DC Firms in Pay Wars Find the Cost of Doing Business Just Went Up
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The Associate Salary Stew Heats Up Down South
By Andy Peters
New York Lawyer
Daily Report
February 23, 2007
ATLANTA -- Hunton & Williams will raise pay for Atlanta first-year associates to $145,000 per year from $115,000, said Kurtis A. Powell, managing partner of the firm’s Atlanta office.
Hunton’s $30,000 raise is twice as large as the $15,000 raises that many other Atlanta law firms have given to first-year associates in recent days.
At $145,000 per year, Hunton first-year associates will make more than Attorney General Thurbert E. Baker, who makes $133,777 and Gov. Sonny Perdue, who makes $135,281. It will almost match Fulton County Superior Court judges’ $147,349 salary.
King & Spalding, Alston & Bird, Kilpatrick Stockton, Troutman Sanders, McKenna Long & Aldridge and other Atlanta law firms had all raised associates’ pay to $130,000 in recent weeks. Efforts to reach those firms’ managing partners weren’t successful as of Thursday afternoon.
But Hunton & Williams’ surprising move already is having an effect on the Atlanta legal-recruiting market. Epstein Becker & Green is seriously considering backing off its recruitment of first-year associates to focus on hiring third-year associates, said M. Maxine Hicks, managing partner of the firm’s Atlanta office.
"If you can hire a third-year associate for $140,000 or $145,000, why would you hire a first-year?" said Hicks. "The differential is worth it."
Meanwhile, Powell Goldstein also said Thursday it would match the $130,000 pay rate for associates set by its Atlanta rivals, an increase from $115,000. The raise is effective March 1, said partner David G. Ross. The firm hasn’t decided whether to respond to Hunton & Williams’ raise to $145,000, Ross said. Powell Goldstein Chairman James J. McAlpin Jr. was traveling and unavailable for comment.
Hunton & Williams’ move to $145,000 is designed to help the firm recruit the best talent, as well as grow the Atlanta office, Powell said.
"This move is reflective of our commitment to growth and competing for the best legal talent in each of the legal markets in which we play," he said.
Powell would not say how many lawyers Hunton expects to add in Atlanta.
"We are committed to smart growth and want to make sure we add lawyers who make positive contributions to our firm both culturally and economically," Powell said.
Salaries for Hunton’s first-year associates in New York will increase to $160,000. In all of the firm’s other offices, Hunton will raise starting lawyer pay to $145,000. That includes Hunton’s offices in small markets like Knoxville, Tenn., and Norfolk, Va.
"The lawyers we have in our various offices are going to be working in national practice groups and on the same type of client work, regardless of their physical location," Powell said.
Although Hunton & Williams’ Atlanta associates will get a raise, they may trail associate counterparts in Charlotte, N.C.; Los Angeles; McLean, Va.; Miami and Washington.
According to a memo purporting to be an internal Hunton & Williams memo, posted on the blog Abovethelaw.com, salaries for seventh-year associates in the group of cities that includes Charlotte will increase to $225,000. The memo says seventh-year associates in Atlanta would make only $180,000. Hunton has 39 associates in its Atlanta office and 26 associates in Charlotte, its Web site says.
Powell said he hadn’t seen the memo posted on the blog and declined to comment on it. He declined to say whether Hunton & Williams had distributed an internal memo about the pay raises.
However, Powell confirmed that more experienced attorneys in cities with lower cost-of-living rates than Atlanta, such as Charlotte, would be paid more than Atlanta’s upper-class associates. Asked to explain the difference, Powell said only, "It’s just the market."
The posted memo is dated Feb. 21, and says it was sent by the firm’s associates committee to all U.S. partners, associates and counsel.
In addition to the $145,000 base salary, associates could also receive a bonus, based on performance, according to the memo. The size of the bonus will be "discretionary" and associates should not expect to receive a bonus "solely on the basis of meeting the firm’s billable hour expectation," the memo says.
The memo also says that "salaries for associates who are not meeting the firm’s performance expectations may be set below the standard salary as determined by the Associates Committee in consultation with team and practice group heads."
