Amid constant pressure on elite law firms to offer competitive pay to high-performing lawyers, partners of at least two prominent New York-based lockstep firms weighed changes to their compensation models in the last year.

One, Debevoise & Plimpton, formed a partner committee to take a hard look at its lockstep model, in what the firm called a periodic process to examine the firm's compensation system. After a review that wrapped up last month, the firm decided to leave its approach unchanged, presiding partner Michael Blair said in an interview.

Blair said the system will remain the same as when he made partner in 1989, with no adjustments. "We don't have any gates or bonus pool," and no new "bells or whistles," he said. "It's a fairly straightforward, seniority-based system."

It's no secret that lockstep firms face special challenges to retain their top business generators, as their non-lockstep rivals dangle huge financial incentives to woo rainmaking partners. Firms including Kirkland & Ellis; Paul, Weiss, Rifkind, Wharton & Garrison; and most recently, Freshfields Bruckhaus Deringer, have all swooped up talent from pure lockstep firms.

But Blair said Debevoise's compensation model review this year wasn't sparked by a fear of losing talent or by a desire to gain an edge in recruiting. He said the firm should "periodically" review pay arrangements, given the regular promotion of new classes of partners. "I think it's simply healthy for the partnership," he said, "to talk about arrangements that we're all governed by." The firm had a similar review, before Blair became presiding partner in 2011.

The partner committee met several times over the course of months, and the firm hired consultants who presented information on a range of compensation used in the legal industry.

The committee facilitated small group discussions of the whole partnership and received one-on-one input. While there were partners who had questions about the lockstep model, there were no partners in the end who advocated for other models, Blair said. Ultimately, the partnership, made up of more than 140 lawyers, unanimously decided to keep the system, he said.

Blair said he believes lockstep is the best system to attract and retain the best talent. "We think it's a competitive advantage, and our clients tell us it's a competitive advantage," he said. "Our lockstep system frees us from any misaligned financial incentives that could get in the way of delivering to clients the best teams for the project."

For instance, there's no incentive for partners to deploy their own teams of associates versus others, and there's no financial deterrent to give a client advice that may counter a revenue stream, he said. "Clients like that," he added.

He added that that one of the great advantages of lockstep is that it facilities teamwork, an important factor in the increasingly complicated matters that the firm handles. Finally, he said the lockstep system is "responsive to the desire for meaning in one's work," putting emphasis on client service in the practice of law.

Meanwhile, Debevoise's financials have not suffered with the traditional compensation system, with the firm reaching new revenue and profit highs in 2017 and 2018.

"We are looking forward to another great year," Blair said in assessing 2019.

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'Undeniable Reality'

Debevoise is not the only New York lockstep firm to consider changes to its compensation model lately, according to people knowledgeable on the issue, who pointed to Cleary Gottlieb Steen & Hamilton partners this year also reviewing their pay scheme.

A Cleary representative declined to comment.

Citing meetings at both Cleary and Debevoise, one source said the firms have been "actively considering, evaluating … talking to partners about the model. There's an undeniable reality about what's happening in the market," with "highly talented partners who are being poached away."

Ethan Klingsberg's move out of Cleary to Freshfields, leading a group of partners and counsel, has put Cleary's lockstep pay model further under the spotlight.

Cravath, Swaine & Moore is one of the most prominent law firms still holding onto lockstep compensation, but the firm's leader said partners there are not seeking changes. "We have not had any discussion or consideration of changes to our compensation system, nor would I expect any," said Faiza Saeed, Cravath's presiding partner, in a statement. "We are pleased with the focus on quality and client service that our model produces."

Despite such high-profile holdouts, it's become increasingly common for the highest-performing law firms to adjust their compensation systems to reward high-achieving lawyers.

Firms can do this a number of ways, such as increasing the bonus pool; taking money away from the lowest-performing partners; increasing the spread from the lowest-paid to the highest-paid partners; and "revisiting expectations" of partner performance so that compensation is closely aligned with performance and achieving the firm's strategy, said Kent Zimmermann, law firm management consultant at Zeughauser Group, adding, "it's not a one size fits all" solution.

Zimmermann noted that some New York and London firms are "evaluating how to be as competitive as possible without completely moving away from their historical approach" to compensation.

Some of those firms have a goal of gradually increasing their bonus pool or spread of partner pay overtime, he said. "Firms," he added, "are reallocating their comp pool to pay market or as close as possible to market to high performers."

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