National Jurist - January 2008 - (Page 32) firms have experienced a boom in business over the past few years, which resulted in more profit and an increased need for manpower, Leipold said. But salary increases are also a marketing issue, and there’s an element of competition among firms, said Michael C. Lynch, chief human resources officer at Reed Smith, LLP. Salary increases originated in New York at large, prestigious law firms. Once the ball started rolling, Lynch said, other firms in New York increased their salaries minds of new associates, he said. “It sets in motion expectations [among graduates] that ‘If they’re getting it, why not me?’” Lynch said. Associates like the increases As one might expect, law graduates who are qualified to go into big firms view salary increases favorably. “Associates are obviously very interested and their view is positive,” said Mary Korby, partner and head of the associate are costing firms over a quarter million dollars yearly, not to mention overhead costs. That all adds to the vastly increased hourly billing rates of new associates. Impact on associates It shouldn’t come as a surprise that a $160,000 salary right out of law school warrants expectations beyond the 40-hour work week. “Everyone knows that really big firms to one extent or another are extremely demanding of their associates in terms of hours,” Lynch said. “Lock-step firms advertise these eye-popping numbers but a law student needs to ask what’s the hidden cost and what happens to associates who don’t produce those kinds of hours.” It’s also no secret that today’s law graduates want more flexibility, better work-life balance and more substantive work opportunities. When they don’t get those things and end up burned out after a year or two of large law firm work, many associates choose to leave. Attrition numbers show that law firms haven’t kept their associates any longer just by raising salaries. “Paying people more money has not lessened attrition,” Leipold said. What’s harder to say is whether salary increases have increased attrition by deepening billable hour pressures and putting more stress on burnt-out new associates— there is no formal research on that issue, Leipold said, and no proven indication that increased salaries are partially responsible for high attrition rates. For now, attrition costs are something large firms are willing to pay, Cotterman said, but some clients are increasingly paying attention to rising law firm attrition rates. Besides simply being charged more per hour as a result of associate salary increases, “what adds insult to injury is that half of them disappear after two or three years,” Cotterman said. With recruitment, training and mentoring costs, Cotterman said it could take three to five years for partners to recoup the investment they put into an associate. So, when associates leave after just a few The latest rounds of salary increases have pushed starting salaries at some large law firms to a startling figure: $160,000. But growth is much slower at other legal employers. The chart below shows salary growth from 1996 to 2006. Law firms, 250+ Law firms, 101-250 Law firms, 51-100 Law firms, 26-50 Law firms, 2-25 lawyers Prosecutors Judicial clerks Legal services 86% 75% 54% 56% 33% 39% 33% 29% $ $ $ National Association for Law Placement (NALP). $ and then big firms in other locations followed suit. “Some of these firms want to show, ‘we’re the best and our starting salary shows it,’” Lynch said. In fact, Leipold said one of the biggest surprises in the latest rounds of increases came when smaller legal markets like Dallas and Boston quickly caught up with traditional mammoths like New York and Washington, D.C. “It’s no longer New York at ‘Salary X’ and everyone else at ‘Salary Y,’” Leipold said. As big firms begin paying their associates in one market at a certain rate, they are likely to set that same rate for associates in other markets, ultimately leading everyone else into a raise. Lynch said decades ago there wasn’t such talk about firm salaries. Some of the growth has been fueled by a recent explosion of information about what people make, in a culture where salary is very much on the compensation committee at Weil Gotshal & Manges, LLP. Korby said she hadn’t received any adverse reactions to the increases, adding that “others understand that [at] big firms that have had very good years, the partners want to share some of that.” But not everyone is happy. Clients of big law firms are balking at the amount of money paid to associates and the ensuing high hourly rates at which new associates are billed out. Corporate counsel, for example, has expressed outrage at the amount charged by firms for the time of inexperienced associates. And $160,000 isn’t even the final figure, pointed out James Cotterman, principal at the legal consulting firm Altman Weil. By the time fringe benefits, recruitment costs and starting and year-end bonuses are factored into the equation, entering associates 32 THE NATIONAL JURIST January 2008 $ $
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