Powell said there should be a "connection between performance and compensation" at any law firm. Associates’ pay may be affected by their performance, but bonuses also are available for superior performance, he said.
Associates will be told the amount of their salaries and bonuses at a May meeting; the new pay rates would then be retroactive to April 1, according to the memo.
The pay raises given to first-year associates varies in Atlanta law firms. Fish & Richardson, for example, raised pay for first-year associates to $160,000, said Nagendra Setty, the firm’s Atlanta managing partner. However, all of Fish & Richardson’s Atlanta associates are intellectual-property lawyers, who tend to be paid higher rates nationwide than attorneys who work in other areas.
DLA Piper and Jones Day both raised pay to $135,000 for first-year associates in Atlanta.
DLA Piper is comfortable with its recent increase to $135,000 and probably won’t raise salaries again, said Mark E. Grantham, managing partner of DLA Piper’s Atlanta office.
"You never say never, but I doubt that we would make any further adjustments," Grantham said.
Associate pay started to go up last month when firms in New York raised starting associate pay to $160,000. In late January, Troutman Sanders said it would raise starting associate pay to $115,000 to $125,000. Days later, Alston & Bird and King & Spalding said they’d boost pay to $130,000.
Since the wave of pay raises began last month, Epstein Becker & Green has been monitoring the situation and plotting its move, said Hicks, the local managing partner. She and her counterparts from the firm’s 10 other offices were scheduled to meet on Thursday afternoon to discuss the situation, she said.
While she expects Epstein Becker will raise starting associate pay to either $130,000 or $135,000 for first-year associates, the firm may decide it’s more cost-effective to focus on hiring more seasoned associates. Epstein Becker has 30 associates in Atlanta.
"We will definitely meet the market, but the market keeps evolving," Hicks said. "I think we’ll remain competitive."
Forecast Calls for Fatter Paychecks in the Sunshine State
By Daniel Ostrovsky
New York Lawyer
Daily Business Review
February 9, 2007
In a move likely to trigger a fresh round of associate pay hikes, Holland & Knight has raised first-year associate salaries in its South Florida offices from $125,000 to $130,000.
Holland also announced Thursday that it is boosting starting associate salaries in its other offices, including raises to $160,000 in New York City and $145,000 in its Chicago, Washington and Los Angeles outposts. The raises in Miami, Fort Lauderdale and West Palm Beach include a $5,000 study stipend.
Holland's move is the latest in a wave of associate salary increases that has swept the country.
Law firm observers predict Holland's associate pay hike likely will trigger similar or even larger raises at other major South Florida law offices. It's expected that New York-based White & Case, which led the last round of associate salary increases in early 2006, will boost its first-years in Miami to at least $145,000 from the current $125,000.
Two New York-based firms already are paying first-years $160,000 in their South Florida offices, according to news reports and industry observers. Those two firms are Weil Gotshal & Manges, which has a Miami office, and Boies Schiller & Flexner, which has offices in West Palm Beach, Fort Lauderdale and Miami.
Both firms confirmed that they pay at the top of the market across the country, including New York, and that they pay the same salary in all their offices. But both firms declined to comment specifically on the figures, citing firm policy.
Most major South Florida firms, led by the Miami office of White & Case, increased their associate salaries last year, setting the South Florida market rate at around $125,000 for first-year lawyers.
When raising first-year pay, firms typically increase salaries for all associates, but do not disclose the salaries of more senior associates.
Holland had just raised its associate salaries in South Florida in June.
"We've been able to raise them again because we had another profitable year and we want to attract and compete for the best legal talent out there," said Peter Prieto, Holland's Miami executive partner. "I can't speak for any other office, but in Miami we have a hugely successful group of associates."
Hikes also are occurring in other major cities. For example, Fish & Richardson bumped associate salaries to $160,000 in all its offices, including in Atlanta.
Last month, Simpson Thacher & Bartlett became the first firm to raise starting associate salaries in New York to the $160,000 level. The California and Washington, D.C., areas remain split between firms paying $160,000 and $145,000 for first-year associates.
Weil Gotshal's new salary scale ranged from $160,000 for the classes of 2006 and 2007 to $280,000 for the 1999 associate class.
