The Search --> Compensation

Show Me the Money!

Money should not be the primary motive in making a career move, but it is an important factor. With the top law firms continually upping the ante, the reporting of salary information in the legal press, and the advent of such Internet sites as "greedy associates" (see, e.g., http://www.infirmation.com/shared/insider/payscale.tcl), expectations can run wild.

Associate compensation has increased by 25% over the past six years, according to the 1999 National Association of Law Placement (NALP) Associate Salary Survey. Base salaries increased nationally, on average, by 10% in the past year alone. Historically, the top New York law firms lead the pack and other firms across the nation struggle to keep up. In past years, New York would set the pace, and firms in other cities would respond by increasing salaries as well, but did not feel the necessity to match the New York numbers.

In the most recent rounds of salary increases, however, that has changed. When prestigious New York firms announced that they would be offering first year associates a compensation package (base plus bonus) topping the $100,000.00 mark, San Francisco's Pillsbury Madison & Sutro and Silicon Valley's Wilson Sonsini Goodrich & Rosati matched them. The rationale was that, in this very competitive marketplace, prominent law firms nationwide were competing for the same candidates. Law firms outside of New York no longer could risk losing the most desirable candidates because of money. And once Northern California firms began to offer entry-level compensation packages in the six figures, major firms throughout the state followed suit. Although law firms across the country have felt pressured to make significant increases as well, a wave of new associate salaries over $100,000.00 has not yet been reported between the coasts.

Once entry level salaries made a huge jump, raises for mid-to-senior level associates were not far behind. The financial focus on attracting new lawyers left some of the more senior associates disgruntled and looking for greener pastures. In an effort to keep their seasoned associates, firms realized that they needed to increase compensation throughout the ranks. Wilson Sonsini led the way with unprecedented mid-year raises in June 1999, followed shortly by firms such as Brobeck Phleger & Harrison, Morrison & Foerster, and Cooley Godward. Overall, base pay was increased by approximately 20% over last year. Some mid-level associates now can expect their total annual compensation, including bonuses, to top $150,000.00, with senior associates earning over $200,000.00 at the top firms. It is interesting to note that, while the raw numbers offered by the New York firms are generally the highest, the rate of increase in compensation over the past three years, according to the October 1999 American Lawyer midlevel associate survey, has been lower in New York than the national average. The highest growth rate, 71.9% was at Palo Alto's Wilson Sonsini.

Bonuses can range from being a small token to being a large component of an associate's yearly compensation. According to the NALP survey, a large majority of firms use a combined merit and lockstep (seniority) bonus system, and most large firms factor in the number of hours billed. Some associates with particularly prized expertise, especially in intellectual property areas, can also demand premium sign-up or annual bonuses of up to $15,000.00. Approximately a third of all firms and most small firms offer profit sharing to their associates instead of, or in addition to, a bonus program. Additionally, during this period of thriving economic growth, a number of firms have given associates "boom year" bonuses, sharing the wealth with the associates whose hard work made the increased profits possible. Generous bonus programs are not just a result of law firms' largess but, in part, are spurred by competition from corporations which can offer generous stock options to lure away valuable associates.

Those astronomical numbers may not be as attractive in reality as they first appear, however. Keep in mind that, as compensation goes up, so must billable hours in order to generate the funds to pay those inflated salaries. Another factor is the cost of living; most of those high paying law firms are located in the cities where the dollar stretches the least distance. The Winter 1999 issue of The Associate ran a chart showing associate salaries adjusted by hours worked and cost of living. The results showed that at many of the firms paying the highest salaries, associates were making the least in actual dollars. For example, at several New York firms that paid over $100,000.00, associates clocked approximately 3,000 hours. Adjusted for New York's high cost of living, those associates only made around $15.00 per hour! Compare that to firms in Texas, which paid in the neighborhood of $91,000.00 per year to associates who worked approximately 2,100 hours. Those lower paid associates actually earned about $46.00 per hour. The October 1999 American Lawyer's midlevel associates survey confirmed this finding, showing that New York, with the highest raw numbers, ranked at the bottom of 15 cities surveyed in terms of real buying power.

History has shown that such economic growth cannot be sustained indefinitely. Predictions are that the pace of increasing associate salaries will slow down and plateau over the next one to two years. Once the hoopla over money has died down, associates will be left with the realities of their jobs. American Lawyer's October 1999 midlevel associates survey found that higher pay alone did not translate into satisfaction. Therefore, when considering a change, look beyond the salary negotiations and focus on the opportunity itself: career growth, new challenges, the practice and the people. Although it is tempting to go for the gold, remember that money isn't everything.

