"Meritocracies can be very divisive," pronounces this
British analyst, in arguing that the most rational and effective partner
compensation model, indeed the "undisputed model of choice,"is the "modified
lockstep."
But isn’t "modified lockstep" an oxymoron? Like "across-the-board
equal performance bonuses?" Well, yes and no; the problem
is of course that compensation schemes are creatures of the firm’s culture,
and in turn join in a feedback loop that supports or undermines that
culture.
Examples of pure-lockstep firms that work resoundingly well are, for
example, Cravath, Cleary-Gottlieb, Davis-Polk, and Wachtel. These
firms place collegiality high if not first in their list of cultural
values, and the lockstep system both reinforces that value and helps
ensure that potential partners who give other values primacy (for example,
"pay me for performance") will self-select away from those firms.
Still, the dual realities of globalization and practice specialization
mean that at times seizing opportunity means paying up for lateral hires—and
this, according to the author, is where the "modified lockstep" becomes
inevitable in order to attract top global talent. But wait: Aren’t
we in the process of watching precisely this model self-destruct at Clifford
Chance, which has lost almost 40 partners since January 2003? I
actually don’t think Clifford Chance’s experience condemns the modified-lockstep;
that firm has seemed to me, at least since the nearly-indigestible acquisition
of Rogers & Wells, to be laboring under its own burdens.
No, I think the modified lockstep is indeed here to stay, if for no
other reason than that the alternatives are far worse: Pure "eat
what you kill" can devolve into "Lord of the Flies," and pure lockstep
(like, I would argue, tenure in much of higher education) can stifle
initiative. If a firm’s innate cultural bones are strong enough
so that all can see that outsize rewards to the few redound to the long-run
benefit of all, then the modified-lockstep is not only the best of a
bad lot, but an essential ingredient to growth through delivering genuinely superior expertise.