Joseph E. Ankus, a legal recruiting consultant based in Weston, said that Holland may have to raise its salaries in its South Florida offices again if White & Case, Greenberg Traurig and Bilzin Sumberg Baena Price & Axelrod up the ante to more than $130,000. Bilzin currently pays first-year associates $125,000.
"I think there is a likelihood that White & Case would raise to meet more of the New York market," said Fort Lauderdale-based legal recruiting consultant Abbe Bunt. "White & Case has always shown itself to be consistently at the highest salary in our community."
Roy Larson, managing partner of Chicago-based Baker McKenzie's Miami office, said his firm "eventually" will have to bump up its starting salary of $120,000 in Miami. "It's just competition for the top talent, and when one firm starts paying more for top lawyers then another firm needs to do so," he said. "The strength of our business depends on the strength of our people."
Mark Sterling, Hogan & Hartson's Miami administrative partner, said that earlier this year his firm increased its first year salary in Miami to $120,000. He said the firm is currently monitoring the South Florida market and is committed to paying competitively.
The National Law Journal, an affiliate of the Daily Business Review, reported that while the starting salaries for novice lawyers may seem extraordinary, associate salaries compared with profits per partner at the nation's top law firms have been at their lowest point in a decade.
Based on last year's Am Law 100 survey, profits per partner at the nation's 100 highest-grossing firms averaged nearly $1.1 million in 2005. Thus, associates pulling $125,000 were making 11.7 percent of the amount partners earned. In comparison, in 1996 associates earned 14.3 percent of a firm's profit per partner.
'THERE'S A LIMIT'
The Miami office of White & Case declined to comment for this article.
In an e-mail, Matthew B. Gorson, Greenberg's national operating shareholder, said that "we are currently in the process of evaluating how we compensate, promote and integrate our associates. We intend to reward our top performers at the highest levels consistent with local market conditions." Greenberg currently pays first-year associates in Miami $130,000, which includes Bar costs.
But Richard Rosenbaum, managing shareholder of Greenberg Traurig's New York office, said that law firms need to raise salaries to competitively recruit associate talent. Still, he said, there's a limit, regardless of how starting salaries compare with profits per partner.
"It's getting to a point where it's not about the law firms -- it's about the clients," Rosenbaum said. "There's a limit to what you bill associates out at the clients' expense."
Other observers also say clients are increasingly reluctant to pay high rates for first-years, who typically have a steep learning curve.
Holland's Prieto agreed that salary increases come at a cost to law firms, clients and even associates. "Eventually, you make up for those increases by primarily two things -- everybody has to work a little harder," he said. "And, while we have no plan to increase rates, over the long term, rates do increase just like everything else in our society."
Richard Morrison, managing partner of Weil Gotshal's 25-lawyer Miami office, which has 19 associates, said "the firm's goal has always been to hire and retain the best and the brightest [and] to do that we pay our associates commensurately with our peer firms."
Morrison explained that Weil Gotshal operates as one firm across all its offices. "The attorneys here are not attorneys of the Miami office -- they are attorneys at the firm that just happened to be sitting here in Miami. We routinely staff matters across departments and across offices, so we pay our associates on the same scale in all the U.S. offices."
Stephen Zack, administrative partner of Boies Schiller's Miami office, also touted the "one firm" philosophy. "We stay consistent with our starting salaries in all our offices, because we are recruiting for the same lawyers in all our offices," he said. "We are a top firm who competes with the other national firms, who compete for the best students coming out of the best law schools."
But many large national firms chose not to follow the one-firm salary structure.
Chicago-based McDermott Will & Emery, for instance, increased its starting salary in Miami to $125,000 earlier last month. In contrast, the firm announced this month that it was increasing starting associate salaries to $160,000 in New York and $145,000 in Boston, Chicago, Washington, D.C. and its four California offices, while leaving the Miami associate salaries unchanged.
"I'm sure you always get a fairness issue," said Ira Coleman, managing partner of McDermott's Miami office. "The answer is our compensation is market-driven. We want to be in step with the markets and at the associate level that's how it works for our firm."
