Bingham McCutchen has joined the ranks of firms that are tweaking their compensation systems, saying Monday it is moving to a "merit lockstep" system that will keep base pay on lockstep but introduce a merit component into bonuses.
Several firms this year have announced a move away from lockstep compensation, including Howrey, Orrick, Herrington & Sutcliffe and Townsend and Townsend and Crew. Nixon Peabody and Pillsbury Winthrop Shaw Pittman have lowered salaries for some associates in each yearly class, resulting in a de facto departure from lockstep. Jones Day says it has always used a merit-based system, and DLA Piper has said it is considering a departure from lockstep.
Bingham is not abandoning lockstep, having discussed options with partners and associates, who preferred the predictability of an overall lockstep approach, according to a memo first reported on the legal blog Above the Law.
"We are nonetheless keenly aware of current marketplace conditions and believe that to maintain our continued success, we need to incorporate a merit component into our overall lockstep structure," the memo said. "We fully expect the vast majority of associates/counsel to continue to achieve annual step increases in this merit lockstep system. However, more disciplined analysis will be applied during the evaluation process to ensure that an attorney's performance supports a merit step increase."
Bonuses at Bingham were previously based solely on meeting a billable hours target. Although billable hours will continue to play a significant role in determining bonuses at the firm, they will also be based on less tangible factors, like teamwork and the overall market rates for bonuses.
The firm confirmed the authenticity of the memo and declined to comment further.
Courtney Goldstein, an associate recruiter at Major Lindsey & Africa, said lockstep compensation has its pluses: Merit-based pay can be time-consuming to calculate, and lockstep removes any suspicions of favoritism. But the biggest pressure facing law firms today is client pushback on billing rates, so any moves toward merit-based compensation reassures clients they are paying the right price for associates.
"It makes sense for law firms, in order to attract new clients and retain clients, to establish a merit-based pay," Goldstein said. "If you go from a lockstep system to a merit-based system, at least the client will know that the billing rate is based on ability and quality of work."
Consultant Peter Zeughauser dismissed that rationale and said the firm simply wanted to get money into the hands of people who deserve it.
"They want to reward people for excellent levels of performance," Zeughauser said. "Merit-based bonuses is something that most firms did many, many years ago. It's not part of a current trend. It happened long ago, not every firm did it, and now [Bingham is] doing it."