Associate “Job Satisfaction:” Why Law Firms should care

Image by Walmart Stores via Flickr

Associate Job Satisfaction (JD)

Associate Job Satisfaction:  Should We Care?

         Jerome Kowalski

Kowalski & Associates

September, 2010

The American Lawyer recently reported the results of its annual survey of associate satisfaction and reported that law firm associate job contentment and morale dipped to its lowest level since 1994. American Lawyer concluded in its survey that job satisfaction, based on a survey of over 5,000 associates found that job satisfaction fell “from 3.897 in 2009 to 3.733 this year. That’s the lowest score since 2004. In particular, associates lowered the individual grades for their own firms, giving an average rating of 3.96 this year–less than the 4.16 rating in 2009–and the lowest score in recent years.”

This report was followed by a series of public comments and blogs that associates who complained were unnecessarily and inappropriately “whining”. Partners and unemployed or underemployed lawyers were particularly critical of associates receiving regular paychecks calling them simply “cranky”; an example of this public dialogue is contained in a recent ABA article, in which some of the nearly 100 posted comments had a rather interesting, if not at times bitter series of comments. The American Lawyer report can be exegetically interpreted and analyzed in a variety of different ways: First, “only” 25% of associates expressed dissatisfaction with their jobs. Second, perhaps cynically, American Lawyer was simply taking a tabloid and a bit sensationalist approach to its report, and the various releases describing its report were made in order to boost sales and interest. Or, perhaps, a rate of 25% of disaffected associates is not acceptable, because it significantly affects lawyer efficiency, morale and law firm profitability.

Employee dissatisfaction is wildly contagious and significantly adversely affects employee efficiency, an unacceptable result in an era in which associate efficiency is critical, in our changing law firm business model of increasing Alternative Fee Arrangements and the death of hourly billing. We have known for at least four decades the reasons for lack of job satisfaction in any work environment. In 1968, the Mayo Clinic identified the factors that lead to job dissatisfaction:  Bickering co-workers  Conflict with your supervisor  Not being appropriately paid for what you do  Not having the necessary equipment or resources to succeed  Lack of opportunities for promotion  Having little or no say in decisions that affect you  Fear of losing your job  Work that you find boring or overly routine  Work that doesn’t tap into your education, skills or interests

The cures for virtually all of these factors is largely greater transparency in law firm management and appreciably greater open and candid discussion, led by law firm management, joined in by partners regarding the state of the firm and how the firm plans to weather the continuing economic turbulence.

Interestingly, Joel Rose, a respected law firm consultant, in a recent guest column described the role of law firm managers. Mr. Rose seemed to suggest that law firm managing partners are hampered in their roles because of their needs to consult and obtain approval of other members of management. He also lists the sundry obligations of the managing partner, listing, in my view, “communications” way too low on the MP’s duties. In the current economic malaise, I frankly would list communication at the very top of the list.

I would take this issue a step further: In thirty years of being deeply immersed in the entire recruiting process, from hiring partner, to heading a legal recruiting firm to ultimately serving as a consultant to law firms on, among other things, lawyer recruiting, training and retention, by far and away, the single most often cited reasons given by lawyers who are asked why they are seeking alternative employment, is one form or another of “lack of feedback,” an absence of knowing what is “going on at the firm” and, finally, a fear by an associate that he or she will not make partner for reasons completely exogenous to the associates performance and a concomitant sense that partnership decisions are made in a fashion that is so deeply mysterious, unfathomable and enigmatic. Every lawyer involved in recruiting and every recruiting professional has heard this mantra repeated consistently and in a virtual talismanic fashion.

Law firms are theoretically well aware of this. Recruiting literature prepared by virtually all law firms for law school graduates consistently cite the firm’s regular feedback and open communications. Similarly, lawyers involved in the recruiting process, upon hearing the gripes of an interviewee of the absence of adequate communications by partners at their former law firms, recite, by rote, as it were, the firm’s open style of communications and regular feedback, with all associates being fully informed about matters affecting their careers. If so many partners hear and say the foregoing, how could so many associates consistently experience a diametrically opposite sense?