Coleman said some of the larger South Florida firms haven't increased associate salaries yet "because they didn't feel that they had to. But if somebody moves, we'll move."
Partners at South Florida firms say that they are not concerned about the $160,000 benchmark set by Weil Gotshal and Boies Schiller in Miami. Those salaries, they argue, do not reflect the South Florida market.
"I don't think that really is a statement of the South Florida market at all," said John Sumberg, managing partner of Bilzin Sumberg in Miami. "They have a completely different model, they have a New York model. We have an enormous advantage in our system of working directly with clients, working directly with partners."
Charles Rosenberg, managing partner of Carlton Fields' Miami office, said the first-year associates in his office currently make $115,000 because "we really have kind of different market here."
He said that Carlton Fields will remain competitive with the other Florida-based law offices. But he cited a higher cost of living and the greater billable hour requirements that New York firms impose as the difference between salaries in other markets and South Florida.
George Yoss, managing partner of Adorno & Yoss in Miami, said his firm's salary structure will not be affected by the "momentary blips" in associate salaries nationwide.
"Most firms can't compete with the larger firms who make the larger adjustments," he said. "And there are many qualified lawyers out there in order to professionally, adequately and competently staff your needs."
Firm’s Pay Hike Spurs Competitors
By Meredith Hobbs
January 6, 2006
New York Lawyer
Two weeks after Alston & Bird’s electrifying announcement that it’s raising
associate pay across the board, King & Spalding and Troutman Sanders have
followed suit, and many of the city’s other large corporate firms say they will
likely do the same--but not yet.
King & Spalding wasted no time in responding to Alston’s Dec. 20 move--which was the first significant rise in pay in the local market since 2000. The next day, the firm matched Alston’s pay hike, which increases first-year starting pay $15,000 to $115,000, and bumps up pay for other classes by at least that amount. The increases for both firms were effective Jan. 1.
King & Spalding’s managing partner, Robert D. Hays Jr., said his firm, the city’s largest, immediately met Alston’s raise so it would continue attracting and keeping top legal talent.
Troutman Sanders also acted fast, telling its associates on Dec. 22 that it would match the pay increase for first-year associates.
"We saw no reason to delay," said Troutman’s managing partner, Robert W. Webb, Jr. "We are in the same market with Alston & Bird and King & Spalding and it did not seem like something to agonize over."
Pay will go up for all of Troutman’s Atlanta associates, but the amount will vary on a case-by-case basis, according to the firm’s merit system, instead of lock step by class, Webb said. Alston, by contrast, upped pay for each class by a uniform amount.
Troutman’s increases also went into effect Jan. 1.
Many of the city’s other firms, in particular the branch offices of national firms, say they plan to hike associate pay but have delayed because they are still sorting things out.
Paul Hastings plans to raise pay in its Atlanta office, where it has 65 associates, said the local managing partner, Philip J. Marzetti, but he must wait until management has sorted out pay for all 17 U.S. and international offices before making an announcement. The firm will decide on raises by Feb. 1, the start of its fiscal year, he said.
"I would guess our salary scale would look very similar to Alston & Bird," Marzetti said, adding that his firm would continue paying its associates salaries at the top of the market.
Jones Day, another international firm with a large Atlanta office, has not yet decided if it will match Alston’s Atlanta salary increase, said local managing partner George T. Manning. He noted that his office started paying first-year associates $110,000 in 2000. "It’s taken Alston & Bird a while to catch up with us," he said.
Locally based Sutherland Asbill & Brennan likely will raise associate pay in its Atlanta, Washington and New York offices and hopes to have the numbers finalized by today, according to managing partner Mark D. Wasserman.
Wasserman said his firm delayed its response to the Alston gambit in order to look at salaries in Washington and New York as well. "We want to do it all at the same time and not in a piecemeal fashion," he said.
Alston’s raise was effective for its Atlanta and Charlotte offices. The firm did not raise associate pay in Washington and New York, where first-years start at $125,000.
In Atlanta and Washington, its two largest offices, Sutherland currently pays first-years, respectively, $100,000 and $125,000.
Wasserman said his firm wants to make sure its pay is competitive across the board, adding that the pay gap between Atlanta associates and their New York and Washington counterparts widens with seniority.
