Over the past few decades, law firms transitioned from the traditional partner/associate firm structure towards the model of the large international accounting and consulting firms, with multiple tiers of positions with different titles, duties, and pay levels. Now, there are all sorts of categories of law firm lawyers. In addition to equity and non-equity partners, there are various tiers of non-partner lawyers, as well, including of counsel, special counsel, career associates, and so forth, with the title and criteria for each set by the particular firm.
For senior associates with skills and abilities valuable to the firm but without all attributes necessary for promotion even to nonequity partner, many firms created positions with titles such as “special counsel” or “senior attorney.” From a business perspective, the up-or-out policy was unwise with regard to these associates. Given the costly investment in training and development of these associates and their institutional and client knowledge, they handle relatively sophisticated work with minimal supervision and, thus, are profitable for the firm. These lawyers are, in essence, permanent senior associates, often without further partnership consideration. They have a semblance of job security, although still employed at will. There’s no business development pressure. But, there’s virtually no advancement opportunity within the firm, either, and no real incentive for professional growth. Some lawyers are comfortable in this situation; others eventually seek other employment with possibility for career advancement. Once again, there’s potential for perceptions of second class citizenship, which lowers firm morale.
Traditionally, law firms assumed everyone who performs legal tasks should be highly qualified, located centrally, and compensated accordingly. But recent economic challenges required law firms to rethink these assumptions. They created additional associate tiers to cut overhead costs and accommodate their clients’ resistance to escalating hourly rates. Many firms introduced a tier of career associates, or permanent associates, who work fewer hours on less sophisticated matters than those on the partnership track for approximately half the pay. With billing rates only 25 to 30 percent less than those of traditional associates, the firm makes a larger profit and the clients pay less money for work done by this tier of associates than if a traditional associate were to bill the same number of hours. The disparity in compensation and opportunity between associate tiers, however, may breed resentment among colleagues. Moreover, these career associates may have problems paying off their law school loans on these salaries. In reality, firms maintained lawyers off the partnership track for years, known as staff attorneys, although usually on an ad-hoc basis. This more institutional practice probably prevents even greater outsourcing or offshoring of jobs.
To realize even greater cost savings, some firms locate these permanent associates or career associates outside the major metropolitan areas in cities like Dayton, Ohio (WilmerHale), and Wheeling, West Virginia (Orrick), with lower office expenses and cost of living. Originally set up as purely support and administrative back-office locations, these booming remote centers now house significant numbers of lawyers, as well. Hiring local talent for the nonpartnership track positions might also create more stability, with local law school graduates pleased to work for a name-brand firm close to home. In some cases, these nonpartnership track associates wouldn’t have the educational pedigree required of the firm’s traditional associates. In other cases, these associates graduated from the same top law schools, but prefer the option of practicing at a prestigious firm without the pressures of working toward partnership, thereby achieving a more reasonable work-life balance. It’s rare for career associates to jump to the partnership track but, these days, many associates have neither a desire for nor any expectation of partnership.
Most clients realize that not all legal work requires the most-expensive associates. As clients continue pushing for reduced budgets and lower legal fees, many firms with single-tier associate structures attempt to appease cost-conscious clients through the use of short-term solutions such as contract attorneys. This third tier of associates is comprised of temporary lawyers who work per diem on a set project with no benefits and no promise of work beyond the one project.
These different tiers of associates require varied approaches to motivation, promotion and compensation. Key to the success of tiered associate programs is identifying “partner potential” at the time of hiring new or lateral attorneys, then investing the firm’s resources in grooming those associates them for advancement. Of course, a firm evolving to a multi-tiered associate structure won’t need to hire as many traditional associates but, ideally, those partnership track associates will have a more satisfying career focusing their time on complex legal work and developing the necessary expertise to eventually become full equity partners.