More crucially, as law firm economic pressure rise, the level of communications and transparency declines. As candid communications and transparency decline, so too does associate morale and efficiency. A material portion, if not all of these maladies can be mitigated with open and relatively full disclosure of the impact of The Great Recession on the firm, its economic performance as well as the firm’s strategic business plans. Associates (and I daresay the partnership) want to know and are entitled to know how the firm plans to get through these challenging times.

The bickering among associates largely caused by uncertainty of continued employment, in a continuing era of associate layoffs (openly acknowledged or through “stealth layoffs), “accelerated” reviews, deferral of start dates and reduced law school recruiting must be addressed in open forums with associate participation in which the subject is addressed and the subject is put on the table for associate input on the question.

On September 23, 2010, Hildebrandt Robbins Baker casually added substantial fuel to the fire and heightened associates uncertainty of continued employment by issuing a report which speculated that during the next 5 to 7 years 17,500 (out of a total of 65,000) “partner track” associates at AmLaw 200 law firms, amounting to some 27% of the total of such  associates could simply be “eliminated” (http://www.hbrconsulting.com/blog/archive/2010/09/23/chipping-away-at-the-traditional-model.aspx )  While, a reading of Hildebrandt’s report show that it is based on a series of assumptions and speculations,  largely not supported by any facts, the result is clearly heightened concern about associates’ job security.   Hildebrandt’s speculations, while widely correctly criticized, see for example, http://abovethelaw.com/2010/09/consultant-says-17500-non-partner-biglaw-jobs-at-risk/#more-37294 , the mere report sent an unnecessary and unwarranted shock wave among at least the 65,000 “partner track” associates at AmLaw 200 law firms and surely trickled down to a significant number of other large law firms below the AmLaw 200.  The Hildebrandt report, suggesting, among other things a completely unsupportable prescience, certainly had the consequence of sending a shock wave through associate ranks around the nation, who doubtless spent unnecessary time fretting and discussing the foreboding “news.”  I daresay that if Hildebrandt had the ability to predict employment statistics seven years hence, its crystal ball surpasses that of any other economist in the nation.

Thus, in addition to the irresponsible conflagration Hidebrandt ignited and the concomittant increase in associate disaffection, partner time is now required to douse these flames.

Issues like this must be the subject of open discussion by and among partners and associates.  Associate concerns simply must regularly be allayed.

Several recent case studies illustrate the point: The London office of Delloite Touche confronted the fact that incoming work was insufficient to keep all of the professional staff employed. Management and had an open dialogue with its professional staff openly discussed the subject; it proposed a number of alternatives, including layoffs or reducing compensation by approximately 20% and concomitantly reducing by the same percentage the time the professionals were required to work. The professional staff openly discussed these and other alternatives and expressed to management that the latter alternative was the far more desirable alternative. The result: enhanced employee morale and despite the reduced number of hours required, most of the professionals had no hesitation in working beyond the 20% reduction for clients, marketing efforts, mastering new skills and writing professional articles. More recently, Norton Rose of England took the same approach to similar effect.

Perhaps an even more insightful analysis appears in Above the Law, in an essay written by a lawyer who “switched sides”  and moved in house to Aon from Sullivan & Cromwell: http://abovethelaw.com/2011/01/inside-straight-human-resources-and-the-law/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+abovethelaw+%28Above+the+Law%29&utm_content=Google+Feedfetcher

Associates observe the obvious fact that many partners increasingly “hoard” work, partially because the AFA model requires quality legal work to be efficiently delivered by experienced lawyers and, quite frankly, sometimes “hoard” hours for their own job security. These factors, again, need to be discussed openly, with associates invited to openly discuss these issues and suggest alternatives, including ways they can contribute substantively to the firm, even in the new era. Acquisition of new skills (not simply in other practice areas, but also in marketing and project management), pro bono work, accepting the fact that they will necessarily take a step back in matter involvement as they endeavor to improve their own efficiency are obviously areas for open discussion.

