<p>I just wanted to take a moment to explain how an associate at a firm that bases bonuses on billable hour targets may not get the bonus that they choose to aim for at the beginning of the year.</p>
<p>On one hand, an associate may want to bill enough hours to achieve the very highest bonus available, 2400+ billable hours in the K&E example, but may fail to actually bill the requisite amount of hours. Why? Most often it would happen simply because deals die, litigation gets settled, the economy in one sector or as a whole slows, a practice area is slow (a great example is that typically when financing and acquisition work is hot, bankruptcy work is slow and vice versa) or because the firm simply doesn’t have rainmakers bringing in the work. A great example that is happening right now is that M&A and private equity associates who were working crazy hours and racking up billable hours like gangbusters through the first half of the year and now suffering through a slower period. Why? I’m no expert, but my experience is that the tightening of the credit markets has led to less availability of money at reasonable interest rates that would enable private equity funds and other investors to buy up interests in companies with the necessary leverage to make the deals palatable to their respective investors. Banks seem reluctant to underwrite and then try to syndicate these bond offerings that are so typical of private equity investments right now (e.g. the recent Home Depot divestiture). In any event, and disregarding any of my debt markets analysis, many M&A and private equity associates at firms with billable hours requirements for bonuses may not hit the billable hour targets that they were eyeing just a couple of months ago. Sure, they will most likely get home earlier and perhaps get to enjoy their weekends, but for those who wanted to bill 2400+ hours, they just may not get there. Unfortunately, those M&A and private equity associates typically can’t simply choose to pick up a new litigation case, a patent application or a project finance deal to fill up their hours, as there are other associates with experience and expertise in those areas available to do that work. Of course, there are exceptions, but this is one example of how an associate who wants to bill lots of hours may not be able to do so. </p>
<p>On the other hand, an associate may want to minimize his or her hours without regard to the effect those hours may have on bonuses. Unfortunately, sometimes these associates can’t simply choose to head home at 6 p.m. every day, and they can’t choose never to work on a weekend. In most cases, associates can get assignments at any time, whether or not they request those assignments. Yes, this applies even at K&E. No biglaw firm is going to allow an associate to sit idle while other associates are working around the clock – at least not for very long. Yes, there are specialty areas within biglaw firms (such as trust and estates, ERISA, tax (sometimes), etc.) that tend to bill fewer hours as a whole, and I’m not talking about those associates. The reality today is that an associate who regularly bills very few hours without some excused reason why may ultimately be asked to leave at their next review (using the “We really think that this isn’t the right environment for you . . . why don’t you take a few months to find a position for which you are more suited . . . you have until the end of March to do so” line). </p>
<p>However, in each case, please don’t misunderstand and think that the quality of one’s work, one’s willingness to step up and take on work, and the total number of hours billed don’t contribute to one’s success and partnership prospects at many biglaw firms. They do.</p>
<p>At the end of the day, that is why only firms that pay the same bonuses to everyone in a class, regardless of hours billed, are generally considered to pay lockstep bonuses.</p>