I don't get the logic: Big firms are lavishing associates with fat bonuses again, while, at the same time, signaling that their chances for partnership are worse than ever. Are firms sending associates a garbled message that essentially says: "We value you and want you to stay--but don't kid yourself that you'll have a future here"?
In recent weeks, firms have been tripping over each other by giving out so-called spring bonuses to their associates (see Above the Law for a summary of bonuses). As you might recall, some firms just forked over end-of-year bonuses about a month ago. It was only in late November that Cravath, Swaine & Moore announced bonuses ranging from $7,500 to $35,000. Then just over a week ago, it announced another round (up to $20,000 this time), to be paid in April.
Besides Cravath, The Am Law Daily reports that "special bonuses" also await associates at Sullivan & Cromwell, Simpson Thacher & Bartlett, and Cleary Gottlieb Steen & Hamilton. And ATL now reports that Cadwalader, Wickersham & Taft is considering joining the springtime bonus club. Though the amounts vary a bit--they all add up to well into tens of thousands of dollars--close to $50,000 in some cases.
My head is spinning because I seem to recall how law firm managers were vowing to put a lid on those out-of-control associate salaries just a year ago or so (for the sake of the clients!). And weren't there some nasty layoffs at big firms and something called a recession?
Oh well, I guess the good times are back, and firms just want to show associates the love. It's all wonderful now, except that the prospects for a long-term relationship has never been bleaker. New York Law Journal's Nate Raymond reports: "Consultants say making partner has become more challenging in this economic environment, which has caused firms to trim their ranks of new partners and stretch out the partnership track."
That's a nice way of saying that partnerships these days are nasty and brutal. Deequitizing and firing partners have become the norm, which can't boost morale.
Some firms are barely making partners at all. Cravath, with just over 500 lawyers, made only one partner in 2010--though it's an improvement over 2009 when it made none. And check out these numbers: In 2010, Skadden made six partners (it has nearly 2,000 lawyers), Cleary four (1,123 lawyers), and Paul Weiss two (761 lawyers).
Granted, the odds of making partner at big firms--especially those super-elite, one-tier shops--were never great. But there's also no doubt that the odds have gotten worse and will likely stay that way. The consultants in the NYLJ article generally predict a smaller partner pool with longer tracks in the future. Dan DiPietro, chairman of Citi Private Bank's law firm group, expects "low single-digit growth in profits," says NYLJ.
Which brings up the question of why firms are dangling these bonuses in front of associates when there's still uncertainty in the air. Is the immediate competition that keen for midlevel associates?
"I can't say with any reasonable certainty what has triggered the spring bonus phenomenon," says recruiter Katherine Frink-Hamlett of Frink-Hamlett Legal Solutions. "The lateral law firm market is heating up, but it's not sizzling by recruitment standards."
If the bonuses aren't about the supply and demand of associates, what gives? Says legal consultant Eve Birnbaum,"firms are telegraphing to the world, 'We had a great year and are doing well and have not been damaged by the economy.'" Recruiter Dan Binstock agrees: "Bonuses are about more than money; it’s about a firm demonstrating its power in the marketplace. And firms will go to great lengths to protect that perception."
Thank goodness the good old days are back and everyone is thinking rationally again.
Related post: "Mad, Mad Money."
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