"At the sixth- and seventh-year levels, the differences between cities is greater than at the starting places," he said.
Powell Goldstein has not yet announced any raises but plans to make a decision in the next week or so, said David G. Ross, the firm’s professional development partner.
"We intend to remain competitive," Ross said, adding that the firm is studying the impact of raises on its Atlanta and Washington offices.
NY Firm Raises First-Year Salaries, Ups Bonuses
By Anthony Lin
New York Law Journal
December 5, 2005
The New York intellectual property boutique of Kenyon & Kenyon has announced it is increasing associate base salaries, with first-years set to receive $135,000 rather than $125,000.
Citing a successful year overall, the firm also said its average bonus for associates this year would be $40,000, up from $29,000 last year. Several associates had received bonuses larger than $100,000, the firm said.
The move by the 200-lawyer IP boutique echoes similar pay raises by similar-sized California litigation shops earlier in the year. Most of the larger New York firms have thus far preferred to maintain base pay at $125,000 for first-years while paying discretionary bonuses at year-end.
Firms Raising Billing Rates, Non-Lawyers' Pay
By Jeanne Graham
New York Lawyer
Texas Lawyer
April 27, 2005
Who needs a law degree to make money in a firm? Not the new generation of nonlawyer administrators, such as chief financial officers and information technology managers. Texas firms are reporting healthy increases this year in billing rates and salaries for nonlawyer administrators compared with 2004, according to Texas Lawyer's annual Salary & Billing Survey. Salary increases for nonlawyer administrators average 8.4 percent for chief administrators, 4.9 percent for office managers, 5.6 percent for finance directors and 4.9 percent for personnel managers. Marketing directors are averaging a 6 percent boost, and librarians a 5.2 percent salary jump. Survey results show a 0.6 percent increase for information services managers, but this average is skewed by one Austin firm's decision to change the information technology manager's compensation from an $85,000 to $40,000 position. Otherwise, the overall average salary increase for IT managers is about 6 percent.
"I think there is a general recognition in the market place as to the value of executive nonlawyers, particularly in the CFO [chief financial officer] suite and chief marketing officer suite," says Glenn West, managing partner of the Dallas office Weil Gotshal & Manges, which has 124 lawyers in Texas and 1,121 firm-wide. "The idea that those of us who practice law are necessarily the best to run the business side of law has changed dramatically in the last 10 years," he says. The roles of nonlawyers have become increasingly executive and increasingly influential in firms, West says.
Nonlawyer professionals who can manage a firm are essential if lawyers are going to concentrate on billing 1,800 hours per year, says William Cobb, president of Cobb Consulting, a Houston-
based consulting firm that has consulted for professional service firms, including law firms, since 1978. Law firms created director of administration positions in the 1980s, Cobb says. During the 1990s, nonlawyer executive positions became more important at firms due to increasingly complicated business regulations and taxes, retirement programs and technology issues, he says. "Now [they] are involved in every compensation meeting and every executive committee meeting," Cobb says.
Smaller firms, such as 27-lawyer Atlas & Hall, often still operate without a team of nonlawyer executives, says Gary Gurwitz, managing partner of the McAllen firm. "We have no IT in-house, no marketing director," Gurwitz says. The firm outsources its technology support, and the firm's management committee makes marketing decisions, he says. The highest paid nonlawyer at Atlas Hall is the controller who handles all the firm's bookkeeping, Gurwitz says. Eight legal assistants and 42 other staff members support the firm's 27 lawyers, he says
Billing Rates Rise
On the lawyer side of the firm, the projected number of billable hours is relatively flat compared with last year's actual numbers and almost all the 34 firms responding to the survey employ some form of alternative billing.
Billing rate increases among the survey respondents range from 1.6 percent for seventh-year associates to 7.7 percent for fourth-year associates. Equity partner and non-equity partner rates jump 5.2 and 6.4 percent respectively. First-year associate rates increase by 7.5 percent, and senior legal assistants will charge 5.4 percent more than they did in 2004.
