Even after the move by Paul Weiss Rifkind Wharton & Garrison to adopt a closed compensation system, Big Law is not moving en masse toward blocking off all internal access to partner pay data, industry consultants say.
But law firms with “open” systems have changed the way they share pay data internally over the years, some consultants say, by not pushing it to partners as readily or as freely as they once did. Some firms with “partially” open systems also have made it more difficult to see full pay or performance data, moving away from a less transparent model.
Some law firms, for instance, previously distributed a compensation spreadsheet to partners “but now only make comp available in a book in the chair or managing partner’s office, which people have to schedule a time to see in the managing partner or chair’s office,” noted Kent Zimmermann, a law firm consultant at Zeughauser Group.
“Not a lot of people actually end [up] doing that,” he said, adding that kind of arrangement “discourages people from both reviewing comp and making internal comparisons, because, in some firms, there’s a view that it’s looked down upon to ask the managing partner or chair to go over that book.”
Kristin Stark, a law firm consultant and principal at Fairfax Associates, agreed that there are firms moving to distribute less data.
Five or 10 years ago, she said, a lot of firms would publish performance and compensation data for all partners, sometimes in a single spreadsheet, and send it directly to partners’ email inboxes. In so doing, it basically encouraged partners to scrutinize the data.
That led to “a lot of partner dissatisfaction and angst,” Stark said. Lately, though, firms have stopped that practice in favor of making the numbers available through internal dashboards and portals, ones where lawyers may have access to all the same information but only after going and fetching it.
“It’s not delivered to their inbox in an Excel spreadsheet that makes it easy and frankly encourages them to want to manipulate the data or run analyses. So that’s a trend we are seeing,” she said. “And frankly it’s the right thing for firms to be doing, because a lot of partners don’t want that data. They don’t want to get the data, and be tempted into overanalyzing other partners’ performance and compensation outcomes.”
Stark said she spoke with a partner at a firm within the last week who talked about who talked about that kind of angst.
“She said, ‘Kristen, I don’t look at the data. I don’t want to see the data. It only makes me unhappy,'” Stark recounted. “‘I don’t need to see it. It’s only going to cause me dissatisfaction.’ And that is not an uncommon message we hear from law firm partners.”
Less Transparency
Paul Weiss moved to a so-called black box compensation system earlier this year, joining Am Law 100 firms such as Jones Day and Ropes & Gray, which also have the closed-off model.
Zimmermann, of Zeughauser Group, noted that, while there is “no shortage” of firm leaders and high-compensated partners who would favor switching to a closed system because there’s less of an ability to make internal comparisons between partners, he has not heard of other firms planning to make the switch to a black box model, in part because there’s already a culture of transparency established.
But by making the data less accessible to partners, firms are moving gradually to a less transparent compensation model, consultants said.
Jim Jones, director of the Georgetown University Law Center on Ethics and the Legal Profession and a former managing partner of Arnold & Porter, also said he’s seen some firms gradually move in that direction.
“They’ll say, ‘OK, the system’s open.’ Then, ‘OK, [the numbers] are technically open, but you have to come in and ask to see them.’ Then, ‘You need to ask the managing partner to see them,'” Jones said. He said it’s tantamount to just hoping the practice of being open with the data “in effect, withers away.”
Stark of Fairfax said that’s a factor of what they consider “partially” open or closed systems — the ability to look through data, but only with the authorization or supervision of a firm leader.
“Another version is, you get access to one dataset, but not the full dataset,” she said. “So you might have access to partner performance data, and not compensation data, or compensation data, and not performance data.”
With the competitive pressure in the market right now, Jones said, it makes intuitive sense that more firms would at least think about moving toward a closed pay system. He also said it can come up as an issue for firms looking to blend systems during a merger.
“It’s just hard to get there if you’ve always been open,” Jones said about adopting a black box approach. “It just looks like you’re deliberately trying to hide something from folks.”
Black Box Trends
A plurality (48%) of respondents in the MLA Partner Compensation Survey, published last week, considered their firms to be open pay systems. About 32% said they were in closed systems, and 20% said their systems were partially open. The breakdown in the 2022 version of the survey was 54% open, 29% closed and 16% partially open. In 2020, it was 63%, 23% and 13%, respectively.
That may look like a decrease in open systems and an increase in closed systems. But that could just be a product of sampling variation, Louis Ramos and Karen Anderson, a managing director and a partner at Major, Lindsey & Africa who authored the survey, said in an interview. Anderson also said even the anecdotal evidence of such a trend is limited.
“I had the same sense, that we’ve seen over the last three to five years maybe, it seems like more firms announcing they’re going to closed systems, in part so they can pay significant partners more,” she said. “But I wasn’t able to find anything that would support that hypothesis.”
Both Ramos and Anderson also agreed that firms have been moving away from spreadsheets to more high-tech solutions, such as web portals and intranet dashboards for sharing pay and performance data internally, for a while. They said in an email that using those kinds of tools also protects the information better.