Two Tracks for Associates: Short-Term Strategy or Long-Term Solution

Two Tracks for Associates: Short-Term Strategy or Long-Term Solution

According to a redcent article in The New York Times, the average starting salary at the nation's largest  law firms exploded to $160,000 a year plus bonuses from $80,000 during the decade from 1997 to 2007. The current economic situation is forcing firms to adjust these inflated salaries and align costs with revenue. The result of this restructuring will be a far more competitive landscape for incoming associates.

In the last two years, many law firms have made significant changes: laying off associates; deferring start dates for hires; adjusting base pay and bonus structures, instituting pay cuts and freezes; redistributing portions of base salaries as bonuses; and eliminating lock-step pay increases.

Historically, law firms have hired a labor force of associates who work to make partner over an eight-year period. The first few years at a firm, associates mainly do busy work which is billed to clients at a standard associate's rate. Chief legal officers are now calling for reform.

As a result, some firms are making fundamental changes by dividing associates into tiers. Law graduates are hired either to specialize in more routine tasks or to work toward partnership.

The Wall Street Journal WSJ Law Blog described the new two-track model:

Non-partnership track associates can be paid up to 50 percent less than the first tier of traditional associates, but may be billed to clients with rates that are only 25 to 30 percent less than those of the traditional associates. Therefore, if a non-partnership track associate bills 1,800 hours, the firm makes a larger profit and the clients pay less money than if a traditional associate were to bill the same amount of hours. 

Non-partnership associates handle "scut work" - such as due diligence and document production - while the more senior associates focus on challenging tasks like brief-writing and depositions. In an age where many associates neither want nor expect to become partners at their respective firms, a non-partnership track allows them to practice at a prestigious institution without the enormous time commitment required of traditional associates. Clients appreciate paying less per hour for the second tier, some of whom have similar experience to traditional associates.

Whether firms at the very top of the rankings adopt tiered systems depends on how long it takes the economy to turn around. But, even if the economy does look better within the next few years, it is likely that all firms will eventually have to switch to a tiered business model in some form to demonstrate improved cost efficiency to their clients.