MS Legal Search founder weighs in on the pros and cons of a firm’s associate compensation decision.
Texas Lawyer Blog
December 10, 2009
Gardere to cut first-year associate starting salaries to $120,000
Gardere Wynne Sewell of Dallas took the plunge on Dec. 10 and announced a new first-year associate compensation plan that will pay a starting salary of $120,000 effective Jan. 1, 2010 — down from the current $140,000. Both salaries do not include a $5,000 starting bonus. However, the firm will only expect the new associates to bill 1,700 hours a year, down from the old 2,000-hour level. The new compensation plan is largely a result of feedback from clients, says Steve Good, the 275-lawyer firm’s managing partner. They’re saying, ‘This is not acceptable.’ We get engagement letters saying. ‘You cannot use first-year lawyers on our matters,’ ” Good says. “That’s a pretty strong signal,” he says, adding that the firm will also reduce the billing rate for its first-year lawyers by an unspecified amount. On Jan. 5, 2010, 10 new associates will join five others who started work this fall because of particular practice area needs, he says. The first-year associates who have been working for a few weeks have been paid at the current $140,000 rate but will drop down to the $120,000 rate beginning in January, Good says. The firm has been at a $140,000 starting salary level since May 1, when the firm moved off the
$160,000 BigTex rate for first-year and second-year associates because of economic conditions. Good says the firm is not likely to save money through the first-year salary cuts because the training will be costly, but it’s an investment in those new associates. “We have an excellent class — probably one of the best we’ve ever had. Look, we want these people here . . . so we are going to invest the time in training them,” he says. The fledgling associates will spend the extra 300 hours in on-the-job training, Good says. “I just think we are getting more focused. You understand you have an investment in these people and they get the right type of training,” Good says, noting that training will include classroom sessions and more opportunity for the first-year lawyers to observe trials, depositions and negotiating sessions. Good declines to speculate whether other large Texas firms will follow Gardere’s market lead. “It seems like everybody is waiting for somebody else to make the move. We decided we’d make our own business decision,” he says. Two Texas recruiters praise Gardere’s new compensation plan, but say it won’t necessarily move the market. “I doubt it will set a trend,” says Stephen Mims of Houston, executive director at Prescott Legal Search. “I think everybody is on their own page right now.” Elaine Makris Williams, president and founder of MS Legal Search in Houston, says the Gardere compensation plan may not set a new market rate for first-year associates in Texas, but it could affect Gardere’s ability to recruit at law schools. However, Williams notes that law students attracted to the highest salaries may not understand what goes along with that big paycheck. “These young kids don’t have the history yet to know how everything works, how the salaries are tied to billable hours and tied to billing rates,” she says. She says Gardere’s new compensation model is a “good thing” because the upward movement of starting salaries has put pressure on first-year lawyers to bill and make rain and they may not be ready for it. “We’ve consistently heard from young associates that they felt they had so much pressure, they would prefer to make less money and have fewer expectations,” Williams says. Mims says he has spoken to a number of general counsel who complain that many first-year associates are not prepared for the job when coming out of law school and would benefit from more training. Gardere’s plan addresses that client concern, he says. “Some additional training . . . something like an apprenticeship if you will, will probably be time well spent,” Mims says.
–Brenda Sapino Jeffreys
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