Issue 27, Fall 2009

www.idaabbott.com

It is fall and firms are welcoming their new associates. For many firms, the classes are smaller this year and associates’ anxiety is palpable. Firms are anxious, too, as they face intense pressure from clients to change the way they do business. Firms are primarily trying to figure out how to move away from the billable hour model of practice to systems that better reflect the value of lawyers’ services, a topic we discussed in Issue 24. As firms look for new ways to charge for their services, they are also exploring collateral issues, including the way they pay and promote associates. This issue of Management Solutions looks at the movement away from lockstep to a performance-based model for associates. This issue also highlights a recent study that found taking a day off from work had positive benefits. This study has special significance for law firms because it shows the value of questioning long-held assumptions about the way lawyers believe they must work. 

Women in Law Empowerment Forum (WILEF) is presenting two programs in October. I will moderate the New York program on October 20 and help host the one in San Francisco on October 27. I’ll be speaking at other upcoming programs, listed below.

Contents of this Issue

  • Hastings Leadership Academy for Women
  • Ins and Outs of Lockstep
  • Challenging Assumptions About How Lawyers Work
  • Speaking Engagements
  • Article

Hastings Leadership Academy for Women

Mark your calendar! The 2010 Leadership Academy will take place July 11-15, 2010. This program is essential for women partners who want to advance their careers and for law firms that want to see more women partners in positions of leadership. Next year’s program will have several new features. It will consist of one intensive on-site session and three quarterly follow-up teleconferences. We will also have special programming that includes senior women in-house counsel and LAW alumnae. Information and registration forms will soon be available at www.pardc.org/LAW. In the meantime, save the date and contact me by email or phone, 510-339-6883, if you would like further information.

"It was just an amazing, enlightening experience. I have never had such a useful forum for advancing my effectiveness..."
-- 2007 program participant

Ins and Outs of Lockstep

Several firms have recently announced they will abandon the traditional lockstep system and start to base associate pay and promotion on “performance” or “merit.” In a performance-based system, associates receive pay increases and progress toward partnership when they achieve designated threshold levels of skills and experience; the number of hours they bill and revenues they generate are also usually considered, especially for bonuses. Basing pay and advancement (as well as billing rates) on performance, not years out of law school, certainly makes sense for firms and clients. Theoretically, a merit-based system is also a welcome step for associates because it allows for greater variability in associate development and performance, and greater flexibility in lawyers’ career paths.

Whether lockstep or performance-based, compensation systems have many purposes aside from paying people for the work they do. The way you compensate associates tells them what behaviors and qualities the firm deems desirable and in doing so, reinforces the firm’s values. If designed correctly, your compensation system can lead to higher engagement, motivation and performance. It does this by being clear about what it takes to be a successful lawyer in the firm, providing the experience and guidance that enable associates to succeed, and rewarding the behaviors and attributes that lead to success.

Performance-based systems are not new. Husch Blackwell Sanders not only adopted one almost a decade ago, the firm published a book in 2001 describing why and how to do it.1 That firm’s “level system” is the inspiration for the model being introduced into most firms today. The level system links associate pay, billing rates and advancement to levels of competency rather than hiring class. Performance measures are based on specific, objective competencies, which all lawyers know in advance. Associates’ performance is monitored closely and discussed with the associate in depth twice a year. Since the program's inception, associate attrition has declined markedly, especially among women. Although the blueprints were available and Blackwell Sanders was able to prove good results in terms of associate satisfaction, retention and advancement, most large firms resisted the idea of competencies and levels. Then the economy tanked. Now firms are paying closer attention.

This kind of system can work extremely well but only if the firm also provides infrastructure, incentives, discipline, and support to make it work. Most importantly, the firm must be prepared to devote a great deal of time and resources to monitoring, evaluating and enhancing associates’ performance. It sounds like it should be easy to do, but a merit-based system is fraught with hazards and must be created with great care. If implemented without sufficient thoroughness and groundwork, it can cause confusion and dissension, and may unintentionally institutionalize bias and unfairness.

Under lockstep, associates’ pay is predictable and their professional development is presumed to be steady. But if you compensate and promote associates based on their individual performance, then you have to pay more attention to them. You must oversee their progress, which requires close supervision, thorough evaluations and meaningful feedback for every single associate. It also requires a set of written standards or competencies for measuring the performance to be rewarded. Even when you use publicly available samples from books or other firms, developing competencies takes time and there is usually a lot of resistance from partners when they are asked to draft them. This should not prevent a firm from moving ahead, but it should go into the process aware that it is undertaking a major systemic change and prepare accordingly.

