Ed. note: We mentioned it briefly in Morning Docket, but thought we’d say a bit more (and give folks a place to comment).
A number of large law firms — although, interestingly enough, not the Cravaths and S&Cs and Davis Polks of the world — are moving away from a lockstep system of associate compensation and promotion. See our collected coverage under Killing Lockstep.
The latest one to jump on the bandwagon: Reed Smith. From Ashby Jones of the WSJ Law Blog:
On Tuesday, Reed Smith announced yet another way to skin the cat. Starting early next year, the firm will go to a sort of hybrid lockstep/merit-based pay system for associates, called CareeRS (get it?). Associates will be categorized as junior, mid-level or senior depending not on how many years they’ve served, but on whether they’ve demonstrated certain “core compentencies.” That is, a particularly talented third-year associate might achieve the “mid-level” designation; a fifth-year on a slower pace might still be a “junior.”
According to the firm’s chairman, Greg Jordan, the move was a response, at least in part, to client demands. “The most painful conversation you can have with a client is to tell him that that all of a sudden, you’re charging more for an associate just because the associate has aged a year,” says Jordan. “Something needed to change. The recession made that clear.”
When the WSJ asked Jordan if the majority of associates would progress normally — getting bumped up to midlevel associate after three or so years, and to senior associate after six or so years — he was a bit vague:
“That may be what ends up being the typical pattern. But we really don’t expect that everyone will take this path. Some will advance quickly, others will need time.”
Hmm…. Should this be cause for concern among associates? How many will, like not-so-smart grade schoolers, get “left back” each year?
Some perspectives, after the jump.
One commenter had this snarky take on the change:
Reed Smith is essentially saying: our associates are incompetent, and we know it. As they become less incompetent, we will give them even more money. Not the best message for the corporate client.
Here’s an email from an ATL correspondent:
In principle [competency-based pay] is not a terrible idea. Paying people based on their skill set only makes sense. However, any time pay becomes discretionary, it is possible that the system will be abused.
Another interesting point: Will people be held back based on hours billed? I imagine they will. It will be interesting to see the exact criteria used to determine which level an associate is in and what pay will be like at those levels. Will pay be uniform across the level, only distinguished by bonuses, or will there be differences between a 4th year mid-level and a 7th year mid-level?
This is a method for the partners to suppress associate compensation, as are most schemes that vary from traditional lockstep, and I doubt we will see associates, on average, earning more under this scheme.
Quite possibly. Even though Reed Smith told Am Law Daily that the program “was nearly two years in the planning and is not being implemented in response to the economic downturn,” the Great Recession is a perfect time to implement it. After all, a job at below-market compensation is better than no job at all.
Readers, do you agree?
Reed Smith Unveils Comprehensive Talent Development Program [Reed Smith (press release)]
Reed Smith Rolls Out Competency-Based Associate Development Program [Am Law Daily]
Reed Smith reclassifies its associates [Pittsburgh Business Times]
Losing Associate Lockstep: Reed Smith Joins the Defect [WSJ Law Blog]