Salary Scramble

When Dan Cadigan finished law school a decade ago, he never could have envisioned 2000's law market in Portland and the country. That market features fiercely competitive scrambling among firms for top talent, along with a salary climate characterized by what a national law columnist dubbed the Great Raise of Ought-Ought.

'When I graduated in 1990, the very last thing a law firm needed was a recruiter,' reflects Cadigan, who today makes his living recruiting, as director of Attorney Staffing Group in Portland. 'It's definitely a different world. Ten years ago, partners were being let go; there was not enough work. Firms weren't hiring associates.'

But these days, thanks to strong economic growth, the top 20 firms in the metropolitan area are plenty busy, and they are hiring services such as Cadigan's to search for first-year and lateral hires. 'There is an amazing demand in Portland for new associates and for laterals,' he observes. Not only that, as recently as three years ago, he adds, smaller Portland firms 'didn't have a need for outsourcing recruiting. But now smaller firms are swamped and are outsourcing' to recruiting agencies.

'Law firms are tremendously busy and need help,' agrees Linda Green Pierce, president of Northwest Legal Search Inc. Two major reasons account for the difficulty in finding people: Nationally, there are fewer law school graduates now compared to a decade ago, according to Diane Reynolds, director of career services at Willamette University College of Law in Salem. Plus, Green Pierce adds, there are not enough attorneys experienced in the specialty areas most in demand right now in this region: intellectual property and corporate securities. 'There's a frenzy for all the firms wanting the same person,' she says, frequently hearing from firms, 'We don't get any resumes anymore.' And one of the principal reasons for firms wanting these specialists - the demands of existing and start-up high technology companies - presents a third pressure factor: keeping experienced lawyers on board.

'The dot-com offers things (to attorneys) law firms can't, like stock options that can make them dramatically wealthy,' Green Pierce says, 'so they're trying to offer incentives to stay,' and only partially with success. When starting associate salaries this year in the Silicon Valley hit six figures - even $125,000 and above, in some cases - Seattle and Portland firms, some with offices in all three areas, had to respond, or risk losing new recruits as well as current firm members.

'That has sent firms here into a tizzy. A lot are paying $60,000 to $70,000 to first-year people.' Now firms are asking, 'Do we want to change the culture and style of our firm' and require more billable hours? Firms have to bill more hours or at a higher rate in order to make up for increasing salaries, or partners will lose profit to pay for the higher salaries. In addition, what happens to lawyers in the firm who are in specialities that are not in the same frenzied demand? 'The firms don't feel as though they should pay those as much,' Green Pierce says, so that adds another pressure, to try to prevent internal dissent.

Seattle firms have not matched the $125,000 California rates, but some have raised starting salaries to $100,000 plus bonuses, according to Green Pierce, who has 15 years of experience, at her firm and previously in law firm management. 'Portland hasn't reacted that high as base salaries, but several firms have $85,000 to $90,000 with bonuses,' bringing them to $100,000 for starting-year people. There is talk that some Seattle firms are going to $125,000 this fall, but she doubts Portland firms will.

Some large Portland firms are posting their starting associate salaries on their websites and, adds Cadigan, emphasizing employment opportunities, as opposed to client needs, on their main page. Perkins Coie is posting its six-figure salary. 'Our starting associates have just hit that number,' says Christopher T. Matthews, hiring partner. 'Starting salary is $85,000, with a guarantee of at least $15,000 in bonuses in the first year.' After the first year, bonuses are contingent on meeting the billable-hours target of 1,850 hours. From the first year on, associates also have the opportunity to work more hours and earn more money if they choose.

'First-year associates will make $100,000,' says Matthews. 'The numbers have gone up quite a bit in the last year. We think that several other of the significant firms in town have responded to that and made increases in junior associate compensation.' At Stoel Rives, Oregon's largest law firm, first-year associates are offered $80,000 ($85,000 in the Seattle office), and an automatic $10,000 bonus for first- through third-year associates - and a $15,000 bonus for fourth- through seventh-year associates - for reaching the billable hours target, which is 1,850 hours, according to Stoel Rives' website.