Law firm management in this new era also must swallow the fact that associates and partners can no longer be assessed by the number of hours billed, but rather, the new metric is efficiency of delivery of quality work product. Applying these basic principles, associates need to educated that making these contributions will eliminate conflicts with supervisors. Dissatisfaction with compensation should also be openly discussed. Associates need to be inculcated with the plain fact that rather than unfavorably comparing their own compensation with that being paid at other firms, they should be comparing the fact that they are receiving compensation and have meaningful employment with the unfortunate throngs of peers not as fortunate.

Reading the commentaries of the articles I cited above, the fact is that most associates do “get it.” Associates should also be encouraged to devote their own time to various programs conducted by virtually every bar group (such as the New York State Bar Association’s Committee on Lawyers in Transition) which provides counseling to lawyers who are unemployed or underemployed. The essence of all of the foregoing is that transparency in management, open and regular communications and dialogue eliminates or, at least tempers) virtually all of the known reasons for employee dissatisfaction.

Interestingly, Professor Steven Harper of Northwestern University School of Law and a former Kirkland & Ellis partner, in a very recent article notes that associate dissatisfaction leads to lawyer inefficiency and adversely affects a law firm’s profitability. Professor Harper argues, quite correctly I believe, that all of a firm’s partners owe a duty to the firm in assuring associate satisfaction and that a metric which should be considered as partner compensation is determined should include the measure by which individual partners contribute to associate satisfaction, or, on the negative side, associate disaffection.

Surely, these concepts are completely revolutionary, as is so much the profession has been going through recently, such as AFA’s, value billing, the death of hourly billing and legal project management. Informed management, as well as each partner, if they do have some measure of concern for enhancing morale and efficiency by the firm’s professional staff needs to step away from the smoke and mirrors of the Wizard of Oz and the secret huddling of partners behind closed doors. But the fact is that the continued management styles that were widely used in the past, treating associates (and indeed, lower level partners and counsel) as mere mushrooms (being kept in the dark and fed muck) and elevates insecurity, job dissatisfaction, fear, inefficiency, morale, rumor mongering, attempts by associates to spend late nights to rifle through partners’ trash bins, email boxes, hack in to the firm’s computer system, seeking any grain of fact or hypothesis, embellish on it or make unwarranted assumptions and conclusions, spread these among associate ranks, which only escalates in the child’s game of “telephone”, and diminish morale, certainty, confidence and efficiency.

© Jerome Kowalski, September, 2010

Related articles

• It Shouldn’t Suck to be an Associate at a Law Firm, Part II (kowalskiandassociatesblog.com)
• Tough Times Bring Out the Poacher in Law Firms (blogs.wsj.com)
• Difficult Times Sometimes Create Desperate People Who Do Desperate Things: Loss Prevention in Handling Client Escrow Funds (kowalskiandassociatesblog.com)
• WSJ: Law Firms Keep Squeezing Associates (taxprof.typepad.com)
• There are Fifty Ways to Leave Your Law Firm (kowalskiandassociatesblog.com)
• Quote of the Day: That’s One Stinky Cologne (abovethelaw.com)
• Trending for Law Firms in 2012: What to Expect This Year (kowalskiandassociatesblog.com)
• A Leaner World for Young Lawyers (blogs.wsj.com)

Associate Compensation in the New Era

2011 MLS Salary Grid (Photo credit: Bernhardt Soccer)

A long, hard look at associate compensation is in its infancy and long overdue.  There is no cosmic obligation that firms universally set the gold standard at a $160,000 starting salary nor is there a divine imperative by associates to demand compensation at that level.  Law firms have received no exemption from compliance with the laws of supply and demand. Nor are they exempt from basic concepts of basic economically rational behavior.

At the outset, let’s recall how law firms got to the gravity defying $160,000 plus bonus starting salaries.  In the last decade, as investment banks became increasingly profitable and the pool of bright B-school graduates was limited, investment banks turned to top law school graduates for fodder.  Recent law school graduates of well ranked schools were then certainly bright enough to perceive that their own economic opportunities, both short term and long term, was far rosier in the investment banking world.  Top ten law firms, upped the ante and spiraled starting salaries to the $160,000 plus level. The next tiers of law firms, forgetting that their business base was largely middle market thought that merely because they had increased in size and paid rent in major metropolitan markets they were cut of the same cloth as traditional top ten firms.

