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Orrick, Herrington & Sutcliffe dumped lockstep associate promotion on Wednesday and began assigning associates to one of three tiers within its partner track.
Now associates, instead of being a first-year, second-year and so on, will hold one of three titles: associate, managing associate and senior associate. Attorneys will have to meet certain criteria to advance from one level to the next.
The firm has said for months that it will depart from lockstep and move to a more merit-based promotion and compensation system, but had not revealed details.
Orrick will also create a nonpartner-track option for associates, and boost the number of staff attorneys doing more routine work like document review.
Orrick Chairman Ralph Baxter Jr. said the moves are meant to create a system in which clients aren't paying for unnecessary costs.
"Why do clients complain so much about how much first-year associates are paid?" he asked. "They complain because they know that the work assigned to first-year associates could be done by people who aren't paid that much money. These additional pieces of our talent model will give us a much more robust set of alternatives in staffing matters, which in turn will address the concerns of clients that law firms incur costs that they don't need to incur in order to deliver the service."
Many associates were skeptical when the firm first started discussing the changes more than a year ago, but they became more comfortable as their concerns were addressed during multiple meetings, said a midlevel associate who spoke on condition of anonymity.
"The firm is good about trying to be transparent," the associate said. "We've had meetings galore along the way, getting input from us, things we were worried about, things we were unsure about.
"I give them the benefit of the doubt that it's probably a good thing for the firm," the associate continued. "If that's appealing to clients and that's going to keep us from being laid off down the line, that's a good thing."
Salary changes will not take place until 2010, but the firm said bonuses that aren't tied to billable hours will play a larger role in compensation.
Orrick's move comes as firms face immense client pressure to control costs. Clients are also increasingly unhappy with paying for inexperienced associates. Several firms have changed or are considering changing their staffing models not only to control costs but also be more flexible to the ebb and flow of demand for legal work.
Other firms have made similar changes, including Howrey, which last week said that its beginning associates will follow more of an apprenticeship in their first two years, and McDermott, Will & Emery, which 18 months ago launched a staff attorney program to handle tasks that could be billed at low rates.
DLA Piper is discussing alternative staffing models that include a nonpartner-track option for associates and more "flex-time" attorneys who can be tapped during busier times, according to a partner there who spoke on condition of anonymity. A firm spokesman said no decisions have been made.
McDermott Co-Chairman Jeffrey Stone said the number of staff attorneys has soared since its program launched. The firm considered outsourcing to India or using contract attorneys, but found quality issues. Permanent staff attorneys have been a good solution, he said.
"As a provider of legal services, one of the things you want to do is provide the spectrum of legal work, and you don't want to overcharge for any component of that spectrum," Stone said.
Orrick will also boost the ranks of staff attorneys at its Wheeling, W.Va., facility. Those attorneys will have such titles as "career attorney." Their roles will include project managers, document reviewers, compliance specialists and other routine work.
Consultant Peter Zeughauser said economic forces will bring more of this type of change to law firms in the near future.
"The basic business model, where all you care about is revenue and not cost -- which is a model that is engendered by the hourly rate -- that model has never been client friendly, nor has it forced firms to manage themselves effectively," Zeughauser said.
CHOOSE YOUR PATH
Orrick has also made a "custom" track available, which is for lawyers who, the firm says, "have outstanding skills yet desire a less traditional path to partnership or do not aspire to partnership at all." For now, associates will be recruited from law schools and join the firm on the assumption they will be on the partner track.
"A lot of people don't mind being lawyers, but don't want to be a partner, and don't want to put up with all the crap that partners put up with," said the Orrick associate.
"That to me has been the major selling point on this. For us, from a day-to-day personal lifestyle perspective, the idea that you can maintain a level that you are comfortable with, without fear of being fired, I think is appealing to a lot of people."
Courtney Goldstein, a recruiter at Major, Lindsey & Africa, said firms that identify nonpartner-track attorneys early on stand to save a lot of time and money.
"For someone that's going to go down the partner track route, it's a completely different mentoring system, they are learning rainmaking skills, marketing skills," Goldstein said. "That's an investment for the firm, that's a down payment, that's money out of their pocket and time out of their pocket. If you are not on that track, the investment will be different."
