Will associate salaries tumble?
by Michelle Lore Associate Editor
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Locally, Dorsey & Whitney last week fired the first shot in what threatens to become a full-fledged big firm salary retreat by making a 10 percent across-the-board cut in associates’ pay. Starting pay at Dorsey had reached $120,000 a year locally during the height of the salary wars, but since the start of the year salaries at the firm have been frozen in place. (The 10 percent salary decrease was announced the same day the firm laid off 55 support staff, including 38 in its Minneapolis office. While Faegre & Benson and several other big firms in town have also laid lawyers off, Dorsey so far has been able to avoid doing that.)
The salary cut for associates was intended as a “share the pain” approach that protects positions, according to Dorsey managing partner Marianne Short. The move was also in line with Dorsey’s perception of market trends.
“The 10 percent decrease looked to us to be the right piece for associates to bear and also probably consistent with what we think the market will be for associate salaries in the future,” Short said.
In making the cuts, Dorsey joins a growing number of national firms paring back salaries. Those knowledgeable on law firm staffing trends say Dorsey’s action could be a sign of things to come in the Twin Cities legal market.
Tim Mahoney, executive director of legal consulting firm Special Counsel, Inc., said that he’s been seeing salary reductions occurring on both coasts and in some larger metro areas, but that this is the first he’s heard of it occurring in Minnesota — and other law firms are taking note.
Jodi Standke, CEO of the legal placement firm Talon Performance Group, predicted that the lion’s share of the salary cuts will take place at the state’s largest law firms. Those firms raised their salaries to levels now proving difficult to maintain as they competed nationally for top associate talent. Smaller firms that did not opt to pay top dollar to young associates are not under the same pressure to reduce overhead, she added.
According to Standke, the salary reductions are being driven in large part by the demands of in-house counsel. Increasingly cost-conscious corporations are no longer willing to pay law firms large hourly rates to essentially train new associates, she said.
“It’s a trend to go back to normal — what’s reasonable and normal for one’s years within a profession,” she said. “I think we were getting a little inflated there.”
Attorney coach and solo practitioner Roy S. Ginsburg agreed, calling Dorsey’s associate salary cuts a reaction to the marketplace.
“Corporate America in its boom days was willing to pay for those types of salaries. They are not so willing to pay for that now,” he said.
Ginsburg pointed out that there’s nothing so unique about how Twin Cities’ law firms are run or their client base that would make them immune to the kinds of things happening around the country.
Firms in other large cities are cutting associate salaries and there’s no reason they shouldn’t be cutting them here, he said. “In fact, I think it’s a proper reaction to what [firms] need to do to keep their clients happy.”
Standke said that law firms also need to begin examining who they are and how they are going to survive in a changing profession. Overall, the leadership in Midwest firms has been slow to make the difficult choices that must be made to run their firms effectively and move them ahead.
“All in all, it’s good to see some tough decisions being made and I think that’s what’s going to lead us all forward,” she said.
Short said that it was difficult to deliver the news of the salary cuts, but that the economic times require that the firm be forward looking in terms of the changing demand for legal services and law firm management structures.
“This is a time to look at the way we’re doing things,” she said.
