Edge International


Creating a Growth Structure from a Lockstep Mindset

Creating a Growth Structure from a Lockstep Mindset

It’s not often I stumble into mid-sized and larger firms that have successfully retained a compensation system that can honestly be described as pure lockstep. Other than a number of the most profitable Wall Street firms, the rest of BigLaw and “not-so-BigLaw” long ago began incorporating some features that track originations and link individual compensation to “slaying the dragons.” Nonetheless, I do stumble into some relatively pure lockstep situations where moving on up to a higher compensation band is a creature of firm tenure and age.

A tenure-based system can be attractive to mid-sized firms as it can reinforce collaboration and cohesion, but given the revenue-growth imperative most firms embrace, I typically recommend that these firms engage some origination tracking in order to assess individual contribution – after all, if you don’t measure and reward certain behaviors, you can expect to get less of those behaviors. For many of these firms, the question becomes how can they dip their toe in the waters of “eat what you kill” without becoming the Darwinian mess they fear?

Partnership Evaluation Purposes

Tracking originations can help firms make individual assessments of current-year compensation, or it can help firms make individual assessments regarding entry to partnership. Firms that haven’t made even anecdotal attribution of originations are often well served by being pretty measured with their first step. A suggested first step might be to begin including a subjective, non-formulaic origination criterion in the partnership evaluation process. The subset of firm lawyers that has strong opinions about partnership decisions tends to be smaller than the subset of firm lawyers that has strong opinions about how the current year “pie” is going to be apportioned.

Current Compensation Purposes

It is an understatement to say that the work of an annual compensation committee can operate in a “charged” environment. Moving in a new direction – like most efforts at law firms – will be best received if accomplished in an incremental way. Below are a few suggestions as to how a firm could introduce a movement away from a tenure-based compensation system: