IX. Your Turn: Climb the Legal Ladder
Summary of Case
Students are provided with an example of a typical pay schedule for law school graduates,
the current economic downturn.
structure to accommodate all their employees and develop less experienced associates without
affecting the firm’s financials. Overall, law firms are shifting from their lock-step compensation
Learning Objective
Demonstrate how to apply several key concepts associated with developing a person-based pay
structure to the profession of law.
Teaching Guidelines
Use this case to help students analyze the changes in the pay structure in the legal profession and
discuss the issue of fairness regarding the person-based pay structure.
Discussion of Case Questions
1. Think about the research evidence discussed in the book. Would you expect the
Sullivan & Cromwell associates to feel their pay structure is fair? What comparisons
would they likely make? What work behaviors would you expect Sullivan &
Cromwell’s pay structure to motivate? Explain.
Based on the characteristics of a knowledge-based pay system, this pay system closely
expectations or outperform them makes the job a very challenging one. Since the associate’s
by some, since it not only depends on the employees skills, but is also dependent on various
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.
job will already be aiming at a partnership in the firm, since the tenure process necessitates
them to do so in six-eight years of practice at this firm. Analyzing the number of billable
out specifically, and some variables, such as bonuses, are still subject to performance only.
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 partners compared to associates. Any parallels to Merrill Lynch’s FAs
and SVPIs?
value and new business that partners are likely to bring to the firm could compensate for the
pay differentials.
4. A few years ago, Sullivan & 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
eighth-year associates. In the following two years, bonuses were cut further. However,
the trend was then reversed with bonuses subsequently being increased (to range from
$30,000 to $65,000 for associates) and more recently, Exhibit 1 shows further increases
in bonuses. What drives these bonus decisions and how they vary over time? How
does this bonus variability over time compare to variability in salaries over time at
Cromwell & Sullivan? What explains the difference in the way salaries and bonuses
are managed over time?
From Exhibit 1, Pay Structure at a Law Firm, it appears bonuses are determined by seniority
and are discretionary. The firm decreases bonuses during lean times and increases them
5. How does the Sullivan & Cromwell approach to compensation differ from that of Dewy
& LeBoeuf? What are the advantages and disadvantages of each approach?
Student answers may vary.
Sullivan & Cromwell uses pay structures with six to eight levels from associate to partner.
year.
The more hours billed the more money associates will make. Hence, associates
will be motivated to bill maximum hours each year and make enough money to cover
their salaries.
Since performance is measured as billable hours, most associates may have to
spend 100 percent of their time. They may work extra hours on certain tasks but won’t
get paid for them.
The method of appointing attorneys from other firms by offering large, multiyear,
Answers to Review Questions
1. What are the pros and cons of having employees involved in compensation decisions?
What forms can employee involvement take?
The advantages include enhanced employee acceptance of decisions, increased trust and
work jointly. Also, when more people are involved, expenses increase and it takes longer to
reach consensus.
2. Why does the process used in the design of the internal pay structure matter?
Distinguish between the process used to design and administer a person-based and a
job-based approach.
the key components involved in designing a skill-based internal structure: skill analysis, skill
impact on employees’ equity perceptions of the pay structure. In addition, if managers and
specified for an internally aligned structure:
Who should be involved?
3. If you were managing employee compensation, how would you recommend that your
company evaluate the usefulness of its job evaluation or person-based plans?
Validity—reflects the degree to which the evaluation measures the relative worth of the
jobs. Does the approach achieve the desired results (i.e. a high percent of correct
structure changes.
Wages criteria bias—how do we evaluate jobs held predominantly by women and are
4. Based on the research on job evaluation, what are the sources of possible gender bias in
skill-/competency-based plans?
Additional sources of bias include differential access to training programs for skill-based
plans and the vagueness and subjectivity of competency assessment.
5. How can a manager ensure that job evaluation or skill-/competency-based plans
support a customer-centered strategy?
Several approaches can be used to ensure that a job evaluation or a skill/competency-based
plan supports a customer-centered strategy:
encouraged.
When employees can see a clear linkage between the objectives of a customer-centered
strategy.