Small Law Firms

Size Matters: Time To Get All Nancy Grace On You

It has been a while since I took the S.A.T, but here goes. Nancy Grace: Casey Anthony Verdict; Valerie Katz: ________.

A. Ramona Singer Pinot Grigio;
B. Biglaw Spring Bonuses;
C. Closed Compensation Model in Small Firms;
D. All of the above;
E. None of the above.

Correct Answer: C. I, like Ms. Grace about the Tot-Mom verdict, am full of rage about closed compensation models in small firms.

A “closed compensation” model is defined as one “where partners in a firm do not know how much the others earn. While partners generally have a sense of how compensation is determined, they will not be party to the outcome by which individual compensation is arrived at.” An “open compensation” model, by contrast, is “one where individual partner compensation is known by all partners of the firm.”

A recent study by the Institute for Women’s Policy Research found that almost half of all workers in the U.S. “are either contractually forbidden or strongly discouraged from discussing their pay with their colleagues.” And, 66.7% of the respondents to my salary survey reported that they did not know the compensation that other associates earn.

Why does this make me think “the devil is dancing?” Find out after the jump….

First, as suggested in the WaPo article, when salary information is secret it is “harder for employees to discover whether they’re being discriminated against or not.”

Second, having salary information about co-workers allows an employee to “assess [her] value” and can lead to “more ‘adult arrangements’ between workers and their supervisors.”

Third, open compensation models result in greater honesty and accountability among partners.

Opponents of open-compensation claim that “such knowledge simply makes [employees/partners] disgruntled and anxious.” Others argue that:

Closed compensation models also have the advantage of being able to more accurately reward star performance, as interpersonal and political considerations are less likely to directly influence compensation outcomes at the firm. Specifically, supporters of closed compensation models point to their ability to more readily reward rising stars in the firm, as perception issues and compensation comparisons are less likely to occur in a blinded model.

Neither of these justifications seem to offer enough of a reason to hide salary information. Indeed, even without salary information, associates and partners have enough other evidence of superior performance to be “disgruntled and anxious.” Without knowing what other associates made at my prior firm, I was still able to determine how I stacked up against other associates (answer: the best). And, unless bills are made contraband, it is pretty easy to figure out how much revenue each attorney is bringing in to the firm.

Further, even if I believed that a closed compensation model made it easier to award “star performance” (I do not believe this), that does not foreclose the possibility that compensation decisions for other attorneys may be based on political considerations or favoritism. After all, it is a closed system and so no one truly knows what factors are considered in determining compensation. To believe otherwise would require blind faith in whoever is setting salaries (something I would imagine attorneys would be reluctant to do).

If you work at small firm, you likely know everything about your co-workers. You know about their kids’ softball games, you have seen many pictures of their wives, and you have seen some of them get freaky on the dance floor at holiday time. This is likely why you chose to work at a small firm — because you wanted a close-knit work environment. In fact, the attorneys who responded to my “small is beautiful” contest told me that they wanted to keep their small firms small because they wanted to keep the environment collegial and prevent any upset to the work-life balance struck by the firm. Given this, and the fact that most people choose to work at small firms for reasons other than economics, there is no reason to prevent these attorneys from having an “adult arrangement” with each other when it comes to compensation.

In other words, if I know that your wife is not a natural blonde, then shouldn’t I know how much more money you make than me?

If there are any readers (partner or associate) whose firm uses a closed compensation model and you support the closed model, please email me with your reasons. If no one gives me some answers soon, this column is going to start looking a lot like HLN.


When not writing about small law firms for Above the Law, Valerie Katz (not her real name) works at a small firm in Chicago. You can reach her by email at Valerie.L.Katz@gmail.com and follow her on Twitter at @ValerieLKatz.

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25 Responses to “Size Matters: Time To Get All Nancy Grace On You”

  1. Amy Whitelaw says:

    As an ATL reader young enough that I took the SAT in relatively recent memory, there aren’t word association problems on the test anymore.  Haven’t been since the year before I took it.  (Granted I’m not old enough to be in Law School yet but still…)

    • Warning says:

      Don’t go to law school.

      • Guest says:

        It’s not that easy. What other options does a young person have?

