Lockstep compensation

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Lockstep compensation is a system of remuneration in which the employees' salaries are based purely on their seniority within the organization. For example, in the legal profession, where this system is most commonly found, all law school graduates hired by a law firm who graduated in the same year receive the same base pay, regardless of the background, experience, or ability of each. These associates will also receive automatic annual pay raises, bonuses, and promotions. Alternatively, some law firms implement a lockstep compensation system starting with partners or partner-track associates.[1] During the late-2000s financial crisis, some law firms began replacing the lockstep system with "merit-based" systems.[2]

Proponents of the system have argued that lockstep compensation promotes loyalty, discourages intra-office competition, reduces the need for perpetual performance assessment, and provides for more flexible work structures. These benefits, however, are limited to situations where a business can predict with some certainty the future productivity of an employee. At the same time, however, the system has been criticized for being inefficient and reducing incentives for employees to improve performance. Because a lockstep system provides little to no accountability for employee productivity, there can be little assurance that employees will not take advantage by reducing their output or that extremely energetic employees will be undercompensated.[3]

Some law firms have modified their lockstep system to allow for performance-based bonus structures. These bonuses can partially cure the incentive-based issues that stem from lockstep compensation.[4] Other law firms have moved toward adopting a purely merit-based compensation system for associates.[5][6] Purely merit-based models have been criticized as too volatile to endure, however, with the prominent failed example of Dewey & LeBoeuf failing under a merit-based partnership system.[7]

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  1. ^ Neil, Martha (2009-03-16). "Illustration Of A Lockstep Progression Income Distribution Plan Tied To Objective Performance Criteria". Article. John P. Weil & Company. Retrieved 2013-01-31. 
  2. ^ "Some Law Firms End Lockstep Pay for Associates, as Economy Plummets". ABA Journal. American Bar Association. Retrieved 2009-08-14. 
  3. ^ Cotterman, James D. (June 2007). "Lockstep Compensation: Does It Still Merit Consideration" (PDF). Report to Legal Management. Altman Weil, Inc. p. 3. Retrieved 2013-01-31. 
  4. ^ Bruce, Debra L. (May 18, 2012). "Partner Compensation Plans – The Modified Lock Step". Article. Lawyer-Coach.com. p. 1. Retrieved 2013-01-31. 
  5. ^ DiPietro, Dan (November 17, 2009). "The Shifting Associate Paradigm". Article. The AmLaw Daily. p. 1. Retrieved 2013-01-31. 
  6. ^ Elinson, Zusha (June 29, 2007). "Howrey to Ditch Lockstep Compensation for Merit-Based Model". Article. Law.com. p. 1. Retrieved 2013-01-31. 
  7. ^ Dias, David D. (September 27, 2012). "Lockstep vs. Eat-What-You-Kill: Compensation statistics highlight Dewey LeBoeuf’s folly". Article. Lexpert BLog. p. 1. Retrieved 2013-01-31.