Like clockwork, the news reports of Cravath’s associate bonus payouts led the dominoes of BigLaw firms to fall.
Much like it did when Cravath announced its intention to pay first year associates $180,000 per year, BigLaw matched bonuses dollar-for-dollar rather than think of the long-term health of its institutions. My friend Pat Lamb has written persuasively about the fundamental disconnect between these compensation decisions and client interests. Simply put, increasing pay to attract top graduates of elite law firms is contrary to how most clients think about value. I bet not one of these firms asked their clients whether they wanted the absolute “best” associates on their matters in exchange for double-digit increases in rates.
But what about the impact on the law firm itself? The single-minded focus on payment to attract top talent is a classic example of how badly law firms misunderstand what motivates performance. As described in my last post, study after study shows that people desire meaning, purpose and autonomy in their work and not just pay. Law firms that rely on money to attract and motivate their best performers instead may be reinforcing a culture that reduces productivity and profitability.
How could the decision made by BigLaw to pay high salaries to newly minted lawyers have a negative effect on culture and long-term health? Let’s run these steps through “the ladder of inference,” coined by organizational development experts, to describe the way in which we take data and observations from our environment to draw conclusions, reach beliefs and then take action on those beliefs:
• A typical employee observes that the law firm is paying first year associates $180,000, widely reported in the media, and considered unprecedented and pays attention to this event given how unusual it is.
• That employee ascribes meaning to this compensation decision based upon his or her personal experiences, culture, etc., and concludes that the law firm rewards work principally by money.
• The employee then assumes the very high paycheck must be in exchange for work that is either difficult, demanding or possibly undesirable, especially as first-year associates lack expertise.
• The employee concludes that the only type of work that is valued by or available at the law firm is difficult, demanding or possibly undesirable.
• The law firm is considered a difficult, demanding or undesirable environment.
Of course, law firms can and do offer work that provides lawyers with meaning and opportunities for creativity, freedom and autonomy. But the emphasis on money as the principal incentive for performance can overshadow other values and negatively affect the long-term financial health of law firms. This isn’t just a hypothesis but is evidenced by the high associate turnover rates at some of the very firms in question and surveys reflecting dissatisfaction in their ranks.
BigLaw’s default to high pay as a means of attracting and retaining talent reflects the short-term thinking pervasive in our industry. What could firms be doing instead of turning to pay in the first instance? If firms thought differently about how to keep lawyers engaged and then designed rewards that aligned with how people in fact are motivated, the ripple effect on long-term financial performance could be profound. For example, if associates are given the opportunity to participate in a meaningful way in the strategic planning process of a firm, the freedom to decide how and when to manage their work or allocate resources and then are recognized for these achievements, the firm could itself benefit from the personal productivity that results.
It would take just one firm disrupting the status quo to find out.
Roya Behnia most recently served as senior vice president, general counsel and corporate secretary of Pall Corporation, based in New York, until September 2015 when it was acquired by Danaher Corporation. Prior to Pall, she was general counsel of a publicly held Internet marketing company in Chicago. She started her legal career at Kirkland & Ellis in Chicago, where she was a litigation partner.