Before embarking on a new system for paying and promoting associates, there are many questions to answer. (See Table) Here are some points to keep in mind as you get started:

State clear reasons for moving away from lockstep . It is imperative to be completely clear about why you are moving to a performance-based system, what you expect it to accomplish, why it is better than lockstep and what you hope will be different – and better for all involved - after you make the change. The reasoning behind the change must be transparent. In particular, you must be able to explain how the change will affect associates’ compensation and advancement and whether and how they will benefit from it. Be honest about it. Any prevarication will lead to distrust and resentment. By stating clear objectives and tracking outcomes over time, you should also be able to determine whether you meet your objectives and whether the change has been cost-effective.

Build buy-in through communication and participation . You must be able to explain why and how a performance-based system is the best way to achieve your stated objectives. If you are proposing a specific system, explain why that system (as opposed to another) is the best one. If you are not proposing a specific system and are inviting lawyers to help design one, then you might present a few different models for their consideration. An opportunity to participate in the design and planning process is important to allay the worries of associates and partners and to obtain their buy-in. If they have input into the process they are more likely to accept the outcome. On the other hand, lack of transparent planning and reasoning breeds confusion and distrust and can undermine the most elegant design.

Develop objective criteria to measure performance. If compensation and promotion are tied to performance, it is especially important for associates to have clear standards so they know what is expected of them. They also need to know how those standards will be applied to measure their performance. To ensure that you can measure performance accurately and fairly, the firm must develop standards or competencies that clearly and objectively define the performance you expect from associates at every level. Competencies should allow you to measure associates’ progression over time as they gain experience, expertise and judgment. They should also set out the ways you will grade their performance and determine what it is worth. If your firm has more than one career track, your competencies and guidelines should explain how these performance criteria and metrics will affect them. You need to be sure that your performance measures do not treat reduced hour lawyers unfairly, and also that associates understand any specific restrictions on their progress (e.g., whether progress is expected only to be upward or whether they can voluntarily move up and down between levels).

Provide individualized talent management and career oversight . A performance-based system requires considerable oversight and monitoring of associates’ work experience, development and progress. If you are making pay and promotion decisions based on an associate’s individual performance, you must be prepared to pay close attention to each associate’s progress so that you can make informed decisions. You will have to ensure meaningful work experience, track the performance and address the development needs of every associate. Consider how well your firm does this now. If all your associates are carefully and thoughtfully evaluated; if they receive good feedback during reviews and in the routine course of work; if assignments are made with their development in mind; and if they receive mentoring and training informally as well as in programs, then adopting this new system may not require significant new effort. However, if your firm does not do these things assiduously under a lockstep system, then adapting to a new system will require a great deal of preparation and possibly re-thinking the way your firm handles all aspects of associates’ professional development.

Prepare partners to provide individualized talent management and career oversight . Supervising partners play a critical role in performance-based systems. They must serve as mentors, ensure that associates have developmental work assignments, give everyday feedback, deliver performance reviews, and have discussions with associates about career progress and goals. Some firms have professional development personnel, career counselors and other managers who can support the lawyers, but it is the partners who bear the ultimate responsibility for ensuring associates have what they need to move ahead under the system. The better your partners are at these fundamental management skills, the better your system will work. If they are not stars in those areas now, your plans should include training and incentives that will enable partners to carry out this vital talent management role.

Redefine value and productivity. Current law firm compensation systems place highest value on hours billed and define productivity as the number of hours billed. In a performance-based system, those measures and definitions will need to change, especially if the firm is also increasing its use of alternative methods of setting fees. For lawyers working on fixed fee matters, productivity will no longer emphasize logging the most hours but rather producing more work in fewer hours. Efficiency, planning and project management will become highly important, and their prominence should be reflected in your performance criteria as well as in compensation and promotion decisions. In addition, you must decide what other factors will be valued (e.g., firm citizenship, management responsibilities) and what value the firm will place on them. If you will give associates bonuses, you must determine what criteria will be used for them and how they will be applied.

Coordinate the change with other professional development systems. A performance-based system must be tied to a robust and coordinated professional development program. When you measure associates’ performance, you have to take into account how that performance is developed in and by the firm. When you adopt performance criteria, you must be able to ensure that associates’ work, training, feedback, mentoring, and other learning experiences will enable them to achieve the standards you set. Of course, their personal motivation and abilities will make a difference in their performance. But so will the assignments, training and mentoring they receive. In order to treat associates fairly, you will need to tie work assignments and client opportunities to associates’ developmental needs; ensure that performance evaluations and review meetings employ in-depth discussions about associates’ performance status and future development; and train partners to use competencies in evaluating associates’ performance. If your competencies include knowledge, skills or experiences that are not currently provided for associates, you may have to institute measures to provide them.

