Historically, law firms around the world, whether in London, New York or elsewhere, have adopted the model of the traditional ‘lockstep’ partnership. It is a simple structure that dictates that the financial remuneration of the firm’s lawyers is dependent on seniority. An equity partner who has been with the firm for 20 years earns more income than one who has been with the firm for 10, and that partner earns more than an individual who just got promoted to the partnership last year.
Typically, this is applicable for the equity partners of a firm; an equity partner is a term used for a partner who has ‘bought’ into the firm, paying a sum of money to invest into the firm, and their income is drawn directly from the profit that the firm makes. However, the lockstep system is often similarly utilised for other, more junior lawyers as well. The main takeaway from this structure is that the amount of money a lawyer earns is independent of performance, or how much revenue they bring in for the firm. In a sense, equity partners can be seen very much like a shareholder in a company.
For a long time, the use of the lockstep ‘model went unquestioned’. However, times change, and the lockstep is no longer the obvious choice as it faces stiff competition from alternative structures after having its drawbacks ruthlessly dragged into the light in recent years. This article will examine the strength of the lockstep model, as well as contrasting it with alternative and hybrid models – namely, the increasingly popular and appropriately named ‘eat what you kill’. Lastly, it will explain why it matters at all levels – including for the prospective trainee.
Undeniably, the lockstep has numerous advantages. Partners are not direct competitors that each compete for clients and businesses; their own income depends solely on the success of the collective firm. If the firm does well, you earn a lot of money; if the firm suffers, so does your wallet. Defenders of the lockstep which includes firms such as Slaughter and May will point to the model’s ability to improve cohesion, loyalty, and teamwork within the firm. It promotes the sharing of talent, skills, and knowledge, and encourages partners to help each other. The interests of the firm, rather than the individual practitioner, are put first. The model ensures that the firm genuinely feels like a partnership – if your partner is not doing very well, it directly impacts your success, and you have an obvious incentive to help your struggling colleague.
Despite all of this, the main drawback is clear to anyone who has read thus far; the lockstep supposedly allows for underperforming lawyers to make a living off the back of hard-working overachievers, who do the most for the firm. It retains and rewards inefficient lawyers, and fails to encourage excellence. It can even harm firm morale when high performing junior lawyers look up to their senior partners and see ‘dinosaurs’ not pulling their weight.
The drawbacks of the lockstep are now more evident more than ever, due to the emergence of the main alternative to the traditional model – ‘eat what you kill’. It is championed by various American firms, most famously Kirkland & Ellis, and firms with the ‘eat what you kill’ approach have laterally ‘poached’ star talent from a host of rivals. There is a simple reason – more pay. ‘Eat what you kill’ is the antithesis of the lockstep; it is a model that rewards your performance, and the revenue that you rake in for the firm. Costs are first shared out between equity partners, and then the profits of the firm are split up between them according to what they earned for the firm through their business.
The disadvantages and advantages of this model are not difficult to decipher by using the earlier analysis of the lockstep. ‘Eat what you kill’ keeps the high achievers – the star players – happy, and ensures that the pay is transparent in the firm – you get what you earn, no more and no less. To all internal fee-earners, it becomes clear why you are earning the amount that you bring home.
The main drawback is that it actively discourages teamwork. There is no incentive for you to help your partner with work when you do not earn anything for it, and your partners’ success has no way of impacting you. You’re less likely to share knowledge, provide support and share clients in accordance with specialties of partners. You will be even less inclined to help out in other ways; every minute spent doing pro-bono, or helping with the management of the firm, is the time that is wasted – it could have been spent on earning cold, hard cash.
Naturally, the aforementioned models are the two extremes, but they also happen to be the two base models, with modifications to either sometimes made to reach a middle ground. An increasingly popular method of attaining the best of both worlds is by utilising a lockstep model for a base salary while simultaneously implementing a bonus system, which adds on extra financial remuneration based on the individual’s performance. The idea is that the benefits of the lockstep are retained, while also adding in an element of healthy competition that is not quite as intense as it is under an ‘eat what you kill’ structure. However, the danger is that rather than accomplishing this goal, a firm could see its attempts fall flat and achieve neither, with partners working hard for the bonuses and not helping each other enough, but still not putting the blood, sweat, and tears that is typical of an ‘eat what you kill’ model.
The reality is that the type of model that a firm uses is bound to have a huge impact on the culture and the atmosphere of an office. This is of utmost importance for any potential trainee solicitor who is choosing the firms that they would like to train with. Pay has become an increasingly important topic, particularly in 2019, with a host of City firms bumping up their newly qualified salaries in order to compete with American firms. However, it is equally if not more so important to consider the model adopted at the firm when considering salaries. It is worth noting that there have been reports of frustration amongst associates, several years post-qualification, at the firms where NQ pay has increased significantly, due to eventually stagnating wages.
The type of structure may also impact your training – in a model that is heavily dependent on the billable hours that a partner or senior associate record, they will be far less likely to be willing to take the time out of their day to assist you or give you lengthy feedback. Contrast this with the lockstep model, which allows for more time away from revenue attracting activities without repercussion.
On an individual level, there is no right or wrong. It is, however, essential that young potential solicitors know enough about themselves to be able to know under which environment they would succeed. Intuitively, competitive individuals might enjoy the life of a high-earning partner at a compensation-based US firm. Similarly, those who are more team orientated and dependent on strong support networks and sturdy training might thrive under traditional lockstep. It is important that thought is given to the distinction when choosing a firm, as the difference is as stark as night and day.