I don't think you want to be replicating the management practices of major law firms, which are generously considered awful places to work. Lockstep bonuses only apply to associates, and are usually a function of the senior attorneys' inability to provide meaningful feedback and performance management, not a desire to reduce competition.
Competition at law firms is fierce. They are rife with unproductive credit seeking, because the real incentive isn't a bonus, it's promotion to equity partner, and there are only a small number of spots open at the top.
But you nail the real issue with stacked ranking: HR departments should help design and manage a performance management system, but the feedback and decisions need to be handled by managers who know the business and have direct involvement in their employees' work. I think you're over-estimating how effective this is at investment banks, where you tend to have transparent performance metrics, but awful managers. But there a lot of major companies tend to get it right.
> I don't think you want to be replicating the management practices of major law firms, which are generously considered awful places to work.
Law firms are generally considered awful places to work because they're in a service business where people are compensated, in part, on their ability to respond to client requests at 2 am. But that aside, there are a lot of very sensible management practices in law firms, that have arisen through more than a century of practical experience in a "knowledge worker" field where employee performance is not easily quantified.
It's in vogue to criticize law firm management for problems that are properly attributed to the structural dynamics of the industry (slowing growth in demand), but I've never found such criticism convincing. Indeed, I think a lot of the historical conditions that led to the current management practices of law firms are similar to the conditions faced by top technology companies today. Google and Facebook don't need to figure out how to get adequate performance from large numbers of mediocre people, like Big Corps often do. Rather, they are in a position where they have plenty of money to hire the top talent, but face an experience shortage. How Cravath, and others, responded to the similar situation in the early 20th century was institutionalized training, lockstep, and "up or out" combined with a substantial equity carrot. Instead of searching high and low for experienced professionals, Cravath hired them right out of school and taught them everything they needed to know. They kept people moving up within the organization, and offered a very real chance for substantial equity in the firm.[1] Those that didn't quite cut it were pushed out, but to a soft landing because the industry as a whole was growing and there was very high demand at other organizations for people with that brand name and that training. Those conditions don't really hold true for law firms today, but seem very similar to me to the conditions faced by Google, Facebook, etc.
Incidentally, I think Fog Creek's system is great, and is practically quite similar to lockstep: http://www.joelonsoftware.com/articles/fog0000000038.html. There are essentially just four levels (9-12) for engineers who are neither interns nor fellows, and compensation is fixed, and public, at each level (except for a small percentage of each level that might get "superstar" status and compensation halfway to the next level). There are no individual bonuses, just profit-sharing bonuses that are based on company performance and also fixed at each level. Promotion between levels is based on a holistic analysis rather than strictly seniority, but that's probably a useful tweak to lockstep.
> Lockstep bonuses only apply to associates
Quite a few New York firms are still lockstep throughout the partnership. When firms abandon lockstep, its because of profitability: only a handful of firms are so profitable that they can compete for rainmakers while maintaining a lockstep regime. Since were talking about Google, Facebook, etc, in this thread, I don't think that constraint is relevant.
> and are usually a function of the senior attorneys' inability to provide meaningful feedback and performance management, not a desire to reduce competition.
Senior attorneys aren't great at providing feedback, but at least they see your work product, day in and day out. Engineering managers usually aren't reviewing and editing every line of code you commit!
I've worked as a software developer and also as a lawyer at a pure lockstep firm, and I preferred the management experience at the latter. The major things I appreciated were the flat management hierarchy and the strict separation between lawyers and non-lawyers. On even a big matter, there was maybe two to three levels above me. That was about the depth of the management hierarchy at the startup I worked for, which was 1/30th the size. And from screening interview to exit interview, I was never evaluated by a non-lawyer. HR was strictly for logistical support, not evaluation. And at the firm, even when feedback was weak, it was always from someone who had actually seen my work product, not some manager who heard from someone else about my work product. When I was at a software company, I spent a lot of time doing image management: making sure that someone important knew what I was up to. It was effective when it came to bonuses and raises, but it probably wasn't the most productive team dynamic. At the firm this wasn't even a concern. The partner on my matter saw my e-mails and often saw my work product. The only thing an administrative person tracked was my overall hours, and all I really worried about other than doing good work was making sure I kept my hours within the acceptable range.
[1] Even today, when partnership odds are considered a long-shot, a new hire at Cravath has a much better shot of becoming partner than a new Googler does of achieving a high VP-rank. This is at least partly because of eschewing the idea of hiring VP's from a separate class of professional managers rather than by promoting from within the technical ranks. This equity carrot is key to getting smart people to put in a lot of work for the benefit of the company.
Competition at law firms is fierce. They are rife with unproductive credit seeking, because the real incentive isn't a bonus, it's promotion to equity partner, and there are only a small number of spots open at the top.
But you nail the real issue with stacked ranking: HR departments should help design and manage a performance management system, but the feedback and decisions need to be handled by managers who know the business and have direct involvement in their employees' work. I think you're over-estimating how effective this is at investment banks, where you tend to have transparent performance metrics, but awful managers. But there a lot of major companies tend to get it right.