Adventure of Strategy

Consider three vectors:

1)  The increasingly stellar salaries being paid to newly qualified attorneys in the top firms, in response to demand/supply imbalances with top talent, leading to a knock-on effect with salaries for more experienced associates too;

2) The fact that superior performance at law school is not always a good predictor of superior performance in practice in a law firm and that associates do not all progress up the competence curve at the same rate;

3) Increasing demands from clients for more value in the services that they receive, especially as rates creep inexorably upwards in response to increased associate salaries.

If one were an 'independent observer from outer space' and observing trends in the legal profession today, one would not be surprised to observe pressure away from associate lockstep compensation structures, to more performance driven models.

It would not surprise one then to hear Howrey LLP, a Washington D.C based but global law firm with > 600 attorneys, saying that they will be ditching their traditional lockstep model, where associates are compensated according to the number of years that they have served since qualification (from a first year base of $160,000 per annum.) From next year, associates will progress through salary levels (each level consisting various compensation points ranging from above market rate to below) on the basis of personal performance evaluations instead of "years served."

For some, this will lengthen the track to partnership; for others, it will shorten it. For chronic underperformers,  no doubt a series of evaluations that yield compensation consistently below market rate will encourage them to seek work elsewhere.

Some recruiters are ambivalent about the new system, saying that it may hinder recruitment and may even turn clients away. Personally, i don't agree. This kind of system resembles the kind that you find in just about every area of commercial endeavour except a few of the professions, including law, and I believe that clients will welcome it. Especially if the system drives up the quality of mid-level talent that the firm is able to retain, so making the firm "different from its competitors in ways that are valuable to clients." (Which, theoretically speaking, would be a logically expected result.)

I predict that more firms will be following suit shortly.

Read a more detailed article, Howrey to Ditch Lockstep Compensation for Merit-Based Model, at Law.com. Read also the inimitable Bruce MacEwen's take on this in his post Fealty to Anachronisms in his blog Adam Smith Esq. Hat tip to Rollonfriday too, who accompanied their article with this photo titled:

"A high performing junior Howreys associate collects his pay packet"