Law Firm Leaders Struggle With Setting Firmwide Rates

December 16, 2014 – In The News
The Legal Intelligencer

Mark Silow was quoted in The Legal Intelligencer article, “Law Firm Leaders Struggle With Setting Firmwide Rates.” Full text can be found in the December 16, 2014, issue, but a synopsis is below.

The weight of collections, partner compensation and rate-setting is upon law firm managing partners this month. And the latter has proven a bit frustrating for firm leaders this year as they grapple with setting rates in an era where firms span multiple markets and practice concentrations, clients aren't willing to pay the published rates and alternative fee deals are a growing part of firm revenue.

Firms are beginning to move away from a uniformly applied rate structure and are turning to a specialized approach that may result in harsh differences in rates charged across offices, practices and attorney level.

Mark Silow, firmwide managing partner of Fox Rothschild, explained that there is a dynamic in the market right now where people are feeling both more encouraged and emboldened about the ability to increase rates and salaries, and, on the other hand, "everybody remains pretty scared" given the recession is not far in the rearview mirror.

Silow noted that some practices are back to boom times while others are operating in the "new normal," making rate-setting much more complicated.

For Silow, issues begin at the first-year associate level where Fox Rothschild is seeing upward movement in starting salaries in certain markets, such as New York, Philadelphia, Los Angeles and San Francisco, but not in others. He said Fox is struggling with how to deal with that market differentiation.

"If you have multiple offices in lots of different markets like we do and you run your firm as one, integrated firm where work flows all over the firm to different offices, how do you deal with the fact that associates may be of the same rank but are being paid different amounts and charge different amounts?" Silow asked.

He said Fox tries to keep associates within a "fairly confined boundary" in terms of the spread in rates charged. The same goes for partners. Silow said there are some matters for which clients will pay a higher partner rate if a certain experience is required.

Silow explained that "for the day-in, day-out, nuts-and-bolts kind of work, it is difficult to have a $700-an-hour lawyer working shoulder-to-shoulder on the same matter with a peer that is charging maybe $300 or $350 an hour."

Silow said the firm and industry are at a crossroads, and he expects to see more market segmentation because markets are simply distinct these days. That creates complications, however, on how firms approach people within the same class, he said.