In the recent ABA Journal article, “Why Are Women Leaving, Big Law Looks for an Answer and Finds Big Disparities,” authors Stephanie Scharf and Roberta Liebenberg advise law firms to “develop strategies and set targets for what they want to achieve. They should take a hard look at gender statistics in their firm and track them over time.”

In today’s workplaces, and especially within law firms, it is imperative to understand what factors, statistically, have led to current gender differences in pay and promotions, and to address differences that cannot be justified. At the present time, we are observing a substantial increase in demand for labor economists, including our own compensation consultants at Welch Consulting, to provide proactive studies of pay differences in law firms, typically with outside counsel protecting confidentiality.

Note that Scharf and Liebenberg are not simply advocating for addressing current differences in gender outcomes; they are also arguing that the human resource function must plan on re-analyzing data going forward as a regular part of annual compensation and promotion reviews.

Understanding Differences in Individual Compensation

compensation consultantsOne of the most challenging aspects of analyzing gender compensation outcomes for highly skilled employees—who often contribute significantly to generating or maintaining their own, and their firm’s, business—is locating documentation as to what actions individuals have taken in their careers and what business consequences have arisen from individual initiatives, including business outreach efforts. If law firms are to meet the authors’ challenge of understanding and explaining differences in gender compensation among attorneys, a greater emphasis will be required on collecting and memorializing individual-specific data—including information on why some new attorneys at the firm are paid above-average salaries (regardless of gender) at hire, what empirical data justifies bonuses being set as high (or low) as they are, how non-revenue-generating activities are valued, etc. Further, these efforts must be on-going, beginning with documenting individual-specific drivers of compensation at hire for future employees and regularly reviewing, and updating, current employee data files for completeness.

As a general proposition, by implementing forward-looking procedures that explicitly document the factors that lead to individual compensation differences, human resources professionals will be able to construct a database that can be used to provide transparency in compensation decisions (and, indirectly, in hiring and promotional questions) arising among all employees.

Perhaps as importantly: emphasizing the gathering and recording of individual-level factors will allow employers, if challenged in the future, to benefit from their enhanced ability to defend statistically against discriminatory claims brought by groups of employees – claims featuring now-documented abilities of, and historical influences on, individual employees that can be shown to differ within the group.

Experienced Labor Economists

Many Welch Consulting clients consult on a regular basis with our labor economists to address employment issues brought to light under federal and state regulations. We regularly assist a multitude of law firms and other large organizations with matters relating to labor economics and statistics, and our expertise is applied to almost every industry in the country.

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