Killing Lockstep

Morgan Lewis: Anticipates Large Bonus Pool and Not Moving Towards Merit-Based Compensation

Morgan Lewis & Bockius associates: your long nightmare might be at an end. All the way back in July of 2009, MLB became one of the first firms to announce its intention to do away with lockstep compensation. Back then, the firm was still in the teeth of the recession, it had canceled its 2010 summer program, and at MLB (and firms around the country) killing lockstep and moving towards a low base-salary, high merit-based bonus structure for associates seemed like an appealing way to reduce employee costs.

But months and months passed without MLB actually implementing anything. We kept hearing vague “details” about the new merit-based system, but nothing actually became formalized, even as other firms went full steam ahead into the merit-based unknown.

Well, the uncertainty is over. At a video-conference yesterday, Morgan Lewis chairman Francis M. Milone announced that the firm is mothballing plans to move towards a fully merit-based system for associate compensation and development. At least not in the three-tier, random factors for advancement, format that some firms rushed to implement in 2009.

Oh, and bonuses are supposed to “substantially larger” than last year for MLB associates…

Here is one of our tipster’s report about the video conference:

[T]hey have decided to completely scrap the idea of merit-based, “level” compensation. They will be moving back to a traditional “lock step” method of compensation for traditional, partner-track associates, with amounts to be determined by the “market in the particular city,” with the clear indication being that we will be paying at the top of the market in each particular city. This will result in January 2011 raises for almost all associates – in some cases very significant raises (i.e., 2006s that were held back a year will likely go from 185 to 230).

Is that the sound of a bottle popping? Could it be that all of the time and energy firms spent on merit-based compensation plans were just a fad? Just an overreaction to the crappy economy? Or is this the result of a firm actually talking to its people before implementing sweeping changes?

Here’s the statement an MLB spokesperson gave to Above the Law:

From the outset, as the firm considered changes to our system of evaluating and compensating associates, we made clear that our focus would be on ensuring our structure matches the reality of the legal industry. This week, our Chair announced several ways in which we will do that, after listening to feedback from our attorneys and clients over the past year. First, we have decided not to make any dramatic changes to our evaluation and attorney development system. Rather, we will make some improvements to the system we currently have in place, such as enhanced training. Second, our Chair confirmed that associates meeting the firm’s expectations will receive base salaries in 2011 equal to the prevailing market level for their class year. In addition, the Firm confirmed it will pay discretionary, incentive bonuses. Third, the firm will now have alternatives to the traditional partnership track for associates–including a ‘career track’. Additional details will be provided to associates in the coming weeks, as the Chair stated during the video.

The alternative tracks for associates is a little wrinkle. It seems that the firm wants to eventually move to a model where they have two classes of associates, one class which gets paid market rate, and another which does not. But we’ll have to wait for details — and based on how the whole merit-based compensation thing went, we could be waiting for a long time.

But, I’m sure many of you noticed that line in there about bonuses. Our MLB friends report that they are very excited for bonuses this year:

Firm did very well last year. Revenue down, but net income up… The bonus pool for this year will be “substantially larger” than last year.

Milone noted that the partners recognized that associate morale was low, and that the associates had been working hard, and that hard work had resulted in a good year for the firm. Thus the good news re comp.

Overall, a damn good meeting.

And here come the models! Base compensation is going to be lockstep with the rest of the market, bonuses are going to be up from last year. That is damn good news indeed!

So, congratulations Morgan Lewis associates. It could well be that you have weathered the storm and now you about to get paid.

Earlier: Morgan Lewis Cancels 2010 Summer Program
Morgan Lewis: Details Still Sketchy on its Merit Based Compensation

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