The Search --> Compensation Show Me the Money! Money should not be the primary motive in making a career move, but it is an important factor. With the top law firms continually upping the ante, the reporting of salary information in the legal press, and the advent of such Internet sites as "greedy associates" (see, e.g., http://www.infirmation.com/shared/insider/payscale.tcl), expectations can run wild. Associate compensation has increased by 25% over the past six years, according to the 1999 National Association of Law Placement (NALP) Associate Salary Survey. Base salaries increased nationally, on average, by 10% in the past year alone. Historically, the top New York law firms lead the pack and other firms across the nation struggle to keep up. In past years, New York would set the pace, and firms in other cities would respond by increasing salaries as well, but did not feel the necessity to match the New York numbers. In the most recent rounds of salary increases, however, that has changed. When prestigious New York firms announced that they would be offering first year associates a compensation package (base plus bonus) topping the $100,000.00 mark, San Francisco's Pillsbury Madison & Sutro and Silicon Valley's Wilson Sonsini Goodrich & Rosati matched them. The rationale was that, in this very competitive marketplace, prominent law firms nationwide were competing for the same candidates. Law firms outside of New York no longer could risk losing the most desirable candidates because of money. And once Northern California firms began to offer entry-level compensation packages in the six figures, major firms throughout the state followed suit. Although law firms across the country have felt pressured to make significant increases as well, a wave of new associate salaries over $100,000.00 has not yet been reported between the coasts. Once entry level salaries made a huge jump, raises for mid-to-senior level associates were not far behind. The financial focus on attracting new lawyers left some of the more senior associates disgruntled and looking for greener pastures. In an effort to keep their seasoned associates, firms realized that they needed to increase compensation throughout the ranks. Wilson Sonsini led the way with unprecedented mid-year raises in June 1999, followed shortly by firms such as Brobeck Phleger & Harrison, Morrison & Foerster, and Cooley Godward. Overall, base pay was increased by approximately 20% over last year. Some mid-level associates now can expect their total annual compensation, including bonuses, to top $150,000.00, with senior associates earning over $200,000.00 at the top firms. It is interesting to note that, while the raw numbers offered by the New York firms are generally the highest, the rate of increase in compensation over the past three years, according to the October 1999 American Lawyer midlevel associate survey, has been lower in New York than the national average. The highest growth rate, 71.9% was at Palo Alto's Wilson Sonsini. Bonuses can range from being a small token to being a large component of an associate's yearly compensation. According to the NALP survey, a large majority of firms use a combined merit and lockstep (seniority) bonus system, and most large firms factor in the number of hours billed. Some associates with particularly prized expertise, especially in intellectual property areas, can also demand premium sign-up or annual bonuses of up to $15,000.00. Approximately a third of all firms and most small firms offer profit sharing to their associates instead of, or in addition to, a bonus program. Additionally, during this period of thriving economic growth, a number of firms have given associates "boom year" bonuses, sharing the wealth with the associates whose hard work made the increased profits possible. Generous bonus programs are not just a result of law firms' largess but, in part, are spurred by competition from corporations which can offer generous stock options to lure away valuable associates. Those astronomical numbers may not be as attractive in reality as they first appear, however. Keep in mind that, as compensation goes up, so must billable hours in order to generate the funds to pay those inflated salaries. Another factor is the cost of living; most of those high paying law firms are located in the cities where the dollar stretches the least distance. The Winter 1999 issue of The Associate ran a chart showing associate salaries adjusted by hours worked and cost of living. The results showed that at many of the firms paying the highest salaries, associates were making the least in actual dollars. For example, at several New York firms that paid over $100,000.00, associates clocked approximately 3,000 hours. Adjusted for New York's high cost of living, those associates only made around $15.00 per hour! Compare that to firms in Texas, which paid in the neighborhood of $91,000.00 per year to associates who worked approximately 2,100 hours. Those lower paid associates actually earned about $46.00 per hour. The October 1999 American Lawyer's midlevel associates survey confirmed this finding, showing that New York, with the highest raw numbers, ranked at the bottom of 15 cities surveyed in terms of real buying power. History has shown that such economic growth cannot be sustained indefinitely. Predictions are that the pace of increasing associate salaries will slow down and plateau over the next one to two years. Once the hoopla over money has died down, associates will be left with the realities of their jobs. American Lawyer's October 1999 midlevel associates survey found that higher pay alone did not translate into satisfaction. Therefore, when considering a change, look beyond the salary negotiations and focus on the opportunity itself: career growth, new challenges, the practice and the people. Although it is tempting to go for the gold, remember that money isn't everything.	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