Busier Firms Fork Over Bountiful Bonuses
By Jeff Blumenthal
New York Lawyer
The Legal Intellingencer
April 13, 2005
Editor's Note: This is the second of a two-part series on area law firms and their bonus structures. The firms are listed in alphabetical order, with today's segment listing firms starting with Klehr Harrison Harvey Branzburg & Ellers. For the first part, click here.
As transactional practices have slowly improved, so have the sizes of associate wallets. Associate salaries at Philadelphia's major law firms were raised as much as $10,000 in recent months to a standard of $115,000. And now, after a lull period that corresponded with the economic doldrums of the past three years, associate year-end bonuses also appear to be more bountiful.
After quizzing almost 30 Philadelphia law firms about their bonus programs, The Legal Intelligencer has learned that, save for a few firms, most bonus programs have not changed in structure but many have increased the pot of money handed out to associates.
The criteria for deciding who gets bonuses and how much money they get are the same at most firms. Billable hours are still the most frequently mentioned standard, but firms appear to be quicker to cite other measures, such as work quality, fee origination and firm citizenship.
Klehr Harrison Harvey Branzburg & Ellers
Partner Michael Coran said firm management has overhauled the associate program over the last few months. He said the first change was altering the fiscal year (now Sept. 1 to Aug. 30) to mark the end of a year of service at the firm, as most entry-level associates start in the beginning of September. The fiscal year had previously started July 1 and ended June 30 of the following year.
The other major change is that the firm has shifted from awarding bonuses solely on merit to having two separate bonuses - one for billable hours and the other for a more well-rounded look at performance, Coran said. He said performance bonus criteria includes meeting a 2,000 billable hour target (up from 1,950 hours) that is in place for associates, fee origination, quality of work and significant firm contributions.
The billable hours bonus includes $5,000 for billing 2,100 hours and $10,000 for billing 2,200 hours or more. Coran said the firm does not offer billable credit for pro bono work.
The first batch of bonuses under the new system will be awarded in September. Coran estimated that roughly half of the firm's associates received bonuses under the new structure.
Klett Rooney Lieber & Schorling
Firm chairman Jack Barbour declined to disclose how much money the firm handed out in bonuses at the end of 2004. But he did say that about one third of all associates received them. He said the firm considered a variety of factors in evaluating who receives bonuses, including hours, fee generation, work quality and firm citizenship. He said no billable credit is awarded for pro bono work.
McCarter & English
Philadelphia office managing partner Alexander Kerr said the firm awards two types of bonuses. The productivity bonus rewards associates for being proactive, efficient, providing client satisfaction and billable hours. Kerr said associates receive full billable credit for pro bono work. He said bonuses range from $10,000 to $38,000.
The second bonus is for discretionary merit and includes factors such as extraordinary work or fee origination. The maximum number for that bonus is $10,000. Kerr said he was not certain how many associates received bonuses at the end of the most recent fiscal year.
Montgomery McCracken Walker & Rhoads
Personnel partner Julie Chelius said the firm considers billables, receipts, discretionary merit and business origination when awarding associate bonuses. She said a point system determines who receives them and how much is handed out. She said roughly one-third of associates received bonuses in 2004 - about the same percentage as 2003 - with a range from $10,000 to $25,000.
Chelius said associates can be credited for up to 200 hours of pro bono work toward their billable target - 1,900 hours as a standard and 2,050 hours for those wishing to receive an hours bonus. She said the discretionary bonus takes into account work quality, the results of legal matters and whether the associate had to endure any specific hardship in reaching a level of achievement.
Morgan Lewis & Bockius
Four years ago, Morgan Lewis established a four-level system for bonuses based on merit and experience that includes several variables. The first level is for first-year associates; the second level includes second- and third-year associates; the third level includes mainly fourth- and fifth-
year associates and the fourth level includes sixth-year associates and above. Firm officials said a high-achieving lawyer could jump a level. The firm would not reveal the number of associates who received bonuses or the amount distributed. Partner Gordon Cooney, who serves on the personnel committee, said the firm awards bonuses to associates based on their quality of work, firm citizenship, pro bono work and billable hours. The firm has a 1,975 billable-hour threshold and associates can count an unlimited number of billable hours toward that figure.
