Salary Wars and Law Firm Pro Bono

Here we go again.  In early June, Milbank, Tweed, Hadley & McCloy*† announcedthat it was increasing starting salaries to $190,000.  (Law firms made significant changes to the associate compensation scale in 2007, just prior to the Great Recession, and in 1999, in advance of the dot-com crash.)  Predictably, Milbank’s move triggered similar raises with firms announcing matching (or more generous) compensation scales, even raising the salaries for their summer associates who just arrived from law schools.  This pattern may continue, as “salary wars” are once again being waged at major law firms across the United States.

As of now, decisions about compensation are still pending at many firms.  Whatever action law firms take, it is critically important that they preserve and protect their commitment to pro bono.

Especially during the first round of the salary escalation in 1999-2000, firm practices with respect to pro bono varied widely.  The size of the salary increases (and of the corresponding increases in compensation for other lawyers), the speed with which firms adopted new associate compensation, the large number of firms that matched that standard, the profound changes in the structure of associate compensation that evolved from the salary increases, and the actions that firms took to accommodate the unplanned additional costs resulting from the domino effect of the salary increases impacted all aspects of  law firm economics and practice for years thereafter, and, to some degree, we are still experiencing those effects.

We have lessons learned to draw on to ensure that the financial and psychological aspects of salary escalations do not negatively impact the pro bono culture and performance that so many firms have worked diligently to develop.

The Pressure to Bill More Hours

In response to the news articles regarding higher associate compensation levels, a number of sources have both predicted and documented that corporate clients will strongly resist higher billing rates for new lawyers.  The higher salaries – and the additional financial burdens they place on law firms – are likely to create pressure to bill more hours.  As billable hour targets have increased and hardened over the past decade, the treatment of time spent on firm-approved pro bono matters vis-à-vis time spent on work for paying clients has become a critical issue.  Even in those firms that have indicated that they are not increasing billable hour requirements despite associate salary increases, the unspoken message – if not clearly, strongly, and repeatedly rebutted in policy and in practice – may be that pro bono time is simply not on a par with work done for paying clients.   Accordingly, the Pro Bono Institute’s Law Firm Pro Bono Challenge®, adopted by many major law firms and used as an industry standard, specifically requires that each signatory “ensure that the firm’s policies with respect to evaluation, advancement, productivity, and compensation of its attorneys are compatible with the firm’s strong commitment to encourage and support substantial pro bono participation by all attorneys” (Principle 5(b)).

Lessons Learned:   Allaying Associate Concerns and Preserving a Strong Pro

Bono Culture

This month’s associate salary increases do not necessarily constitute a sharp break with previous law firm policies and practices.  Indeed, in many respects, the salary adjustments are a continuation of changes that have already taken place at many large law firms. And, in the interim since the first round of salary escalations of 1999-2000, the pro bono culture and infrastructure at many large law firms has been significantly strengthened.  There is greater awareness of the importance of pro bono and its benefits to the firm, its lawyers, and the community and pro bono clients.

Nevertheless, the recent increases have prompted concerns about the manner in which big firms operate and the potential impact of the increases on the pro bono culture of law firms and the willingness of associates to participate in pro bono work.  Because perception can be as powerful as reality, it is essential that top firm leadership address the issue of pro bono in the context of these salary increases, unequivocally reconfirm their personal and institutional commitments to pro bono practice, and assess and reconfigure the firm’s pro bono efforts to maximize their impact.  Firms that have not yet joined the Law Firm Pro Bono Challenge® initiative should do so now to make their commitment as clear and public as possible.  Firms may want to review, and, if necessary, revamp their pro bono policies to make their commitment to pro bono explicit and understood.

Law firms that have raised associate salaries and/or increased or hardened billable hour benchmarks cannot and should not remain silent on the subject of pro bono.  Associates, who will benefit from the salary increases, understand that their productivity will be highly scrutinized.  Partners, who, consciously or unconsciously, may resent or question the new salary levels, may be more likely to send negative messages to associates about pro bono.  Even at major law firms with the strongest pro bono cultures, lawyers will often draw unwarranted conclusions in the absence of clear messaging and reaffirmation of support for pro bono.

Firms that already provide parity for time spent on pro bono work – the vast majority of law firms with which we work – should reaffirm that parity.  Even if they have not provided parity in the past for pro bono time, firms should now commit to providing billable hour benchmark parity for pro bono work to signal their support at this pivotal time.  Providing parity, as many firms have discovered and documented, does not negatively impact financial performance; rather, it ensures robust and effective pro bono participation.

In addition to announcing or reconfirming pro bono parity, firms should ensure that their procedures and actions are consistent with the policy.  Including pro bono work in strategic plans, business plans, self-assessments, and evaluations and specifically requiring every lawyer (at every level of seniority) to review her or his pro bono performance reinforces the firm’s message.

Compensation changes may accelerate the changes in staffing models already underway at many firms.  Associates are not the only attorneys creating value: staff attorneys, managing attorneys, discovery attorneys, and project managers all provide valuable services, often at lower cost.  The rising costs of associates will place added pressure on firms to revisit current staffing levels and models. Firm pro bono policies and practices need to keep pace to ensure that they address current firm demographics and categories of attorney personnel to promote maximum pro bono involvement and inclusiveness.

While firm leaders undoubtedly feel pressure to ensure profitability despite the amplified financial obligations resulting from these salary increases, the most important lesson from the earlier rounds of salary wars is that under no circumstances should firms retreat from their commitment to pro bono and their policy of giving generous credit for pro bono work.  Firms that backed away from their pro bono commitments found that they paid for that misstep – with negative publicity, sharply diminished pro bono hours, and lower associate and partner morale and rankings.  Many admit regretting that decision and subsequently changed course.  The performance and reputational damage, however, lingered.

Firms that increase starting associate salaries to the $190,000 level (or the commensurate increased level in their communities) are keeping pace with their competitors and the market.  They are not gaining a competitive advantage.  Experience and academic research indicate that, particularly for this generation of associates, commitment to pro bono service can be a critical differentiator and a vitally important recruitment tool.   Downgrading pro bono in this highly competitive environment would be a mistake.

Firms and markets that elect not to follow the trend of increasing associate salaries may avoid the resulting financial pressures, but they will face the question of how they can continue to compete for the best and the brightest recruits despite their lower salaries.  Quality of life and work issues – flexibility; autonomy; inclusion; training, mentoring, leadership, and professional development opportunities; interesting work; and, yes, pro bono – have been demonstrated to be the most compelling qualities that new lawyers seek.  Firms that opt out of the salary escalation should particularly highlight their continuing and strengthened pro bono commitment as a competitive advantage.

To be sure, the most recent round of associate salary increases may be cause for concern for pro bono champions.  However, they also offer the opportunity for firms to recommit to pro bono and to rethink and reshape programs, refocus firm leadership’s attention on pro bono, develop new approaches that address structural problems related to pro bono administration and increase efficiencies, and, ultimately, strengthen pro bono and the impact that our work can have on our communities and our pro bono clients.  After the dust has settled, in order to attract and retain the best legal talent law firms must differentiate themselves from their competitors.  Pro bono offers a meaningful vehicle to demonstrate a firm’s core values: commitment to its attorneys, its community, access to justice, and the highest ideals of the legal profession.

As with all other aspects of law firm pro bono practice and administration, the Pro Bono Institute’s Law Firm Pro Bono Project is available to provide assistance to firms addressing the new challenges to pro bono presented by rising associate salaries.

* denotes a Law Firm Pro Bono Challenge® signatory

 denotes a Law Firm Pro Bono Project® member