        • Bonobo_Bro says:

          Teach English in Asia, my buddy did that for a year, ended up tutoring the son of some BSD (I think at JPM) and is now starting as an analyst. Sure it’s a long shot but probably a better chance of a decent job than going to law school is going to get you. 

        • Guest says:

          Oh lord here we go with the “tutor english in asia” crap again. Anecdotes aside, that’s a bigger fantasy than a TTT law school.

        • Bonobo_Bro says:

          Well it probably helps that he had a finance degree from a decent Ivy and was just taking a year off. 

      • Bonobo_Bro says:

        I dunno, someone who keeps track of word association problem frequency on the SAT might be a great fit for law school. 

    • Guest123 says:

      try 4chan, I don’t know why anyone who isn’t a lawyer or in law school would read this site… much less comment on an article having to do with compensation models for law firms.

  2. Dick Decent says:

    Valerie, explain again why it is you are out of the kitchen?  Is it that whole fat-ugly-got-no-man thing?

  3. The_Haterade says:

    Nancy Grace: Casey Anthony Veridct :: Valerie Katz:Kickbacks from firms looking to advertise?

  4. BilingualFRERE says:

    “If I know that your wife is not a natural blonde, then shouldn’t I know how much more money you make than me?”  No.  You may have snuck a peak in the sauna, but my money is my business. 

  5. Bonobo_Bro says:

    Val, I’d kindly prefer you didn’t get on me at all, Nancy Grace style or otherwise. 

  6. Yeah says:

    You know what would be hot? If Valerie cuckolded her Jew husband with Elie. Imagine Shlomo hiding in the closet peeping through a slit in the door as he watches Elie satisfy his wife. Elie pulls out that 10″ slab of thick brown blood engorged meet, which weighs more than most wimpy biglawyers’ thin forearms. Valerie whimpering in fear and anticipation, wondering if she’ll be able to take it all. Elie climbs on top of her, and all you see is his black body completely covering her alabaster white petite frame. All you can make out are screams of joy as Elie easily drives Valerie to orgasm, then dumps his massive load inside her. That’s hot.

    • Trollface says:

      Dude.  That was so wrong.

    • GMoney! says:

      Welcom back, Elie’s Lawyer. We’ll give you a couple posts to clean up the capitalization, spelling, and grammar, and we’ll expect you in top form for Monday. Elie’s 10″ monster has not been receiving adequate press/respect lately.

  7. DP says:

    For Christ sake, please get rid of that damn Asian’s picture!

  8. Guest says:

    “they will not be party to the outcome by which individual compensation is arrived at”

    Is that supposed to be English?

  9. Employed2009Grad says:

    “An ‘open compensation’ model, by contrast, is ‘one where individual partner compensation is known by all partners of the firm.'”

    Does anyone think this is an actual problem at small firms? Its as if you think partners at small firms can’t figure out what they are worth when in reality they often know the revenue they bring to the firm down to a dollar. The analysis may be different if we were taking about associates but your own definition of the open compensation model says nothing about them and if you’re really talking about associates being in the dark regarding comp that should be more explicit.

    • Guest says:

      This is sort of along the lines of what I was thinking.

      Associates are obviously employees and have to depend on whether they’re told of the firms financials or not.

      But wouldn’t partners (assuming they’re real partners, not employees called “partner”) normally have access to all of the firm’s financial information and know exactly what sort of draws the other partners are taking? 

  10. Meh says:

    It’s pretty easy to figure out other associates or partners are making more than you when they drive up in brand new Porches wearing Kiton while you’re still driving your mom’s Subaru wearing Casual Male. HTH.

  11. “if I know that your wife is not a natural blonde, then shouldn’t I know how much more money you make than me?”
    If you’ve checked my wife’s carpet to make sure it matches the drapes, then yes, you also should know how much more money you make than me.

  12. Guest says:

    I think the (de) pressing question is why VK is still writing for ATL?  Lat could just post the Asian pic and then run one of the normal ATL adds.  Saves him money and we get better content.  Any thoughts?

  13. Guest says:

    I think the (de) pressing question is why VK is still writing for ATL?  Lat could just post the Asian pic and then run one of the normal ATL adds.  Saves him money and we get better content.  Any thoughts?

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