Firm officials said they do not reveal bonus information to potential lateral associates or law students, only telling them that they will get top of the market compensation.
Obermayer Rebmann Maxwell & Hippel
Firm managing partner Robert Whitelaw said the firm hands out three types of bonuses to associates each December. He said the first one deals with fee origination, as associates receive 10 percent of the fees received in matters they bring in the door. He said the firm also awards a merit bonus, which factors in billables, the associate's profitability (money they bring in the door compared to their salary) and non-fee related work. That bonus can start at a nominal level and escalate to about $25,000.
Whitelaw said the origination and merit bonuses are awarded to 50 percent of all associates. The firm also awards a bonus to associates who turn in exceptional performances on a matter.
Pepper Hamilton
Director of Associate Development Molly Peckman said the firm has revamped its bonus pool over the past two years. The firm awards two bonuses - one for billable hours and the other for performance.
Peckman said the billable hour target for associates is 1,940 hours. Associates are awarded $10,000 for billing 2,000 hours, $15,000 for billing 2,100 hours and $20,000 for billing 2,200 hours. She said 91 out of 155 eligible associates - those who join the firm mid-year are not eligible - received the hours bonus at the end of 2004.
As for the performance bonus, Peckman said those are awarded in March after performance reviews are completed. The criteria for receiving that bonus include quality of work, effort and collegiality. She said that 88 associates were awarded the bonus and that the top of the range was $20,000 and the total pool of money was $1.3 million.
Post & Schell
Post & Schell CEO Brian Peters declined to specify the amount, monetary range or average of bonuses the firm has handed out. But he said the firm does have criteria for awarding the bonuses. At the top of that list is work quality, graded during performance reviews. He said quality trumps productivity, which factors in billable hours and client development. As far as billables, the firm used 2,000 hours as a regular threshold - with some exceptions - and usually requires an associate to bill substantially higher than that to receive a bonus.
Peters said the firm also factors in substantive professional development, which he said includes writing articles, speaking engagements and other activities designed to enhance the associate's reputation. In addition, Peters said the firm also weighs cross referral and marketing activities, and collegiality.
Reed Smith
Reed Smith management said the firm's bonus program has four components: profit sharing, individual production, business origination and discretionary.
Second-year through senior associates who meet defined service and performance requirements in a given calendar year are eligible for an annual profit-sharing bonus based upon Reed Smith's overall profitability as determined for that year by the firm's management committee. To qualify, an eligible associate must have worked a total of 2,200 quality hours in the calendar year of which at least 1,950 are a combination of client chargeable hours and credited pro bono hours.
For associates who elect to work in excess of Reed Smith's regular hours expectations, Reed Smith will pay a production bonus for hours recorded during each calendar year as follows: For 2,350 total quality hours, of which 2,050 of the hours are a combination of client chargeable hours and credited pro bono hours, or for 2,500 total quality hours, of which 2,200 of the hours are a combination of client chargeable hours and credited pro bono hours.
Management said all but first-year associates are eligible for a bonus on fees collected in a calendar year that derive directly from new business, that is originated by the associate.
Reed Smith rewards outstanding associate performance and other contributions in a given calendar year through an individual discretionary bonus. The Reed Smith department heads and practice group leaders recommend the qualifying associates. Bonuses are awarded in the firm's discretion based on the totality of an associate's performance and other contributions, including but not limited to the following: Exceptional legal work, including pro bono, extraordinary personal investment, including support of firm initiatives and significant practice development activities/successes.
Firm management offers 60 hours automatic credit toward chargeable hours for pro bono service and unlimited credit if the associate otherwise meets the standard chargeable hours expectation (1,900). But management said it retains discretion to credit more than the 60 hours even when an associate does not hit the billable expectation.
Firm management said 67 percent of associates received bonuses in 2004 and that the bonuses ranged from $2,500 to $46,075.
