The Lawyers Weekly - August 6, 2010

THE LAWYERS WEEKLY
August 6, 2010 | 23

BUSINESS
CAREERS

JORDAN
FURLONG

If you set out to determine why many business practices exist in modern law firms, you’d get an alarming number of answers that amount to, “Because we’ve always done it this way.” The hourly billing system is Exhibit A of this tendency, but perhaps just as pernicious is our long-standing system of paying associate lawyers.

In most cases, associate compensation is determined by salary (usually based on year of call) and bonuses (based partly on billable totals but also on how well the firm performed overall). You might notice that neither of these factors has much to do with the associate’s own contribution of value to the firm or its clients. In its reliance on worker seniority and organizational success, it’s far more reminiscent of the assembly line at a unionized auto plant.

Any real scrutiny of this approach reveals its numerous flaws, but that kind of scrutiny is what law firms have successfully avoided for many years — until now. Thanks to the impact of the recession, numerous U.S. and U.K. firms have finally taken a close look at their associate compensation systems and decided they’re too arbitrary and irrational to continue any longer.

Here’s a list of some of the well-known firms that, just in the past year, have formally announced they’re modifying or abandoning the traditional lockstep method of paying associates: Clifford Chance LLP, DLA Piper LLP, Hogan Lovells LLP, Reed Smith LLP, Wilmer Cutler Pickering Hale and Dorr LLP, Olswang LLP, Bingham McCutchen LLP and Sonnenschein, Nath & Rosenthal LLP (now transatlantic firm SNR Denton LLP). These are some of the biggest and most profitable law firms in the world.

These and other firms have turned to merit-based systems, the novel (for lawyers) idea that how much you make should be determined by how good you are at your job. Since many firms still choose to believe that a lawyer’s quality is directly linked to his or her dockets, some firms will instead compensate directly by hours billed — something that should strike mortal fear in the hearts of their clients.

There is a better way: institute a compe-
tency model for lawyers and use it to assess
their mastery of the skills that matter and
their consequent compensation. Larry
Richard of Hildebrandt describes it well: “A
competency model is a framework that
identifies all the competencies that an asso-
ciate needs to have mastered at each level
along the climb to partnership and defines
each of those levels in a sufficiently clear
manner for the associate to understand the
attitudes or behaviours expected of them.”
Orrick Herrington & Sutcliffe LLP, for
example, threw out its lockstep system last
summer and instituted three levels of
associateship for partner-track lawyers,
with advancement dependent on meeting
certain skills and accomplishments cri-
teria (Orrick created a non-partner track
as well). Litigation and IP firm Howrey
LLP did the same back in 2007, rewarding
lawyers for writing, discovery, trial prac-
tice and client presentation skills and
instituting extensive training programs to
hone those skills.

Seyfarth Shaw LLP has gone the furthest of all: its associates are sorted into nine different salary levels based on their proficiency in 11 core competencies such as client service, legal research, and analysis. Advancement is impossible without demonstrated mastery of the next level’s skill set. What’s more, associates’ billing rates are aligned directly with their competency levels, so that no lawyer can bill clients more than he or she is worth.

There are some critics of merit-based
compensation—and, it should be noted,
some supporters on partnership commit-
Many lawyers delaying retirement

DONALEE MOULTON

For many professionals, retirement is the brass ring at the end of a long and prosperous career. For many lawyers, however, retirement is anathema. The reluctance to let go is often to the benefit of the firm. And its detriment.

It’s not unusual for lawyers to work until
later in life. What is new, said Alan Stern,
counsel with McInnes Cooper in Halifax, is
the extent and scope to which older lawyers
are staying in the job. “Lawyers have always
retired later than the general public. What
has changed is that more lawyers are work-
ing full time well into their seventies.”
Several factors are driving the desire to
stay gainfully employed. First, there is the
reality of life as a lawyer. “The practice of
law is such an all-consuming profession.
You do it 24/7. It’s hard to turn it off,” said
Bob Carter, a partner with Boyne Clarke in
Dartmouth, N.S.
Older lawyers, he added, have often
worked for more than 40 years. “[The
firm] is your second home.”
Clearly, there is a comfort to coming to
the office. For many, there is now also a
necessity. “Over the last two years we’ve
seen everybody’s portfolio downsize. Every-
one has extended their working life as a
result,” said Warren Bongard, vice president
and co-founder of ZSA Legal Recruitment
in Toronto.

“There is a better way:
institute a competency
model for lawyers and
use it to assess their
mastery of the skills
that matter and their
consequent
compensation.

tees—who see this trend simply as an excuse to reduce associate salaries, which in many jurisdictions had spun completely out of control. But the firms that have instituted these systems insist that while yes, cost containment was a factor, what they’re really driving towards is the ability to measure a lawyer’s actual value to the firm, which lockstep cannot do.

Firms that have adopted merit-based
compensation systems have learned the
challenges of making them work. Associ-
ates paid on merit must be rigorously
trained in those skills, which requires not
only that a firm seriously assess what makes
a lawyer valuable and productive, but also
that its partners dedicate real, otherwise-
billable time for training, evaluation and
feedback. Many potential merit-based sys-
tems die on the vine right there.

Jordan Furlong is a partner with Edge
International who specializes in analyzing
the extraordinary changes now underway
in the legal profession worldwide. He is also
a senior consultant with Stem Legal and
head of its media strategy service. He
authors the award-winning blog Law21:
Dispatches from a Legal Profession on the
Brink http://law21.ca.
Pension and
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