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.
I think 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 partners compared to associates. Any parallels to Merrill Lynch’s FAs and SVPIs?
Let us be clear first who are partners, 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 & Cromwell announced that year-end bonuses will be cut in half, with a maximum of $17,500 for early-career associates and $32,500 for eighth-year associates. However, last year, bonuses ranged from $2,500 to $20,000 and for the current year, bonuses are estimated to be $1,000 to $5,000. Should Sullivan & Cromwell be concerned about difficulties in recruiting or retention?
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 indicates that firm is not generating good revenue and this may affect the firm to hire new employees.
5. How does the Sullivan & Cromwell approach to compensation differ from that of Dewey & LeBoeuf? 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.