Saul Ewing
Firm managing partner Stephen Aichele said the firm awards bonuses for merit and profit sharing. He said associates are eligible for the merit bonuses after their second year and that 75 percent of those eligible received them at the end of last year. The range started at a nominal level and increased to $22,000. Associates are evaluated for meeting milestones in their professional progress, work quality, firm citizenship, and building client relationships. He said the firm does not use billable hours as a criterion for the merit bonuses because Saul Ewing believes that if an associate is not billing enough hours, it often is due to working in a slow practice area.
As for the profit sharing bonus, Aichele said the firm allows associates to share in profits by using a specific formula. If the firm beats its projected budget by 5 percent or more, 10 percent of that excess goes to associates who meet the following criteria: billing 1,850 hours or originating at least $25,000 worth of business. He said about 50 associates received this bonus and the range of money awarded was from $6,000 to $18,000.
Schnader Harrison Segal & Lewis
The firm awards three types of bonuses: one for origination, one for fee hours and another for outstanding merit. Firm managing partner Diana Donaldson said lawyers receive an 8 percent cut of business they originate. She said the hours bonus kicks in at 2,000 billable hours and is based on a percentage of salary. She said 10 percent of billable hours can come from pro bono work. The merit bonus comes from pro bono work, firm citizenship and exceptional quality of work. Donaldson would not say how much money associates received but did say that 42 of 60 associates received a bonus.
Stradley Ronon Stevens & Young
Partner James Beam, chairman of the firm's associate compensation committee, said associates can earn four different types of bonuses. One third of associates qualified and received an hours bonus. To be eligible for that bonus, an associate must bill at least 1,900 and will receive $5,000. For every increment of 100 hours above that level, an associate will receive an additional $5,000. Beam said the range awarded was from $5,000 to $20,000.
Beam said the firm has a profit sharing plan for which two thirds of associates received a bonus. He said it is based on the point value of the firm or how well the firm fared financially during the year. In 2004, the range awarded was from $2,000 to $17,000. But Beam said the two thirds who received this bonus in 2004 will not likely repeat in 2005 because the firm has decided to limit awarding this bonus to senior associates.
Beam said the firm also awards a business generation bonus for associates who generate a "significant" amount of fee work during the year. He said there was no exact threshold that an associate needed to meet to receive it but that only one associate received the bonus in 2004. He said five associates received an extraordinary bonus - generally in the $5,000 to $10,000 range - for outstanding achievement.
White & Williams
Firm chairman George Hartnett said the executive committee evaluates associates for bonuses each year largely on a mathematical formula that includes billings and realization. He said the firm then adjusts that number up or down based on firm citizenship and work quality. He said the firm has consciously chosen not to evaluate associates based on billable hours because it believes that would encourage them to be inefficient. He said that roughly 50 percent of associates received that bonus in 2004, up from about 42 percent in 2003. The range was from $2,500 to $10,000.
Hartnett said the firm awards a second bonus for fee origination, giving associates 20 percent of collections for new business they brought into the firm. He said roughly 40 percent of associates received that bonus, which ranged as high as $10,000 in 2004.
Woodcock Washburn
The city's largest intellectual property boutique completely overhauled its associate compensation structure. The firm did not hand out bonuses. Instead, associate compensation was awarded wholly based on a percentage of billings. Executive committee member Dianne Elderkin said associates liked the system because it rewarded hard work.
But Elderkin said the system became too complicated and was divorced from what other firms were doing in the marketplace. In addition, firm management wanted a subjective way to reward associates. So it established a lock step base salary structure - starting at $125,000 - and offered bonuses for hours and merit. The firm has a 1,950-hour target for its associates but to receive an hours bonus, Elderkin said the billable hours must be higher than that and escalates with the number of billables.
She said the merit bonus rewards quality of work and firm citizenship. Elderkin said bonuses for 2004 will be handed out later this year and she was not certain about whether the average associate at the firm will receive a higher total compensation. Nor was she aware of what range of bonuses would be awarded.
Wolf Block Schorr & Solis-Cohen
Chairman Mark Alderman said the firm has a bonus program that factors in the quality of billable hours, quality of performance, firm citizenship and pro bono work. Alderman said the firm has a 1,900 billable hour threshold. Roughly 35 percent of associates received bonuses, which range from a "modest" number to $30,000. Alderman said the firm emphasizes billable hours in determining who receives bonuses.