Week 2 Homework
Chapter 6 Your Turn – Climb the Legal Ladder, page 201
1. Think about the research evidence discussed in the book. Would you expect the Sullivan and
Cromwell associates to feel their pay structure is fair? What compensation would they likely
make? What work behaviors would you expect Sullivan and Cromwell’s pay structure to
motivate? Explain.
Sullivan & Cromwell associates will feel their pay structure is fair because firstly, they are well-informed
on the job structure and their job evaluation process which underline the pay structure. The pay
structure Sullivan & Cromwell’s initially offered for any law school graduate person looks very attractive
and sufficient. Though it’s not clear how the company evaluate the employee, it seems they are paying
as per the knowledge of the employee. Definitely the firm’s pay structure seems to be fair as per market
comparison while its competitors are reducing pay and cutting jobs, Sullivan and Cromwell are paying
handsome to attract new graduates. The firm’s pay structure is high.
While the competitors are reducing the pay and cutting jobs, the firm may attract freshers for the job.
The current practice of Sullivan & Cromwell is giving high amount of bonus to its employees. If the form
reduces its bonuses, the market evaluation of the firm may be assumed to be down falling or the
reputation of the firm may go down.
Sullivan & Cromwell instead of making their base pay high, they should focus on giving percentage-
based scheme. The employees may get certain percentage of the client conversion. This will motivate
the employees to work harder and also will reduce the burden of the firm and will create internal
competitiveness. This will help the firm to pay on performance base rather than knowledge base which
will help employees to be motivated.
2. What about associates who joined the firm four years ago? If the salaries for new associates
increased by $20,000, what would you recommend for other levels in the structure? Explain.
The associates who are working in the firm for four years have a base salary of $210,000 and a high
bonus of $45,000. This means they are making $60,000 more than an associate who have been there for
one year. If new associates get an increase, then the other levels in the structure should receive an
increase as well. If the other levels receive an increase this can help to decrease turnover. The turnover
means the associates may take away the clients after the leave the firm, which is not good for the firm.
Based on the experience the increased salary should be adjusted for the senior associates too.
But at a certain point, the senior employee’s growth is stagnant, it is debatable. This can be
compensated through bonus. While motivating the new entrants, demotivation of senior staffs should
not be done. So its obliged to increase the salary of all the employees.
New associates with knowledge, skill and education or proven in training with related fields can be paid.
The firm should maintain the same pay ratio that it will increase for new associates to avoid the
business loss due to turnover.
3. Partners make around 10 times the highest paid associates. A Wall Street Journal writer laments
that law firms form “giant pyramids… (in which) associates at the bottom funnel money to
partners at the top.“ What is missing from the writer’s analysis? Hint: speculate about the likely
differences in content and value of the work performed by the partners compared to associates.
Any parallels to Meryl Lynch’s FA’s and SVPI’s?
The partners are those who have been working in the firm for longer time, it means they are employee
turned to partners. With the time they had spent in the firm, they had more bonding with the clients.
That means the clients are more loyal to the associates turned partners then the firm.
With career advancement comes greater scope of responsibility and accountability, and thus, partners’
work has a greater direct contribution and impact to the law firm’s success than associates. When
something goes wrong, the problem needs to be dealt by partners as they hold ultimate accountability,
even though it may be a mistake done by an associate. Therefore, whilst they are rewarded more and
have higher status, they are in a position with greater influence to the business’ strategy and
performance—and thus in a position which faces greater risk and challenge.
Offering as partners will help the business to be within the firm, the more the clients are with the firm
the more the profitability so it will not affect the company revenue if they are giving away it as a partner
offering.
4. A few years ago, Sullivan and Cromwell announced that year-end bonuses would be cut in half,
with a maximum of $17,500 for early career associates And $32,500 for eight year associates. In
the following two years, bonuses were cut further. However, the trend was then reversed with
bonuses subsequently being increased, and more recently, as exhibit one shows, there are
further increases in bonuses. What drives these bonus Decisions and how they vary overtime?
How does this bonus variability overtime compare to variability in salaries overtime at Sullivan
and Cromwell? What explains the differences in the way salaries and bonuses are managed over
time?
The base pay at Sullivan & Cromwell is already high, so it’s not needed to pay bonus at all. The firm may
pay bonus in form of other compensation like more challenging task, recognition and rewards etc. The
bonus should be performance base where employees should get paid on the base of billable hours,
numbers of cases won / solved and effective contribution to firm’s internal structure.
If firm reduce the bonus or remove the bonus system, many employees would not like to work at half
bonus or package or if they work, they may not focus on completion of target.
The firm’s target is to complete 2200 billable hours per annum which is overburden for newly
graduates. In achieving target, the young lawyers lose work-life balance. If the firm wants to reduce
bonus, the target should be less and should provide employees (lawyers) work life balance so they enjoy
the work.
As we know, Sullivan & Cromwell’s market reputation is, highly paid employers could be fall in dilemma
when firm decided to reduce bonus, it may indicate that firm is not generating good revenue, and this
may affect the firm to hire new employees.
5. How does the Sullivan and Cromwell approach to compensation differ from that of Dewey and
LeBeouf? What are the advantages and disadvantages of each approach?
Dewey & LeBoeuf offered larger multi-year packages in order to recruit and maintain employees.
Sullivan & Cromwell offer pay based on performance and longevity in order to maintain the employees
they have and show them that hard work does pay off.
With Dewey & Lebeouf the advantage is they are able to recruit employees but the disadvantages is if
business declines how can they maintain the offers they have in place.
Sullivan & Cromwell the advantage is that the employees feel appreciated and know if they do the hard
work and stay with the organization they will be compensated accordingly.
The disadvantage is that it could be harder to recruit employees and if business declines, they would
have to decrease the bonuses.
Chapter 7 Your Turn – Two-Tier Wages page, 251
1. To what extent is the renewed job growth in the automobile industry in the United States due to
the use of two-tier wages?
