Biglaw, In-House Counsel, Money, Partner Issues

Inside Straight: A Tangent on Merit-Based Compensation

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Ed. note: This is the latest installment of Inside Straight, Above the Law’s new column for in-house counsel, written by Mark Herrmann.

I like what Steven Harper’s doing these days. After 30 years at Kirkland & Ellis, he retired from the fray, and he now comments on big law firms from an outsider’s perspective, at The Belly of the Beast. Although Harper’s critiques are often cutting, I think they reflect his underlying concern, not animosity, about law firm life.

But, to my eye, Harper recently missed a trick. In a recent column at the AmLaw Daily, Harper speculated that big law firms may prefer lockstep compensation to merit-based systems because merit-based reviews require partners to invest nonbillable time thinking carefully about associate performance. There’s no incentive for partners to invest that nonbillable time, says Harper, so firms settle for lockstep — and firms thus delay giving meaningful (and ultimately helpful) guidance to associates.

I think it’s worse than that. I think there’s actually an invidious incentive for partners at large firms to mislead associates about their performance. Why?

The skeptics among you are thinking: “Sure. Firms tell associates they’re doing great, great, great, and then — whoops! no partnership! — because those early reviews encourage associates to stay at the firm, generate hours, and increase profitability. Firms have no reason to lower the boom early.” Perhaps that’s true; perhaps not. I never served on an associate review committee, so I really don’t know.

But there’s something else happening here, and I think Harper (and others) overlook it. Jack Nicholson understands it. He was onto something in “A Few Good Men.” The problem is: “You can’t handle the truth!”

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Suppose a partner calls an associate into his or her office and says this: “I’m going to give you an honest and constructive critique of your performance. Let’s start with your written work. I’d rate it middle of the pack. Here are some things you should think about.

“First, when you draft introductions to briefs, you typically recite all of the arguments that we’ll later make in the body of the brief, and you give all the arguments equal dignity. Sometimes, that’s the perfect introduction. But sometimes it’s not. Occasionally there’s one particular argument that represents the jugular, and everything else is an aside. In those cases, go for the jugular, and ignore the rest of the arguments (in the introduction). Remember: We’re paid to win, not to follow some brief-writing formula.

“Second, you’re fixated on the verb ‘to be.’ That’s a boring verb, and you should use it less. Please don’t tell me over and over that the rule ‘is applicable’ here. Instead, the rule ‘applies’ here; that’s both shorter and more interesting. Please review all your drafts to find the verb ‘to be’ and substitute more interesting verbs where possible.”

And so on.

What’s your reaction to that? If you’ve spent your whole life in the top ten percent of your class, you’re not going to be delighted that a partner sat you down and tried to help you. Instead, you’ll be annoyed that the partner doesn’t appreciate the magnificence of your work, and you’ll start worrying about your future at the firm. You can’t handle the truth!

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Partners aren’t stupid; they know this. I’ve heard from law firm partners (not necessarily colleagues at the places where I’ve worked) that honesty can be the worst policy. “What are you doing, Mark? You can’t tell people that their work needs improvement. That makes them unhappy and unwilling to work for you. Even if they work for you, they won’t give up nights and weekends for a guy who’s always critical. Some day, you’ll need those associates to run through brick walls for you. And you can make ’em do it. Just encourage them! Tell ’em they’re great! That’s how you build loyalty. That’s how you build a team.”

Unfortunately, that advice contains a certain amount of truth. And, true or not, many people believe it. So I’m adding this tangent to the Harper critique: Merit-based compensation does not simply require that nonbillable time be spent carefully evaluating each associate’s work. Even beyond the difficulty of evaluating an individual’s work, personal and institutional incentives may deter senior lawyers from giving truly honest critiques.

Earlier: Prior installments of Inside Straight

Mark Herrmann is the Vice President and Chief Counsel – Litigation at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law.

You can reach him by email at inhouse@abovethelaw.com.

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