If royalty was cloaked in red velvet and astronomic starting salaries were part of that vestment, these newly large firms thought that they would also be viewed as part of the regal clan by including this vestment, ignoring their somewhat humbler roots.  So, the legal profession went in to a bidding war with the investment banks for this talent.  We’ve now seen the virtual death of the investment banking industry and, guess what?  The legal profession won the bidding war.  But, what it won was the booby prize; the investment bank world has largely died.  The competition for the high priced talent died with them.  And, law firm clients were no longer interested in financing either the no longer existing bidding war or the cost of training young lawyers.  Rather, the primary focus is on efficiently deployed legal expertise, understanding the client’s objectives and budgeting.  I have scoured the curricula of over 100 law schools and none offer coursework in these vital areas.

Rather anomalously, another driver in maintaining logic defying extraterrestrial associate compensation levels are the various blogs in which so many associates happily and anonymously share gossip,  divulge confidential information about their law firms and whine about salaries.  These blogs have assumed a jarring force in the profession.  Assuredly, many, many lawyers and professionals either sneak peeks at these blogs or follow their titillating tales with religious regularity, but basing important business decisions on these blogs is as rational as making life decisions based on the tabloids piled at supermarket checkout stands.

It certainly has not escaped our attention that in the waning weeks of 2009 and upon the dawn of the new decade, some firms announced bonuses and the unthawing of salary freezes.  Many of these announced bonuses were cosmetic, as were the thawing of the freezes. Some of the bonuses as well as increased salaries were conditioned upon realizing minimum annual hourly billing; an unrealistic achievement for many associates who are both honest recorders of time and simply haven’t been assigned enough work to get to the brass ring. Some of the “unfrozen” salary and concomitant cosmetic raises now also include a “holdback” of material portions of annual compensation, a neat way to also preserve capital and at year end, microscopically scrutinize performance, giving the firm the option to decline paying holdbacks because of purported failures to pass muster.  In some cases, the unthawing of salary freezes came with an elimination of lockstep compensation.  Thus, some firms could give the appearance of joining the elite in the AmLaw and simultaneously deal with associate compensation in the ever changing black box we witnessed in early 2009.  The ultimate results in continued declines of associate morale will again reoccur.  (Associate job satisfaction is not something not to be trifled with: http://kowalskiandassociatesblog.com/2010/09/13/associate-job-satisfaction-why-law-firms-should-care/ ). Since early 2009, we have been strong advocates of complete transparency on associate retention and compensation issues, including involving the associates in the factors being considered by management in making these crucial decisions.   That view has not changed.

In the case of some of the early 2010 announcements of unconditional thawing of previous freezes and the resumption of bonus payments by a small number of law firms which are simply top ten wannabes,  this is simply a short sighted error in judgment, with long term adverse consequences.  It is a repetition of previous lemming-like conduct, for which the financial penalties will be the same experienced in 2009.  As George Santayana famously said in 1905, “those who don’t learn from the past are condemned to repeat it.”  Or, as psychologists are wont to say, the repetition of the same acts expecting different results is the ultimate definition of insanity.

The year end associate public bonus announcements demonstrate a lack of a grasp to reality.  Surely, rewarding those who have contributed to a firm’s year end success, whatever that may be, is certainly commendable.  But, fixed amount bonuses make no economic sense.  Munificently rewarding those who are simply still breathing at year end and survived the scythe of layoffs and crowing about that grandiosity publicly also shows an indifference to client concerns that “lawyers are making too much money,” a sentiment we now know widely exists among clients.  Such bonus awards, if appropriate, should be granted privately during personal year end reviews. Associates should be told during year end reviews why he or she received or did not receive a bonus. It defies credulity that each surviving associate at each level of seniority performed and contributed equally to the firm’s year end results is simply absurd.  No firm would reward partners an equal bonus, based only on seniority.  Rewarding associates in this public fashion not only makes no sense but serves to throw more sand in client’s eyes. No other business awards annual bonuses and salary increases by simply taking an employee’s pulse, measuring continued brain wave activity and simple confirmation of continued life at year end.

