Merit-Based Compensation for Associates

Law firm compensation looks a lot like a game of Simon Says. Simon (or Cravath) Says pay all first years x. Simon Says pay all first years y. Pay first years based on their performance. Tsk, tsk . . . I didn't say "Simon Says."

Most of the BigLaw firms follow the leader, paying the same compensation and bonuses based strictly on class year. But several firms have said so long to BigLaw Simon and ventured into merit-based compensation models. A recent panel at NALP called "How Is That Performance-Based Compensation Working for Ya" discussed law firm compensation based on competencies. Three law firms-which all feature some type of performance-based compensation-were represented on the panel: Orrick, Paul Hastings and Fenwick & West (notably, the Director of Professional Development at the now-dissolved Howrey was originally scheduled for the panel). Moderated by David Cruickshank, Consultant at Kerma Partners, the panel included Siobhain McCarthy, Managing Director of Global Attorney Development at Paul Hastings, Carolyn Bortner, Director of Lawyer Development at Orrick and Cheri Vaillancour, Director of Professional Development & Legal Personnel at Fenwick & West (for a fantastic summary of the panel, check out Above the Law's David Lat's post, linked below).

After Cruickshank discussed several types of compensation models, ranging from pure lockstep to lockstep plus a merit-based bonus to a mix of lockstep and merit-based to a completely merit-based system, each panelist explained the compensation system at her firm:

  • Paul Hastings: Lockstep base compensation plus a merit-based bonus (based on competencies).
  • Orrick: Junior attorneys in their first three years receive lockstep base compensation plus a merit-based bonus. Mid-level and senior associates receive merit-based compensation.
  • Fenwick & West: Merit-based compensation (based on competencies) with three levels of associates.

 These firms may be in the minority, but are they on to something when it comes to associate development? According to Cruickshank, "lockstep and hours-based programs do not reward development of the multiple skills and investments that we seek from partners. Inflexibility of hours . . . makes it difficult to create customized career paths." As an example, Cruickshank described a senior associate who had turned down a non-billable writing opportunity offered to him by a partner because he had to meet a certain number of hours to get his bonus. As Cruickshank explained, lockstep compensation will award associates, regardless of whether they take advantage of opportunities and develop the qualities and expertise necessary to be good partners.

To read the complete post, follow this link to Vault.com.

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