Last week, I published an article discussing how underpaying associates can be costly to law firms. In case you missed the piece, I basically argued that paying attorneys low salaries increases the amount of turnover at a firm, which can have many negative consequences. I received a lot of positive feedback about this article, and I think that many people intrinsically understand the basic argument that underpaying associates can be “penny wise and dollar foolish,” as my grandfather would say.
In any event, there are a bunch of additional reasons why underpaying associates can be harmful to a firm that I did not mention in the original article. On the off chance that my pieces convince employers to pay associates more reasonable salaries, I wanted to convey additional reasons why underpaying associates can be costly to law firms.
Every firm should think seriously about succession planning. Although it is easy to believe that attorneys will practice law forever, lawyers ultimately retire, and firms need to groom a new crop of attorneys to fill the breach when this occurs. It is usually in a firm’s best interest that a shop continues as a going concern even if the principal attorneys retire.
Law firms typically sign long-term leases that partners can be on the hook for even after they depart from a firm. In addition, retiring attorneys might be entitled to receive residual payments from firms long after they leave a shop. Furthermore, partners probably want to secure their legacy by having a law firm they spent years building continue operating long after they retire.
However, underpaying associates can interfere with succession planning. If attorneys feel cheated by their shop, they will not want to stick around, and there will be no one to groom for partnership. As such, there will be no one who can continue operating the firm when partners decide to retire, which can increase the likelihood that partners will face serious liabilities in the future.
In addition, underpaying associates makes attorneys disillusioned with their firms and less likely to go the extra mile to originate business. It is oftentimes dangerous for law firms to rely on a few rainmakers for most of the business at a law firm. This is because rainmakers can leave a shop on short notice, or might lose their “juice” with clients once in-house contacts retire or move to new jobs.
Almost all attorneys are capable of originating business, and the smaller the law firm, the more likely it is that associates have contacts who are able to pay a firm’s hourly rates. There have been many times in my career when I witnessed associates originating substantial amounts of business, and the more people a firm involves in the business development process, the more likely it is that different clients will come to a firm. However, if an attorney thinks they will soon leave a firm, or holds ill will to their employer because of a low salary, they will be less likely to attend networking events, cultivate contacts, and try to originate business. This can affect a firm’s bottom line, and paying associates more money could improve the client base of a law firm.
Moreover, underpaying associates affects the quality of work an attorney performs. If an associate makes a low salary, they are more likely to view their job as a 9-to-5 gig, and will be less willing to work on nights and weekends for the good of a firm. In addition, an attorney who makes less money is more likely to do crappier work, since there are few reasons for underpaid associates to “go the extra mile” and exceed expectations.
The shoddier work performed by underpaid associates can affect relationships with clients. Oftentimes, clients want responses as soon as possible, even if this requires an attorney to do research and communicate with them on nights and weekends. Underpaid associates are less likely to do this, since many attorneys who make less money view freedom from work on nights and weekends as a trade-off for their lower salaries.
Certain types of matters need to be performed on an exigent basis, and underpaying associates might mean that a firm is unable to accept some emergent matters. For instance, I once originated a case while working at a smaller law firm that required me to respond to an order to show cause on an extremely tight time frame. I almost referred the case to another attorney, since I knew that this small shop would have trouble handling the matter on short notice. I eventually handled the matter myself, and since the time frame for a response was so tight — and required work on nights and a weekend — I ended up doing most of the work myself. In any case, underpaying associates can affect the types of matters a firm might handle, and this can impact the bottom line of a shop.
In the end, there are many reasons why underpaying associates can be harmful to a firm. Of course, paying attorneys lower salaries can have some short-term benefits, and I understand why many shops underpay associates. However, some law firms might realize substantial benefits in the long run if they simply paid attorneys more money.
Jordan Rothman is the founder of Student Debt Diaries, a personal finance website discussing how he paid off all $197,890.20 of his college and law school student loans over 46 months of his late 20s. You can reach him at Jordan@studentdebtdiaries.com.
Underpaying Associates Can Be Costly To Law Firms (Part II) curated from Above the Law
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