'Salaries are increasing dramatically,' says Cadigan. One 'very well-respected law firm, very choosy about who they hire,' has raised starting base salaries from the low $70,000s to $90,000 this past spring, he adds. 'A couple of boutique intellectual property' specialty firms are now at 'over $100,000,' and bonuses at some firms of 10 percent to 25 percent of base salaries are 'not uncommon,' Cadigan says. Firms want associates to stay, because 'it costs much more than the base salary - an estimated 150 percent - to replace and retrain an associate within the first year.'

These salaries are tied to productivity and quality of work, and firms generally recognize that means not just billable hours, but also whether or not the associate is bringing in new business to support the firm. 'The Portland market has been significantly affected by what happened in Seattle,' says James D. Zupancic, past chairman of Davis Wright Tremaine's compensation committee. 'It doesn't take that long to ripple through the marketplace.' Now larger Portland firms are wondering what they must do to keep pace 'in order to attract the most talented graduates.' At the same time, firms face 'the external pressure of keeping talented lawyers in firms when they're tempted by companies outside,' he says. Firms have to make packages attractive, or stand to lose lawyers to high-tech companies.

'What you're seeing also in Portland is pressure for internal parity,' Zupancic adds. Raising compensation for certain specialty areas such as intellectual property causes internal pressure from those not in that specialty. Moreover, salary raises cause firms to re-examine their rate structures to compensate for the salaries, or they stand to lose profit for the partners. 'Your rates have to reflect your cost structure.' Associates, he says, must understand that 'you cannot pay them more and have them work less.'

For lateral hires, larger firms are starting to make exceptions on salaries when it comes to attracting an in-demand attorney. 'Firms are more open now today that they've ever been in terms of paying money to a significant individual,' says Doug Davis, director of client relations for Schwabe, Williamson & Wyatt. Schwabe also has made a financial commitment to ensure that associates stick around: The firm appointed a partner, Elizabeth Schleuning, to serve half-time as shareholder in charge of associate professional development. She says Schwabe is the only Northwest firm to appoint a lawyer on staff to coordinate and develop skills training for associates, which the firm does for first- through seventh-year associates. She adds that some associates have told her they haven't even considered a lateral move because they appreciate the firm's training program.

Klarquist, Sparkman, Campbell, Leigh & Whinston, a 33-member boutique firm specializing in intellectual property law, takes a somewhat unique approach to earnings, according to Ramon A. Klitzke, hiring partner. It pays attorneys who have at least some experience a percentage of their billings. This allows them to make varying amounts depending on their efficiency and hours, and some lawyers can make what they could in bigger cities, he says.

Such a system offers 'a lifestyle choice,' says Klitzke: Some people want to work 1,600 hours, while others want to work 1,800 or more, and the firm offers them the flexibility to do that. 'There have been other firms that have adopted a similar system. It's a mild trend, more so on the part of boutique firms, to compensate their associates this way. It's a different model, not the classic model of a law firm leveraging associates.'

Klitzke concedes, 'It is a challenge to find first-tier candidates as patent attorneys, especially software and electrical engineering.' But Klarquist Sparkman uses three lures to try to compete: the fact that it is a mid-size firm, which some lawyers prefer; the advantages of living in the Portland area; and 'self-selecting to the level that suits your lifestyle.'

Michael W. Shackelford of Ater Wynne says his firm is in the process of setting new base salaries. The goal is to remain competitive in this regional market, but 'we don't attempt to try to compete with those salaries, not $125,000 salaries.' But he said the raises elsewhere have 'forced all of us local firms to go up; it has resulted in significant increases in entry-level salaries.'

Ater Wynne, which also has offices in Seattle and the Silicon Valley, is 'trying to put into place an incentive component for people who want to work more hours than base expectations,' says Shackelford, who heads the business department. Finding experienced lawyers for corporate finance and intellectual property is 'a challenge; we have to rely on recruiters. They're out there, but you've got to find people who want to come to this area. Silicon Valley pays significantly higher, but you have a better quality of life here.… People are seeing that more and more, that the housing costs there are tough. We're always looking (for ways) we can get top students from top national schools. That's what's driving the market.'

