
It also almost guarantees that these firms end up with women and minorities making less money and having a harder time making partner (a common side effect of "merit" systems, see here, also via Yves). In addition to life demands for women away from work, in my experience women and people of color have more demands put on them to do non-billable work for the firm. They need "diversity" on their recruiting committees, associate committees, summer associate committees, etc. Only the firm isn't necessarily all that diverse. So women and people of color get stuck with a lot of extraneous bullshit that doesn't get counted as "billable" hours. And the new "merit" system means they won't get paid the same as the white boys who are a dime a dozen and don't have to sit on a million committees. They will fall behind in pay and, inevitably, will be less likely to make partner.
And just as AIG contracts are untouchable, but GM's have to be renegotiated, it's this fix to associate salaries that is heralded as the end of a medieval system. The system where partners make huge amounts of money based on the crushing hours worked by associates is just fine. No reason to change partner pay. Buried at the end of the article (emphasis mine):
The current standard for starting pay at the top firms, about $160,000, was set in January 2007 when New York-based firms including Simpson Thacher & Bartlett LLP and Sullivan & Cromwell LLP raised pay 10 percent from $145,000. Other firms across the country followed suit. Salaries for most senior associates at the biggest firms seldom rise past $400,000, Henning said.
Associate salaries at some firms are less than 10 percent of partners’ shares of the profits. Per-partner profit at New York’s Cravath, Swaine & Moore LLP was $2.5 million last year. It was $2.14 million at Philadelphia-based Dechert LLP, according to the American Lawyer, a trade magazine.
But, hey, I'm sure this isn't about making sure those $2.5 million paydays keep rolling in for the partners while associates work 18-hour days for less than 10% of that amount. That's not feudal at all. No, this is about "merit" and "reform."
* What the article doesn't seem to mention is that most law firms already have a merit system in place in that while all associates in the same class get the same base salary, bonuses generally go to high performing or high billing associates.
** I recognize that a lot of people aren't going to have a lot of sympathy for well paid law firm associates. $160,000 is a lot of money to make at 26. But $100,000 is also a lot of money to owe at 26 and a lot of graduates of top law schools owe at least that amount, which greatly limits their choice in employment options (the symbiotic relationship between top schools and big firms that basically ensures the most talented end up having to work for corporations at law firms is a post in itself). Essentially associate lawyers at big firms sell their lives to the firm, they're just well paid for it. (See this evocative and insightful article by Dahlia Lithwick that nicely captures the dynamic.) Still, the basic relationship here isn't all that different than at a local factory - the workers take the pay cut so the owners don't have to.
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it's all feudalism, baby!
it's not just lawyers [though you guys make more than most of the rest of us]. i once worked at an engineering firm that had similar ideas about pay distribution. if you did well, your boss got the big year-end bonus.
and billable hours! 30-minute increments only, meaning if you talked to a client on the phone for 5 minutes, you billed for 1/2 hr. and while my official job title was 'scientist' i often acted as project manager or site supervisor, so for those projects my time was billed at the higher rates, even though i never got paid more for those particular jobs.
and yeah, 75-hour workweeks were the restful ones.
tangentially related, i was reading this article earlier...
Yes, that data-mining article...
... is excellent, hipparchia.
"First they ignore you, then they ridicule you, then they fight you, then you win." -- Mahatma Gandhi
Paying by the hour
I noticed that when I started doing contract work, and getting paid by the hour, the demands for me to bill more time went down. Suddenly, I wasn't under pressure to put in face time, because every hour I sat there, I was on the clock. And while they could bill my billable time (and in litigation, it's all billable time), the amount they made per hour never increased.
Which of course is why "merit pay" will never equal "paying by the hour."
One thing you never, ever do as a big-firm associate is figure out how much you're making per hour when all is said and done, because it's heartbreaking. Especially if you go the extra step and then figure out how much the firm made off of you in that time (I did this once; I figured out that my firm CLEARED more than half a mil off my work per year. I was paid considerably less than that, and given static about a fucking $35/month Transitcheck benefit).
It's a hellish, hellish existence, being a big-firm associate, and I am always and forever glad that I got out of it. That being an asshole is rewarded so that many, if not most, of the partners are assholes doesn't really help.
BTW, there already is a track for associates who don't make partner and probably never will. Either they get called "of counsel" and paid a bit more but are still on salary, or they're perpetual associates. Law firms, like hedge funds, are basically pyramid schemes, and there just aren't the kind of slots open at the top that are necessary to make everyone who's talented partner. In the old days, those people would set up their own shop, but with cases so big, it's hard to get teh kind of client contact and responsibility within eight years to do that. In fact, some of the dumbest attorneys I've ever met have been at big firms.
i wondered what 'of counsel'
i wondered what 'of counsel' meant.
Well, I think it's entirely fitting
that big firms act like this when their primary purpose in this world is to help companies screw over 1) little guys, 2) the government or 3) other companies. Unfortunately the public often looks at the money that big firms pay out and have little sympathy for attorneys. Numerically, most lawyers don't work for big firms.
I was never the right sort for big firms and have always been in solo private practice (and without health insurance, retirement, etc). Most lawyers I know are thoroughly middle class people struggling to pay their bills as their own clients struggle to pay them. I remember all too well the a**holes in law school who were on track to work for the big firms and it seems like a weird sort of justice for them to get screwed over in the name of commerce. I've seen the big shots strutting through the courthouse on different cases billing each client the same amount of time on each case (double-, triple-, quadruple-billing). I've had cases with some of them, watching them churn fees with pointless busy work. You wonder if they would band together and force a change, but instead they corrupt themselves and allow themselves to be corrupted.
You're right
You are right, I don't have a lot of sympathy. An entry level engineer, who usually needs an MS to get a job also owes somewhere in the neighborhood of $100,000. Their starting pay is more often in the $50,000 range. They too are judged on billable hours or % billability.
And that is an ENGINEER, god help you if you are 'merely' a scientist like a biologist, or hydrologist, or geologist, or soil scientist. Then, should you even get a job in your field, you are typically paid 10% LESS than an engineer and still subject to the same billing requirements. Plus, you can nearly guarantee that regardless of how many hours you bill or ass you kiss, you will not be a principal in any firm, unless you have a Phd and have really played the game well.
Hmmm, it's sounding like I am experiencing sour grapes, and yet, I'm not! It is just the nature of things in businesses which revolve around charging for time rather than output. So I will explain the primary dynamic.
Here is the key: when you are young, you are defined by your successes, when you are old you are defined by your failures.
When you are a young lawyer, engineer, architect, etc.*, it is in your employer's best interest to promote you, encourage you and define you by the successes you have had. This is because they can bill you at a higher rate. Even if they have to pay you more, since they generally bill with a percentage multiplier (+-3x), the more you make, they make 3 times that. The more you make, the much more THEY make. You are defined by your successes.
However, the good times can't last forever, ultimately, when you approach the high-end of the rate for what is billed for your services (or what your superiors are billing), your employer needs to find a way to not pay you more. You want a raise, but they will lose money if they give you one. it is no longer in your employer's best interest to promote or encourage you. That is when you start to be defined by your failures. From then on out you will have to fight for even cost of living increases.
*actually, this goes for any wage earning job.
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I'm not such a bad guy once you get to know me.