Rewarding additional bonuses based on yearend total hours billed is plainly pernicious. Dr. Atul Gawande, the renowned surgeon, MacArthur Fellow and New Yorker journalist has poignantly pointed out that paying physicians on a simple fee for services basis only provides economic inducements for physicians to order and provide more services, needed or not and certainly does not provide better medical care or better medical results. Compensating associates (and indeed law firms as a whole), based on hours billed breeds only more hours, not better results. When the economic risk is passed on to the law firm, as sea changing alternative billing arrangements require (http://kowalskiandassociatesblog.com/2010/08/24/alternative-fee-arrangements-lesson-ii-of-the-primer/ ), closer scrutiny of hours billed by the firm will be the only economic result; improved or enhanced legal services will not necessarily be achieved.  The firm will more carefully consider whether a particular item of research is really needed, whether a deposition of a particular witness is really necessary.  Clients now really understand this; firms too often just don’t get it.

And, let’s say openly what we have been afraid to say publicly for a generation or more:  When you base associate compensation on hours billed or bonuses on reaching higher plateaus, you simply encourage cheating at worst and exaggeration at best. A reading of http://kowalskiandassociatesblog.com/2010/09/14/222/ is instructive.   If the associate is performing well and he or she is not billing sufficient hours, it is the firm, not the associate who is at fault. It is the firm’s obligation, not the associate’s obligation, to fill his or her plate, with due consideration to the performance of the associate.  Our deep and dark dirty little secret is that compensation and bonuses based on hours billed breeds a culture of dishonesty.

While statistics sometimes make the eyes glaze over, it is significant to quickly review some significant raw data about young associates and future recruiting: The recent publicly acknowledged round of layoffs of associates in 2009 at AmLaw 200 firms alone numbered in excess of 5,000.  That number does not include so called “stealth layoffs,” that is, lawyers who were let go because of accelerated or routine annual reviews, for which the “bar” was set higher. That number does not include layoffs for firms of 100 or more lawyers, not members of the hallowed AmLaw 200.   Nor does that number include partners or counsel who were let go; greater discretion and judgment kept these partners from wagging their tale of woe to the nearest blog. All told, we believe that approximately 27,000 lawyers are now unemployed who previously worked at firms of 100 or more lawyers.

And, the pipeline keeps spewing out more lawyers. Approximately 40,000 students graduate each year.   At the height of the hiring boom in 2007, AmLaw 100 firms hired a total of 10,000 new graduates. The estimated total number of recent graduates hired by firms of over 100 lawyers during that same top of the curve is estimated at approximately 27,000.  Accordingly, the total available labor pool for 2010 will be more than 75,000 lawyers – new graduates plus currently unemployed or underemployed lawyers.  Accordingly, if miraculously the demand in 2010 equals the demand that existed at the previous zenith; there are still three times as many available applicants as openings. We must also add to this calculus that headcounts at AmLaw 200 firms declined by about 5%. Sadly, we know that miracles seem to be in rather short supply.   2011 will add at leat 45,000 new graduates to this pool.

The incredibly long lines appearing in 2009 before the windows reading “hiring today” tells the story. Forty thousand applications were submitted for 1,200 federal clerkships. Hundreds of applicants apply for each lawyer posting appearing on www.usajobs.com. And that’s just federal jobs. Anecdotal evidence suggests that there are more than 30 applicants for each government job; the openings range from assistant counsel at a municipal waste district to the hallowed halls of the Justice Department. Six applications are made for each pro bono position. Imagine that:  six people competing for a job that offers no compensation.  The Manhattan District Attorney’s office took on so many pro bono applicants this year that it didn’t even have enough folding chairs, let alone desks, to seat them. Aspiring lawyers, $150,000 or more in debt are sitting on the floor trying to work for free to enhance their resumes in the hope of landing a paying job when the smoke clears. One bright small note is the passage of legislation which provides for law school tuition loan forgiveness for lawyers employed in the public sector ( http://legaltimes.typepad.com/blt/2010/09/doj-to-finally-give-government-lawyers-loan-relief-.html )

We have all heard a bit too often recently that employment is a lagging indicator in a recovery from a recession. But, your blood may further chill upon learning the fact that job recovery for the legal profession following a recession is one of the most significant and longest lasting indicators.

