Sweeping Sonnenschein Pay Plan Eliminates Lockstep, Offers ‘Flexibility’

Joining a few other major firms that have recently made similar announcements—and perhaps going beyond their programs—Sonnenschein Nath & Rosenthal has announced a sweeping plan to reconfigure the firm's relationship with its associates. It includes but is not limited to across-the-board cuts, at least initially, in associate pay and a shift from traditional class-based "lockstep" compensation to a merit-driven model.

Billed as a move to provide the value that corporate clients are seeking yet enhance the professional lives of associates, Sonnenschein's "comprehensive redesign" involves structural changes not only in compensation but in the firm's hiring, development, staffing and evaluation of associates, explains firm chairman Elliott Portnoy in an internal memorandum (PDF) today that was provided to the ABA Journal.

The firm anticipates smaller first-year and summer associate classes for the foreseeable future, he says, although it will continue to hire outstanding law students and lateral candidates. It also expects to put star associates on a fast track to partnership while offering "flexibility" in other arenas as well to those who seek it.

As of June 1, Sonnenschein will cut the starting "base" salary for incoming first-years to $145,000 and implement a reduced "individualized base salary" structure for the rest of the firm's associates, the memo states. At the same time, however, the firm will also increase its bonus pool and eliminate a minimum billable hours requirement to qualify for a merit bonus.

"The net effect will be to reward our highest-performing associates—at levels that can exceed their current compensation—while reducing our cost structure in ways that will give us flexibility to better meet the needs and changes our clients are seeking," Portnoy writes.

Rather than focusing on billable hours, the firm plans to shift in 2010 to a "performance and merit-based system" of compensation and promotion for associates, the memo states. A greater emphasis on associate training, evaluation and mentoring will be part of this approach, and the firm also plans to expand secondments, in which associates work in the offices of corporate clients.

"What we’re doing is really groundbreaking. It’s really a key strategic initiative; it’s not just a response to the economic climate,” firm spokeswoman Linda Butler tells the ABA Journal.

Additional coverage:

ABAJournal.com: "Baker & McKenzie Reportedly Cuts Pay for Some Associates"

ABAJournal.com: "DLA Piper Cuts Starting Pay to $145K, Apparently May Eliminate Lockstep"

ABAJournal.com: "Reed Smith Cuts Associate Pay 10%; New Hires Could Take Bigger Hit"

ABAJournal.com: "‘Meganumbers’ Pay for Lawyers Is On the Wane, Recruiter Says"

National Law Journal (sub. req.): "Sonnenschein announces associate pay cuts, performance-based compensation system"