Bursting the Bubble of Associate Compensation

At the end of each fiscal year, many law firm leaders work diligently to demonstrate their poor grasp of business economics by issuing associate bonuses that both erode profitability and do little to improve their firms’ competitive standing, all because of a misperception about a war for talent.

I like law firm associates. I think they’re hugely valuable and economically additive. Law firm leaders should do more, far far more, to find and hire good associates, and then train and nurture them. But there is no shortage in the associate supply chain, so it’s important to not over-pay.

I also like really smart law firm associates, those who graduated at the top of their class, from fine law schools. I’ve hired and worked alongside many, to great advantage. Naturally only a finite number of students can graduate in the top 10 of their class. Some experts estimate that the number of top 10 graduates is limited to about 10 per school per year. So yes, there’s obviously a scarcity of these candidates. But are they the most desirable?

Law schools don’t teach students how to practice law. And law firms don’t teach new associates how to practice law in a way that maximizes expertise and client satisfaction. There is surprisingly little correlation between what qualities clients seek from outside counsel and what qualities law firms recruit and reward and promote. What we have, then, is both law firms and law schools relying on academic performance as a proxy for what makes a good lawyer. Hence, law firm leaders have fabricated an imaginary war for talent.

This isn’t about the students or the associates. They should and do work hard, often way too hard, for limited rewards. This is about law firm leaders and their myopic understanding of the factors that generate success. When they seek to understand what makes their firms great (or used to make them great), they’ll find a wealth of talent ready and waiting.

You can read more of my thoughts on this topic in a recent American Lawyer article here.

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Fellow, a member of the Hall of Fame and past president of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. A sought-after speaker and writer, he also authors Corcoran’s Business of Law blog. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.