Friday, June 29, 2007

Merit Pay and Performance

Brian Leiter posts on his blog today about a the decision of the Howrey law firm to pay its associates based on "merit" rather than seniority. I was surprised that this is seen as a radical move. Given the growing acceptance of merit pay even among unionized teachers who have long been suspicious of the idea, I would have thought the private sector would be far more accepting of the idea.

I know that many public law schools follow a lock-step approach to faculty compensation and that faculty salaries are largely a matter of public record. (Is this universally true?) At my private law school, there is much more secrecy and flexibility about compensation. The dean has flexibility to compensate entry-level candidates according to what the market will bear; he can match offers that colleagues have elsewhere; he can make allowances for over- and under-performance; etc. Furthermore, he is not obligated to share with the faculty who makes what or what the basis for any individual compensation decision is.

My MoneyLaw question is what effect these two broad approaches to faculty compensation -- lock-step and public vs. discretionary and private -- have on law school performance? Intuitively one would think that the merit pay creates incentives for performance, and helps deans reward and retain high performers. But the suspicion and jealousy that secrecy breeds can have a devastating effect on morale and collegiality. Is there a middle ground between the two approaches that might balance these two effects?

In baseball (and other professional sports) compensation is usually at the discretion of management but is public. Salaries are reported in the paper next to the ball scores. If management makes poor decisions about whom to compensate and how much, it is accountable to ownership and the public. Would this kind of discretion and accountability improve things in a law school?

4 Comments:

Blogger Alfred Brophy said...

Sam--thanks for this post. I've been wondering about a related question recently (perhaps I'll post on this sometime soon). My guess would be that the range for discretionary pay increases is quite narrow at law schools. If that's true, I'd imagine that even great performance can't be rewarded much; and I wonder if the costs (such as frustration among those who aren't receiving as high a merit increase) are worth the benefits.

That also raises the question: what are the benefits? How much will a small merit bonus motivate people? I'm trying to write the best scholarship I can; the incentive an other even few thousand dollars won't make me perform any better.

As always, I'm most interested in what everyone else thinks.

6/29/2007 1:31 PM  
Anonymous Brian Leiter said...

The pressure on the top schools to have discretionary, "merit"-based (which really means market-based) compensation is now enormous--and this is true whether they are public or private schools. The public schools face the difficulty that their salary data is or may become public, though I've not seen much evidence that this has stopped, e.g., Virginia, Texas, Michigan, Berkeley, or UCLA from offering market-driven compensation. And often the data that makes it into the public eye turns out to be only a portion of the compensation (e.g., academic year salaries--so not including summer salaries, housing allowances, etc.--not to mention programmatic money).

I emphasize market-driven rather than simply "merit" because the market responds not only to merit--e.g., scholarly productivity, quality of the work--but also to area. There will be more market demand for the very top folks in tax or corporate law, for example, meaning that salaries are likely to be higher. I confess that all I have to go on here is anecdotal evidence, so I may be mistaken. But I have a lot of anecdotes!

Wheteher a school should have lock-step or a "merit" system depends a lot on the school. "Merit" systems of compensation, especially to the extent they are public, can breed envy and resentment; but they may be essential if a school wants to improve and if there are real differences in productivity and quality on a faculty. Lock-step works well when faculty quality is more uniform. But the market for lateral talent, which by all accounts is more intense now than 25 years ago, means that even traditionally lock-step faculties have to make merit discriminations, even just to hold on to their current place in the hierarchy.

6/29/2007 2:20 PM  
Anonymous rick bales said...

While annual merit increases may be small, my sense is that most deans have the capacity to match lateral offers from elsewhere. This, unfortunately, forces productive faculty to shop themselves on the market if they want a significant raise, and penalizes faculty who (often for family reasons) cannot easily do so.

6/29/2007 2:36 PM  
Blogger Jeff Harrison said...

Ideally a Moneylaw Law School would award faculty on the basis of merit. There are three problems. What is merit; what is there to be awarded; who makes the awards? All if these mean that the connection between productivity and salary increases are tenuous. The net effect is, as Al suggests, that it hard to believe that many law professors are driven by the hope for a higher salary.

On the other hand, I do think the sense of having been treated fairly relative to others -- even if the salary pool is small -- is important and may affect productivity not so much with respect to scholarship but with respect to the many other ways a law professor contributes to the institution.

6/29/2007 4:52 PM  

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