Having long recognized the flaws inherent in lockstep systems, a growing number of law firms are now transitioning to performance-based compensation and advancement systems. The downturn in the economy has certainly accelerated the pace of these transitions, but other factors contributed to the change in the way firms are hiring and managing associates. These developments include changing expectations from clients, who question paying high rates for attorneys that are still developing their skills, as well as different expectations from young associates, who want more work-life balance and are not as concerned about the path to partnership as older generations. Law firms are also starting to design their talent management systems so that they better align compensation with actual performance.
The traditional lockstep approach has allowed firms to go on autopilot, basing everything from compensation and billing rates to promotion consideration on an attorney’s class year. Early efforts to move away from lockstep involved the adoption of various forms of merit-based compensation tied into a skills-based evaluation. However, these approaches typically placed too much emphasis on just acquiring technical skills, essentially ticking off tasks accomplished, rather than asking individuals to develop and exhibit specific behaviors necessary to become well-rounded, accomplished partners.
The more current, performance-based systems (also called “levels” or “competency-based” systems) focus everything – from gaining additional responsibility and additional compensation, to achieving higher billing rates, to developing professionally to maximize value to clients – on identifying key competencies that excellent attorneys need to master at various stages of their careers. These skills include not only traditional technical competencies, like strong written and oral communication skills and research and analytical abilities, but also include behavioral competencies like self-management skills, interpersonal skills, client relations skills, and attitudinal elements like a strong work ethic or a “drive for results.”
Unlike the autopilot of lockstep, performance-based systems give attorneys a clear roadmap to follow and allow them to shape their own professional destiny. The firm’s expectations are clearly outlined and associates are given a means to direct and measure their professional development at each step along the way. These systems replace rigidity with flexibility, motivate attorneys more effectively and allow firms to recognize, reward and retain their best and brightest. Performance-based systems also allow the firm to separate billing rates from compensation by setting rates that reflect not just how the firm perceives a given attorney’s value, but more importantly how clients perceive it.
Performance-based systems require active management on the part of the law firm and recognition that systemic change is required. The system needs to have a sufficient number of levels to differentiate the logical steps in an associate’s career, the right competencies by which to measure an associate’s progression toward firm and client-relevant objectives and to evaluate associates in a meaningful way, with the right compensation plan and the right timing. But, having a good design is only half the battle; effective implementation of the design is equally important. To maximize chances for success, firms also need to convince key constituencies of the need for change and gain their buy-in, while also developing a fair, accurate and consistent evaluation system. To navigate the path from lockstep to a performance-based system, firms need an effective change management process, the right support systems and decisive leadership.
Why Choose Hildebrandt?
Hildebrandt has been on the forefront of the move from lockstep to performance-based systems, from helping with overall system design, to development and implementation. Hildebrandt consultants helped guide the Blackwell Sanders firm, the first large firm to embrace the change, in making its initial transition almost a decade ago. More recently, our consultants helped guide Orrick, Herrington & Sutcliffe, the first global law firm to commit to the lockstep-to-levels transition, through its transition in 2008-2009. In between, we have helped many firms move from traditional lockstep to variations of merit compensation or other performance-based systems.
We also developed a webinar program, entitled “Transforming Associate Advancement: Moving from Lockstep to a Performance-Based System,” which drew one of the largest Hildebrandt Institute audiences ever. This program introduced a pioneering systemic approach to transitioning to a performance-based “levels” system.
Since the transition to a performance-based system involves so many aspects of the firm – from human resources to strategy, and from pricing to training – it requires the experience and expertise that only Hildebrandt, the leading consultant to the legal industry, can bring.
No other consultants to the legal profession have comparable experience across the breadth of practice areas, geographies and client industries. Our consultants are experts in the key areas needed to successfully implement a performance-based associate compensation and progression system in your firm – human resources and talent management, strategy and positioning, compensation and pricing and training.
What Hildebrandt Can Do to Help You?
Although performance-based systems that are not based at all on “class year” are a relatively recent phenomenon for most law firms, our consultants have long been instrumental in working with a large number of firms in pioneering these types of systemic changes to help manage and motivate your associates. We can help your firm carry out the entire process needed to make the transition, or we can guide you with discrete steps along the way, by:
- Conducting an audit to identify the capabilities of your firm’s existing systems for evaluation, compensation and infrastructure that would be necessary to support a performance-based system.
- Developing a competency model that fits your culture and practices, including identifying which professional competencies and behaviors will be measured in a performance-based system.
- Using sound behavioral science techniques, helping you to determine the right approaches for your unique culture and strategy and to build buy-in among the various constituencies within the firm.
- Helping you to develop an appropriate communications plan to accompany the roll-out of a new performance-based system.
- Conducting an analysis to determine the impact of changes to a performance-based system on rates, compensation levels and firm profitability.
- Advising on setting appropriate billing rates and salary ranges.
- Rolling out a performance-based system, monitoring it and making the necessary changes to insure that it runs smoothly and achieves the firm’s objectives.
Pressure on the overhead costs of law firms will remain high for the foreseeable future. The need to attract and retain the best talent will also be important. Implementing an effective performance-based system that can reduce unwanted attrition, enhance associate development and lower talent costs will be critical to continued law firm success. Hildebrandt has the experts to help.