While I feel a need to apologize for numbing you with these numbers, these rather ugly statistics should play an important role in fixing associate compensation, deployment of associates and the recruiting process as a whole.

As an aside, I have frequently observed over the last year that if law school deans who recruit college graduates to enroll in law schools were held to the same standards of disclosure as issuers or underwriters of securities, many, if not most, would now be housed by the Federal Bureau of Prisons.

My own guess is that economic realities will compel a continued downward spiral of starting salaries; tiering of associates; moving associates up through the tiers only upon their mastery of important client demanded skills.  Most significantly the powerful Association of Corporate Counsel is now publicly ranking law firms by clients on a scale of one to five for six objective criteria. Thus far, 1,800 evaluations have been made of 600 law firms. Associates will be necessarily evaluated on their mastery of the ACC identified skills.

Nor does it make sense given the current state of affairs to maintain a bench full of young lawyers to be available for that call from the Big Client for a major matter.  Rather, with the streets teeming with well educated and often well trained lawyers, more associates will be engaged directly by law firms on a project by project and as-needed basis, subject to oversight by  project managers and quality control systems and personnel. Less than voluntary flex time and part time lawyers will be more common.  These lawyers obviously will be paid less and will not receive benefits.  The increasing use of temporary help, as opposed to full time employees, across all industry lines was a trend noted and reported on December 19, 2009 by the United States Bureau of Labor Statistics.  And, given the vast army of such lawyers pounding the streets, as I previously described, the necessity to use contract lawyer agencies to effectively act as distributors of these resources and paying them a distributor’s profit, the efficient law firm will retrofit its own recruiting personnel, no longer engaged as deeply in on campus recruiting and deploy them to find these project lawyers.  Some number of these project lawyers will shine and be offered full time employment.  Most others will return to await the next casting call.

Law firms in the coming months and years, are going to be dragged, perhaps kicking and screaming, back in to basic economic norms, including laws of supply and demand, rational compensation systems, merit based increases, leaner staffing, more efficient delivery of legal services and compliance with client demands.

It’s a brave and scary world out there.  But virtually every other member of the business community has already learned to survive and often thrive adhering to basic economic norms.  The fallout to the legal profession is ineluctable.  Associate compensation will continue to scale down. Numerous lawyers will be day laborers. Many lawyers now in the profession will never again work as lawyers.

© Jerome Kowalski, January, 2010, All Rights Reserved.

Related articles

• It Shouldn’t Suck to be an Associate at a Law Firm, Part II (kowalskiandassociatesblog.com)
• What is the Fair Market Value of a Full Service Commercial Law Firm? (kowalskiandassociatesblog.com)
• The Coming Invasion of the Body Snatchers: Are Offshore Law Firms Going to Invade the United States? (kowalskiandassociatesblog.com)
• Why Are Lawyers So Expensive Even With The Excess Supply Of Lawyers? (forbes.com)
• Private Equity Investments in Law Firms Have arrived in the UK and Have Largely Ignored BigLaw; What Will Happen as This Phenomenon Arrives in the United States? (kowalskiandassociatesblog.com)
• Leverage is Back: The Return of the Pyramid Business Model for Law Firms, with a Twist (kowalskiandassociatesblog.com)
• Trending for Law Firms in 2012: What to Expect This Year (kowalskiandassociatesblog.com)
• How to Succeed in BigLaw While Really Trying: A Four Act Unfinished Play, Now Playing at a Law Firm Near You (kowalskiandassociatesblog.com)