A lockstep revival?

In recent months, a substantial part of our firm's practice has involved working with law firm partners to improve their compensation systems. (I am currently working on four such projects with firms in Latin America and Africa.)

One interesting issue that has arisen in some of these projects, as well as in my conversations about compensation with partners at the recent Balkan Legal Forum in Sofia and the annual IBA Law Firm Management Conference in Moscow, has been a renewed interest in the "lockstep" system of compensation.  This is a system in which all partners (or, in some firms, all partners in the same class or with the same equity percentages) receive the same compensation.

The distinguishing characteristic of lockstep is that partner compensation is based on some factor (such as being a partner or years of service or percent of ownership) other than individual partner performance.

This renewed interest in lockstep appears to be more prevalent in law firms that already have, or are moving to, fee agreements that are based on something other than the hourly rate - alternative fee agreements, or AFAs, to use the currently popular acronym.

The thought process goes like this:

  • When a firm must bill on some basis other than time, the amount of time that a partner spends producing a legal service should become less relevant in determining his or her reward.  Indeed, sometimes having a partner work on an AFA matter might hurt the firm's profitability, rather than enhance it as might have been the case with hourly-billed work.
  • In the AFA world, collaboration, delegation, and teamwork are usually essential to ensuring the client's work is done competently, efficiently, and profitably.
  • Collaboration, delegation, and teamwork are values that firms with lockstep systems typically advance as a compelling advantage of a lockstep system over a system based primarily or entirely on individual work.

Our firm takes no position on the relative merits of lockstep and performance-based partner compensation.  Both models, as well as a blended one, have their strengths and risks.  Most, certainly not all, of our clients whom we advise on partner compensation usually select a system that includes elements of each.  But we have also advised law firms concerning lockstep systems that have worked very well in their unique professional cultures and financial contexts.

Lockstep compensation in not dead in law firms.

In fact, for some firms it can be the best approach. We recommend that all of our client law firms carefully consider lockstep before assuming that only a performance-based system can produce the results that the firm needs. Even in an AFA age, lockstep may not be right for every law firm, or even most of them; but it should not be automatically ruled out.

Read more on the Walker Clark Worldview Blog.