Over the course of 2009, we covered attempts from a number of firms to replace lockstep associate compensation with a “merit based” compensation system. We have seen firm after firm (and consultant after consultant) claim that clients really care about how law firms pay their associates. And who can disagree with a term like “merit?” DLA Piper put it this way in its defense of its new, merit-based system:
At its core, this new system forces differentiation and rewards outstanding performance.
Right now, merit-based compensation is certainly winning the branding war against lockstep. There are certainly very good arguments in favor of merit compensation.
But there are also good arguments in favor of lockstep. There are reasons why lockstep is still the choice of firms considered to be the best in the country. If merit-based compensation is just a thinly veiled attempt to cut total associate compensation, that’s one thing. But let’s not forget that lockstep has some serious upside for associates, partners, and yes, clients.
As many of you know, I used to work at Debevoise & Plimpton. Debevoise is a firm with a pure lockstep model. Lockstep base pay, lockstep bonuses, Debevoise would probably have lockstep bathroom breaks if it could.
You know who wins under a pure lockstep system? The most talented associates. Because under a pure lockstep system, the only incentive is to perform well. When you show up to work at a lockstep firm, you are not worried about whether your performance review will screw you out of money. You’re not worried about hitting some kind of arbitrary hours requirement to make your bonus. Instead, you show up to work each day fighting for respect. Respect from the partners, respect from your peers, and — as you become more senior — respect from your clients.
Your motivation is to do the best work you can do. And you want to do it as efficiently as possible. You see, at a pure lockstep firm, there is no special monetary prize for taking 2400 hours to do what a peer can do in 2100 hours. The more efficient person receives the prize of sleep and a personal life. (Back in the day, when the economy was booming, the more efficient person received the prize of having time to do more work. Yay?)
When firms move away from lockstep, we are told that clients no longer want to see lawyers compensated merely for how much time they’ve spent at the firm. I find that argument slightly strange. Is it really controversial to suggest that the longer somebody does something the better they’ll be at it? Even Malcolm Gladwell did his whole “writing a whole book about something obvious using other people’s research” thing to explain the phenomenon.
The implicit criticism of lockstep is that it somehow allows the talentless and the slackers to slack through their no-talent existence without monetary punishment.
If that is a problem, it would seem to be a problem with a firm’s talent acquisition model, not the lockstep compensation model. If you recruit the right caliber of attorney, the fear of being the “worst lawyer in the office” should be more than enough of a motivator. It feels like some of these merit-based compensation systems are trying to use money as a substitute for a sense of professional competitiveness and pride. Which is fine. But one imagines that gunning to grade out highly on a subjective performance review is only going to take a person so far.
In a lockstep system, the only metric that matters is whether the people you work with and for respect the value of your counsel. Isn’t that what lawyers are supposed to be concerned with?
Maybe lockstep is best suited for the top Biglaw firms that recruit exclusively from the top law schools? Maybe some lawyers need their performance incentivized with cash money in order to produce their best work?
But for the firms that make it work, lockstep provides a strong value proposition for clients. Pure lockstep = pure teamwork. At a firm like Debevoise, you ask questions of the more experienced guy sitting next to you — instead of trying to be a hero, reinvent the wheel, and end up billing eight hours on a two hour project.
When partners compensation is significantly tied to a lockstep system of seniority, that’s when real collegiality is built. Let’s just say that I wouldn’t have known what a business origination fight looked like unless friends at other firms needed to bitch after work.
Assuming billing rates are equal — and no firm has announced “merit-based billing rates” to go along with their merit-based compensation scheme — do clients really want their lawyers fighting over who gets the best performance review?
In a lockstep system, superstars will do their superstar thing while mediocre associates try to raise their game. A merit based system might throw a little bit more money at the superstars, at the expense of the mediocre performers. Will that make people work harder? More importantly, will that make people better at their jobs?
Lockstep might not have the word “merit” in its name, but lockstep still rewards talented people.
Earlier: DLA Piper: Taking the Merit Based Model Out for a Spin