It is wonderful for me, blogging into mostly implacable silence, to hear from someone, whether or not they agree with me. In fact, disagreement helps me learn and adjust my views. So when Dan Williams wrote me about some of my variations on rate freezes (See my post of Nov. 17, 2009: seven permutations.), I appreciated the time he took and the ideas he expressed. With his permission, here is the “conversation,” slightly reworked.
Rees: “If any lawyer works more than 500 hours for a company, the firm can raise that lawyer’s rates.”
Dan: “That disproportionately affects the main purpose for a rate freeze – which is to keep overall costs down. It makes more sense to say you can’t raise rates if over XX hours because the larger billings give that timekeeper more flexibility and they have more revenue to keep their firm happier.”
Rees again: “If productivity rises faster than rate increases, that should be acceptable. Lawyers who worked a lot during the year are more likely to have gained productivity.
Rees: “Only partners may raise their rates, or only senior associates – sometimes thought to be the best bargain among the various classes of timekeepers.”
Dan: “Partners have more flexibility to keep rates frozen. More importantly, law firms have a more reasonable argument for raising associate rates because their experience levels increase. We ‘sometimes’ allow rate increases for associates for increased experience, but at the increased experience level of the preceding year.”
Rees again: Good point, Dan.
Rees: “Only non-core lawyers have their rates frozen.”
Dan: “See #1, This doesn’t affect the bottom line. Also, more importantly, we want our firms to share in our compensation sacrifices (e.g., we’ve had compensation sacrifices).”
Rees again. Another good point, Dan. Share the pain.