Be sure that the new system is fair and unbiased and supports your diversity goals. Unless you design and monitor the system carefully, moving to a performance-based system can adversely affect women, minorities and part-time lawyers. Safeguards are necessary to ensure that “merit” does not inadvertently become a vehicle for institutionalizing favoritism and bias. Tracking the experiences and trends for all lawyers, for major demographic groups (e.g., women, lawyers of color), and for part-time lawyers will help you identify aspects of the system that may be having an unintended discriminatory effect.

Consider how much time and money will be required to design and implement the new system. Adoption of a new performance-based system may take one to two years or more from beginning the planning process to system implementation, and requires considerable effort and resources. Be sure to commit and allocate sufficient time, money and administrative support to do the job right.

The current law firm model is in a state of flux and merit-based systems hold promise as firms adapt to new marketplace realities. But these systems also carry risks that could lead to negative unintended consequences. Thoughtful planning and careful implementation can avoid those hazards and lead to a system that fosters professional growth and stimulates high performance.

1 Peter B. Sloan, From Classes to Competencies, Lockstep to Levels, Blackwell Sanders Peper Martin LLP, Kansas City, 2001


Table: Questions to Answer When Moving from Lockstep to Performance-Based Pay and Promotion System

  • Why are we making this change? What are our objectives?
  • How will this change achieve our objectives?
  • How will we design the change and communicate why we are doing it? How will we explain our reasoning to partners and associates?
  • What kind of performance do we want to promote? What performance will we reward? How will we reward it?
  • How will we measure performance? What standards and criteria will we use?
  • How will we redefine value and productivity?
  • How will the change impact work assignments, evaluation process, training, and other professional development systems?
  • How will we ensure that decisions about pay and promotion will be made fairly and without bias?
  • How will we ensure that the change supports our diversity goals?
  • How will we identify and address associates’ development needs under the new system?
  • Are we prepared to provide the individualized talent management and career oversight that a performance-based system requires? How will we do it?
  • How much will the change cost?
  • How will we measure results? How will we know if the new system achieves the stated objectives or not? How will we know if the benefit is worth the cost?

Challenging Assumptions About How Lawyers Work

Research described in the October 2009 issue of Harvard Business Review shows the benefits to individuals, teams and clients of having high-powered management consultants take predictable blocks of time off from work. It completely upsets the assumption that they must be available and at their jobs 24/7 in order to provide high quality client service. A four-year study of consultants at Boston Consulting Group found that requiring every team member to take a day off from work each week led to better communication, greater work efficiency, and overall, better work product. 1 Moreover, individuals who participated in the study reported greater job satisfaction, less work-life conflict and better work habits than those who were not in the study group. The researchers’ conclusion was that knowing that people would be away from work every week forced teams to plan work better and communicate more often, and forced individuals to be more efficient and focused on their work.

The study also found that when management consultants realized they did not have to work 24/7 to achieve excellent results, team members became more willing to question other assumptions about how work is – or should be - done. In doing so, the researchers conclude, they were able to develop new ways of working “that benefit not just individuals but the organization, which gains in quality and efficiency—and, in the long run, experiences higher retention of more of its best people.”

At a time when client demands and market trends are forcing law firms to change the way they do business, it is critical that firms also examine the way that lawyers do their work. This study highlights the immediate value to law firms of providing blocks of down time for lawyers. But more significantly, the study underscores the need and benefit of questioning the way lawyers work. Law firm leaders cannot change structures and models without also changing the underlying assumptions about work expectations and processes. Rather than continue to accept old assumptions, firms should look for improvements in every aspect of what lawyers do and how they do it.

1 Leslie A. Perlow and Jessica L. Porter, “Making Time Off Predictable—& Required,” Harvard Business Review, 2009

Speaking Engagements


Women in Law Empowerment Forum (WILEF)

  • WILEF East: October 20, 2009, Best Practices of Law Firm Women's Initiatives, New York
  • WILEF West: October 27, 2009, Playing the Long Game: Positioning Yourself for Career Success, San Francisco (I’ll be there but not speaking)

Further information and registration are available at http://www.novamedia.co.uk/rrd/wilef-2409-online.htm

NALP Professional Development Institute

Designing an Effective Leadership Program for Women Lawyers (with Linda Chanow)
December 3, 2009, Washington, DC
www.nalp.org

FlexTime Lawyers, Leading Yourself to Success

Article

I am quoted extensively in “A Shoulder to Learn On,” The Recorder Special Edition on Mentoring, July 20, 2009
http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1202432369500 (subscription required)

 


©2009 Ida Abbott Consulting
email: IdaAbbott@aol.com
web: www.IdaAbbott.com
510-339-6883