Requiem for a Lockstep

Last week I met with a partner I have known for a long time. His firm, which he has led as managing partner for two terms, is widely considered the leading law firm in his country, an institution over a century old, built on a reputation for values and quality that few competitors can match. When the conversation turned to my new book on Law Firm Partner Compensation, he stopped me. He looked at me the way one looks when admitting a loss in the family. “You know Jaap,” he said, "last year we had to abandon the pure lockstep.” Pressure from a number of highly successful younger partners, who had 'threatened' to leave for a more 'aggressive' competitor.

I did not see it coming. The culture at that firm is genuinely strong, not the performative kind that collapses the moment money gets involved. But I was not surprised either. The lockstep, once the hallmark of the world’s most respected institutional law firms, is disappearing. What replaces it almost everywhere is the modified lockstep. Partners are still allocated profit points, the device that gives every partner a direct stake in how the firm performs as a collective rather than just in what they personally bill. What changes is how those points get handed out. Seniority can still play a role, and often does, but it is no longer the only driver, or even the main one. Performance, origination and leadership contribution can all enter the formula. The modified lockstep is not a weaker lockstep. It is a different mechanism wearing the same name.

What the lockstep actually set out to solve is worth stating plainly, because it gets lost under the mechanics. The aim was to put the interest of the firm ahead of the interest of any individual partner, on the theory that if the institution thrives, every partner thrives with it. A beautifully aligned incentive, on paper. In practice it has never really worked, not in the pure sense the theory describes. Individual, short-term self-interest keeps winning out over collective, long-term interest, because that is what people do. It is not a flaw in any particular firm’s culture. It is human nature, operating exactly as you would expect. The lockstep works, when it works, not because the formula removed self-interest but because something else was holding it in check: shared ambition, trust, and generosity among the partners. Those are the conditions, not the formula. When they hold, lockstep firms are extraordinary places to practise law. When they erode, no formula, pure or modified, survives the erosion for long.

Paul Cravath joined what became Cravath, Swaine & Moore in 1899. He built something the legal profession had not really had before: a firm designed to outlive its partners rather than dissolve with them. Associates were salaried rather than commission earners. All business in the office became firm business, not the personal property of whoever happened to bring it in, and origination was never tracked or rewarded. Competition between partners was ended by anchoring compensation to seniority. The strict points ladder we know today as the lockstep, where a partner climbs one rung a year until reaching a plateau, took decades to harden into its modern form. The founding principle did not. The institution mattered more than the individual, from the start.

Several of the firms built around that principle, Cravath foremost among them, became the most prestigious and most profitable in the world. For decades the correlation held. Lockstep firms outperformed eat-what-you-kill firms in both income and reputation.

The theory was elegant. Remove the financial reward for hoarding a client or a mandate, and partners will staff matters with whoever is best suited, not whoever needs the credit. Reality has been less generous. Under a collective system, partners do not stop noticing who is and is not pulling their weight. If anything they become hypersensitised to it. A partner under pressure to keep climbing the ladder will quietly open a file under their own name rather than hand it to the colleague better placed to run it. They will hold onto a client relationship a little too tightly. None of this looks like self-interest on the surface. It looks like diligence. But the effect on staffing quality is the same as in any other system. The most suitable partner does not always end up on the mandate. The most visible one does.

Pure lockstep does not abolish performance pressure either. It relocates it. A partner some distance from the plateau watches the total number of points in the pool grow every year as new partners join below them, which means their own slice shrinks in relative terms even as the firm grows. The pressure to generate revenue, to be seen contributing, to avoid the gate that can freeze or reverse progression, is constant. Some lockstep firms have introduced what amounts to negative lockstep, where a partner who stalls can be moved back down the ladder rather than merely held in place. Seniority was meant to remove the scoreboard. It only changed what was being scored.

There is a separate problem, and in my experience a more corrosive one than performance pressure: the ambition gap. A partnership can absorb a wide spread in revenue generation as long as the spread in ambition stays narrow. What genuinely poisons a partnership is not the colleague who earns less. It is the colleague who does not put in the effort. The partner who treats equity like a nine-to-five arrangement, who objects to every initiative and follows up on none of them. No compensation tweak fixes that, because the problem was never financial. Stripping points from an unambitious partner does not make them more ambitious. It just makes them poorer, sitting next to partners who are neither.

Cravath itself eventually discovered that theory and lateral market reality do not always agree. Scott Barshay’s departure for Paul Weiss in 2016, reportedly trading a Cravath pay ceiling in the low four millions for something closer to ten at his new firm, became the symbol of a wider problem. It was not the sole cause of what followed, but it was the moment the industry started asking the question out loud. How long can an institution this prestigious keep paying its best dealmaker the same as everyone else at his level, while a rival is free to pay whatever it takes? Cravath held the line for years. Then in 2021 it formally moved to a modified lockstep, framed by its leadership as a way to reward extraordinary contribution rather than tenure alone. The firm that gave the model its name no longer runs it in its purest form.

Which leaves two significant holdouts, Wachtell, Lipton in New York and Slaughter and May in London. At Slaughter and May partners there still retrieve their napkins from individual pigeonholes at Bunhill Row, a small ritual that says more about the firm’s self-image than any compensation memo could. There is no financial incentive to hoard a client, so referring a major mandate to a better-placed colleague costs nothing. The trust that produces is real, and hard for merit-based firms to replicate. But the cost is becoming visible. Two partners left last year, derivatives partner Oliver Wicker for Simmons & Simmons, M&A partner Paul Mudie for personal reasons. Barely two months later, corporate partner Mark Zerdin, more than two decades into his career at the firm, joined Paul Hastings. Three rare events in close succession, at a firm where lateral departures used to be newsworthy precisely because they almost never happened. Market commentators are asking the same question they once asked about Cravath. Not whether the lockstep will go, but how much longer it can hold.

Every institution that has clung to the pure model has eventually discovered the same thing. Seniority can buy loyalty for a generation. It cannot buy it forever, not while a rival is willing to write a cheque that says otherwise, and not once the trust and generosity the model depends on stop being renewed. The lockstep was never really about fairness. It was a bet that shared ambition and mutual trust would outcompete individual self-interest over the long run. For a hundred years, at a handful of extraordinary firms, that bet paid off. What we are watching now is not the failure of an idea. It is the slow, well-mannered admission that even the best bets eventually come due.

This article is part of a weekly series drawing on the themes of Law Firm Partner Compensation by Jaap Bosman and Jaime Fernández Madero. If you would like to know more about this topic, read the book.

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