Raising Associates to $190K: The Economy is Lulling Law Firm Leaders to Sleep

The good economy is lulling law firm management to sleep when leaders should keep the sense of urgency required to deliver innovation and value to clients.

Actions like adjusting salaries on an across-the-board basis are evidence of this. In a realistic, albeit optimistic, environment, these decisions should be, as they are for us, individualized, local, and tailored to what is best for the client, the associate, and the firm. Associates in many firms will end up frustrated due to enormous workload hours when work is there and intense pressure to bill when work ultimately slows down due to market conditions. Clients and partners in many firms will be unhappy with the pressure on rates to pay for these decisions. And for a number of firms who are following along with the rate increase because they think they must, it will hit partners in the pocket, because the practices at those firms don’t justify higher rates.

From our perspective, we will continue to coordinate across the firm; analyze rates, work ethic, quality, productivity, and market conditions applicable in each office and practice, and make decisions on a local level that are fair within the firm and sensible for our clients and talent alike.

With a hyper focus on delivering excellence and remaining innovative, competitive forces for both clients and the best talent can be balanced. Whereas if you have an emphasis on just one component of the service delivery model, eventually there will be structural failure. There is financial evidence, according to The American Lawyer, that associate salary increases often precede a recession or slow down, while increasing firm costs.

A one-size-fits-all approach to associate compensation is no more appropriate for our profession than a single model for lateral guarantees, mergers or partner compensation. A buoyant legal economy can hide many tactical missteps. A downturn, or even a correction at the margins, will make it very clear whose strategic decisions about recruitment, compensation, and mergers were made with a holistic understanding of clients’ needs, wants and pressures, and whose weren’t.

Few law firms will be able to preserve their old habits and business models simply by placing them on steroids. The first question any good manager must ask, and the question that all clients will ask, is: who is going to pay for this? If you are truly committed to clients, you know the answer.

For us, our highest priorities remain excellence, delivering value and innovation and maintaining a wind-proof culture based on individual respect, trust, empowerment, and collaboration. Change can be empowering, but not when it is simply based on what the “pack” is doing rather than a solid strategy which is grounded in our core values. For over 50 years, we have found our best opportunities in change; it has allowed our firm to be diverse, entrepreneurial, nimble, and responsive over the years. But we do not base our changes on the whims of the marketplace or ill-advised, so-called experts.

This is a time when the best and the brightest should get paid fairly based on all factors. It is a time to have the courage to step forward and innovate, not step backward and assume good times will last forever and there will be time later to address the cultural destruction and economic issues, or both, caused by undisciplined business practices.

Author Information

Richard A. Rosenbaum is the executive chairman of Greenberg Traurig, LLP.