Editor's comment: Bend with the wind

Not broken but in need of more flexibility

A year ago Legal Week observed that the model of associate lockstep was too rigid to effectively react to changing market conditions - certainly to the dramatic changes looming in 2009. The year has proved to be as turbulent as expected and the model has continued to be revised, initially with widespread salary freezes. Lockstep's failings have also been apparent from the growing number of firms moving towards competency-based systems where associate pay is determined on the basis of promotion to defined levels.

That has gone a fair way to help, but it's doubtful it will be enough. While activity levels have picked up since the summer, by consensus, pricing levels have not. Some firms, with their restructurings out of the way, have in recent months taken the view they need to buy in work in certain areas as they have little enthusiasm for further cuts. Added to which, clients - rightly or wrongly - are increasingly pushing back against the model of leverage, which charges relatively high rates for fairly junior assistants.

The issue now is if firms will have the nerve to start refashioning their model more substantively. One firm that has taken a major step in this regard is Reed Smith, which this month announced it was to cut the pay of incoming newly-qualified lawyers in the US by roughly 20%. This has been explicitly sold to win client approval, with the firm also committing to cut billing targets for these lawyers to allow for increased training.

It makes a lot of sense. Blanket freezes again in 2010 would seem a very blunt instrument - it's time to come up with something that more closely reflects associates' actual development and the value that clients put on their services, which will mean paying some of them more, not less.

Reed Smith has also been active at the other end of the scale, unveiling a plan to have non-equity partners contribute up to 15% of base pay to retain their status as partners. Again, this makes sense as the expansion of salaried partner ranks was a boom-time trend. This tactic has become increasingly problematic at many firms as the high cost weighs down on the firm and the interests of equity and non-equity partners come into conflict in tough times - which, of course, undermines the whole spirit of partnership.

None of this means the law firm business model is bust, but it must change with the times. If associate lockstep is too rigid then so is the version practised by most partners. There's a decent business case for lockstep at many firms, but when did it become scripture that it has to be 1:2.5 from entry to plateau with no gates allowed? It's too rigid. If the model doesn't bend, then it will surely break.

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