The big salaries outside of Portland draw an even starker contrast between the higher pay with longer hours in larger areas as opposed to working here and having a rewarding practice and a life outside the office, says Stephen L. Griffith, who is chairman of the recruiting committee for Stoel Rives. This represents 'a test of priorities for law firms and students.… We're competing at the same law schools as law firms from the largest cities.… A wise law student and a smart law firm would be looking at the entire picture and try to address all of the person's aspirations and desires, and not just money.'

Griffith, who in June completed a six-week, coast-to-coast bicycle trip with another partner from the firm, says he doubts that many big-city firms would allow such outside activities. He says law graduates should take into account a firm's attitude toward leisure time, the firm's 'humanity' regarding individuals pursuing their interests and lifestyles, and the willingness of lawyers in the firm to teach associates. Recruits will find out within seconds what the firm pays, 'but that's just the beginning of deciding where you want to be a lawyer. People who stop at that point probably wouldn't be attracted,' and Griffith says he probably wouldn't want them to be, if money was their only consideration.

Jean Ohman Back, who works part time for Schwabe, Williamson & Wyatt, says she has heard that some of the graduates being courted are rejecting the trade-off of higher salaries if it means longer hours. 'I think there are a lot of students in the top 10 percent who are looking at these $100,000 salaries and saying, 'No, thanks, ' ' says Back, who serves on the Oregon State Bar's Quality of Life Committee. 'I really think you're going to get people who won't care about $100,000 to start. If you're going to spend all of your time in the office, then what is the point of being paid an exorbitant amount of money?'

Further, Back speculates that some lawyers already employed will have to decide whether they want to remain in firms that have instituted raises with higher hour expectations. 'Not every person who is working at these large law firms wants the trade-off of more money for more time.' Not every hour you work is a billable hour, plus firms also look for business development, committee service and pro bono. 'All of those things take time,' she notes. 'Those are not family time.'

Still, she adds, for young lawyers with no families or outside commitments - and especially for fresh graduates with big bills to repay for their education - the opportunity to make a high salary right away is welcome. 'For those people, I can see it's a real exciting time. They can save a lot of money.'

Pay is important, for 'students are leaving law school with much higher debt loads than in past years,' says Merv Loya, assistant dean and director of career services at the University of Oregon Law School. But the No. 1 issue for today's graduates is quality of life, he explains, so firms that are flexible are at an advantage: 'The firm able to accommodate those people who want to make a lot of money and hours, and at the same time accommodate recent graduates who are concerned with quality of life, is the firm that's going to be successful in this market.'

For average graduates, prospects are better than in the past years of a lawyer glut. 'Those not in the top 10 percent or top quarter of their class are having less difficulty,' says Northwest Legal Search's Green Pierce. 'They're not going to make $100,000 in Portland. They will go to the next-level-down firms, who (also) have raised their salaries.' Attorney Staffing Group's Cadigan concurs: 'Top firms are still very choosy about who they're hiring. If someone graduates from a top-tier law school, will they find a job in Portland where they will make $90,000? No, unless they graduate at the top of their class and have something special to offer. Smaller firms won't pay nearly that much. When the person gets a lucky break, usually smaller to mid-sized firms pay salaries in the $40s to $50s (thousands) and offer respectable work.'

Cadigan adds that graduates who finish in the middle of their class 'definitely will find jobs; some will be more skilled in negotiating what their salary should be.… Folks for whom the red carpet is not rolled out, there is contract work,' which can provide good experience and lead to full-time employment.

'I definitely would not paint a gloomy picture for recent graduates. There are jobs for folks who can earn their J.D. and do or don't pass the bar.'

'I've been at the law school for 14 or 15 years,' says Loya. For both employment and salary prospects, 'this is the best I've seen it.' The average student, he adds, still will have to work hard to find work, but jobs are available. 'It's clearly better now than it was five years ago.' The majority of attorneys in Oregon work in firms of five or fewer lawyers, and those firms don't have personnel departments that give on-campus interviews.

'But even at that level, we've seen a much better market for our graduates,' Loya says. 'There are going to be a number of openings there for students, and that will be up to the graduate to go out and talk to those people.' +

ABOUT THE AUTHOR

Cliff Collins is a Portland-area free-lance writer and a frequent contributor to the Bulletin.

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