The Changing Face of Law Firm Compensation

The recently released Partner Compensation Survey, 2012, by Major, Lindsey & Africa, exhibits some definitive changes in the ways partners and attorneys look at law firm compensation – changes that are interesting for attorneys in comparing what others think to their own perceptions.
 

Gender bias in partner compensation seems to be growing


To begin with, while in 2010 only 5% of respondents attributed gender bias as one of the main reasons for their lack of compensation satisfaction, in 2012 the percentage has more than doubled to reach 11%. On the surface, gender bias seems to be going away, but the results of the survey seem to indicate that attorneys think and find otherwise, and gender bias is seen as a much stronger cause resulting in poor compensation than it was two years ago. While all the other reasons attributed by respondents for their lack of compensation satisfaction hovered around previous findings made in 2010, the more than double leap in gender bias perception is a revelation.

The importance of billable hours is shrinking in determining compensation

The industry and the market are having their say. The demonic billable hours' pressure and the lack of transparency surrounding the billable hours' model has made clients urge for alternative billing methods for quite some time. Since the recession, there has been a significant number of clients refusing to continue with the billable hour models and opting for flat-fee arrangements in as many areas as possible.

On their parts, law firms are also working out methods to break free from the billable hours system wherever possible, bringing down the importance of billable hours sharply, when it comes to determining partner compensation. In the survey, while 74% of respondents in 2010 thought billable hours were important in determining partner compensation, today only 57% think so.

Again it's an eye-opener that less than 60% of law firm partners surveyed believe that billable hours are important. A few years ago, it would have been considered sacrilege to think otherwise.

More significantly, even though law firms continue to practice otherwise, only 8% of respondents thought billable hours are the most important factor in determining partner compensation, and only 4% thought it “should be the most important” factor for determining law firm compensation. So, the verdict against billable hours seems to be spreading from clients to attorneys with equal zest.

It's becoming tougher for the traditionalist

The Partner Compensation Survey, 2012, by Major, Lindsey & Africa made some other significant findings that show law firm culture is moving away from being a bastion of traditionalists. While in 2010, only 11% of respondents thought good citizenship was becoming less important in determining law firm compensation, the number jumped drastically this year by four times with 45% of respondents opining that good citizenship is becoming less important. In keeping with the trend indicated by good citizenship losing priority, seniority is also becoming less important according to a greater number of respondents. In 2010, only 32% of respondents had opined that seniority was losing importance as a factor for determining compensation, in 2012, 52% of the respondents have opined seniority no more figures in pay packages. Another drastic change in perception was observed in non-billable hours, typically the hours that go in administrative work or socialization, and while in 2010 only 7% of respondents thought non-billable hours were less important in determining partner compensation, in 2012, 36% say non-billable hours have lost their value.

If one cares to read through the results of the survey, while law firms are getting leaner is true, they are getting ‘meaner' beyond any doubt.