It is according to the recent article in The American Lawyer: Is Raising Salaries the Best Way to Retain Associates? (By Elizabeth Goldberg and Ben Hallman, 03/05/07)
This past January, Simpson Thacher & Barlett, as many of you already know, raised salaries for its associates. I won't say I was unhappy when I first heard the news. But there's no such thing as free lunch.
This past January, Simpson Thacher & Barlett, as many of you already know, raised salaries for its associates. I won't say I was unhappy when I first heard the news. But there's no such thing as free lunch.
According to the article, partners at large firms are understandably unhappy about having to pay more. But the associates aren't all that happy either. Some New York firms have raised their "minimum billables from 1,950 to 2,000 hours." Firms that haven't officially raised their minimum billable hours, nevertheless expect more from associates.
If the purpose for raising salaries was to increase retention rates and prevent the ever increasing law firm exodus, then according to the article, it hasn't made a dent. "A third-year associate recently left Schulte Roth and Zabel for a hedge fund with a salary approaching $700,000...." Ergo to people who are driven by money the recent raise ain't that hot.
Fortunately for partners at these large law firms, money hunger is not at the heart of the issue. It's rather "quality of life." There is no official study on this, but it seems that more and more law students are also leaving law school. The message, in short, is that "Generation Y" (Hat tip to Anna Ivey) cares less about the pay and more about the way. A pay boost can temporarily increase associates' morale, but once the snow settles, people are reminded that somebody has to shovel the snow.
But when thinking matters from a partner's perspective, the problem of improving "quality of life" for an associate is another ugly pickle. Should firms require less billable hours? Allow associates to go home promptly at 5:00? Then what about surprise client demands? Is lowering associate salaries even an option, if there's a trade off between business and higher quality of life?
And what about those partners that feel that the 80-100 hour weeks are a lawyer's rite of passage?
I often find law students comparing their prospective salaries and life styles to that of ibankers. Bonuses in ibanking is contingent upon performance, whereas in law firms it's pretty much set for each class. Another significant difference is the nature of work. A lawyer spends hours pouring over word documents, whereas an ibanker spends hours pouring over an excel spreadsheet. However, in this very act of making comparisons, law students are saying something. They've heard one too many times that ibankers spend more time interacting with people, teams, and clients, but lawyers work too many lonely nights. They've heard that ibankers feel invigorated by their work, while lawyers feel that their work is too monotonous. They've heard ibankers live the high roller's life, while lawyers work like dogs.
Ibanking ain't easy. Though I don't have first hand experience, I've learned during my brief tenure at a venture capital firm that ibankers work like dogs too. Meritocracy in ibanking allows those that are gifted and talented to climb faster, but generally speaking the "high roller's life-style" doesn't kick in unless you're vice-president.
In this matter my point is simple: if your options are limited to ibanking and law, you're going to work like a dog no matter where you go, so do what you love and follow your passion.
As for the issue of retaining associates, it seems like a good idea for the legal profession as a whole to re-think its compensation model into a more merit driven model. Simply raising everyone's salary across the board won't stop the exodus because associates who want more money aren't satisfied (i.e. "that other guy is making $700,000!!!") and associates who want better quality of life aren't satisfied (i.e. "that's just great, I have to work more hours now") In the end everyone seems unhappy.
My final words are for my fellow colleagues in law school. Lets not be too hasty and get excited about the $160,000 salary boost. Our innocent excitement will only contribute to the perpetuation of a tradition, which so many of those who've walked this road ahead of us gripe about.
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