- Partner Compensation Systems in Professional Services Firms
by Michael J. Anderson
When a group of managing partners settle into a conversation about firm leadership, the topic - sooner or later - turns to partner compensation. Over the years, we’ve seen systems that range from pure formula with heavy emphasis on personal collections to mostly subjective with an emphasis on difficult-to-quantify “firm-building” contributions. What’s the best system for a smaller to mid-size firm in today’s environment? More to the point, what’s the best system for your firm? Micheal’s article will help answer these questions as he takes us through seven types of systems with commentary on the strengths and weakness of each one.
- Jackson Lewis Move May Sway BigLaw on Associate Billables
by Scott Flaherty, Law 360
Every now and then, a reporter will call to ask for comment about a trend in the legal industry or about the activity of a specific law firm. In this case, Jackson Lewis, the national labor and employment firm, has announced that, effective, January 1, it will no longer include billable hours among the criteria to evaluate its associate attorneys. Rather, it will look at work quality, efficiency, pro bono and responsiveness to assess associate performance. Is this the beginning of a trend? Personally, I think not. Associates should be evaluated based on a multitude of factors…with billable hours at the top of the list.
- Splitting the Pie: Partner Compensation
by August J. Aquila
Compensation is invariably the most talked-about subject at The MPF Leadership Conference or at any gathering of managing partners for that matter. Over the years, we’ve learned that no two systems are exactly alike, and there is no “right” or “wrong” system for any particular law firm. We like systems that reward both billable and non-billable contributions to the long-term success of the law firm. August Aquila, a long-time member of the MPF Faculty and a leading expert on compensation models in professional services firms, weighs in with some very thoughtful concepts on the topic in this short, but very important, article.
- Bonuses Spread to Associates at Midsize and Small Firms
by Christine Simmons, New York Law Journal
Compensation is always a hot topic when a group of managing partners gets together to talk shop. And if you’ve read any of our writings over the years, you know how we feel about compensation. Yes, it’s important to consider the numbers (typically billable hours, collections and origination), but it’s also important (perhaps more so in some cases) to reward the time and effort your firm’s attorneys invest in the future. Contributions like mentoring, training, business development, firm leadership, etc. And that applies to associate attorneys, as well.
In the article, seven managing partners share how their firms go about rewarding associate attorneys. In addition to the billable stuff, here are some of the other factors they consider at bonus time:
- Firm Citizenship
- Sharing and Teamwork
- Client and Partner Satisfaction
- Business Development Effort
- Revealed: Compensation Spreads of The AmLaw 200
by Aric Press, American Lawyer Media
Have you ever considered the difference between the total compensation of the highest and lowest paid partner at your firm, and how it affects overall cohesiveness and profitability in the organization? Does too wide a spread have a negative impact on a collaborative, firm-first culture? And what’s fair to the individual partners, some of whom bring considerably more to the table than others?
For AmLaw 200 firms, the average multiple is just under 11, according to the most recent survey. That is to say that the highest paid partner makes 11 times more than the lowest paid. The widest disparity was at Lowenstein Sandler, a 300-lawyer New Jersey-based firm, with a multiple of 24. Only a few firms reported multiples under 5.
Aric is the Editor-in-Chief of American Lawyer Media. He serves on the MPF faculty and was the keynote speaker at this year’s MPF Leadership conference. His article appeared in the July 17th issue on The American Lawyer.
- Law Firm Compensation Systems
by Selected Authors
If you had to pick one topic that intrigues managing partners and law firm leaders the most, it would be compensation – by far. The most successful firms look at the numbers (usually billable hours, collections, and origination credit), but also consider non-billable (and difficult to quantify) contributions such as firm citizenship, sharing, teamwork, mentoring, client satisfaction, governance and leadership. Over the years, we've featured quite a few articles about law firm compensation models and these are five of the best.
- Partner Compensation Systems:
Systems Used in Professional Services Firms
by Michael J. Anderson
This is one of the better articles we've read on law firm compensation systems. It succinctly reviews the pros and cons of seven basic systems, including lock-step, modified Hale and Dorr, and eat-what-you-kill. Importantly, Anderson says there is no perfect system that will satisfy all partners, that compensation must support firm strategic goals, and it's important to keep it simple, stupid.
- Tolstoy Was Right
by Ed Wesemann
In this gem of an article, Ed says he finds little in common among unsuccessful law firms, because each one tends to fail in its own unique way. He does, however, find that there are a number of factors that are almost always present in highly successful law firms. These factors include leadership, expectations, and a subjective compensation plan.
- Partner Compensation:
Creating a Performance-Boosting Scorecard
by August J. Aquila
In this terrific article, Aquila offers his guidance to build a "near-perfect" compensation system at your firm. He says your compensation system should strive to achieve nine important goals if you want to achieve long-term success
- Rethinking Partner Compensation Criteria
by Howard L. Mudrick
In this article, Howard says you get what you pay for when it comes to setting partner compensation. He encourages law firms to look beyond seniority and personal productivity. Too short-sighted, he says. Rather, they should find ways to measure and reward contributions to the firm's long-term success. These criteria might include client service, project management and firm leadership.
- Administering Partner Compensation Systems
by Joel A. Rose
Partner compensation. It's invariably the "hot-button" issue whenever a group of managing partners gathers to talk shop and compare notes. This thoughtful article discusses ideas your firm might consider to build a more "unified" firm culture. When it comes to comp, there's more to it than formula.
- Associate Salary Figures in a Holding Pattern, NALP Survey Shows
by Karen Sloan, Law.com
NALP (National Association of Legal Placement) released a report in September 2010 stating that starting salaries for first-year associates at large law firms have been stagnant in 2010. The median annual salary is about $115K for first-year associates across all firm sizes for both 2009 and 2010. That's down from $130K in 2008.
- Firms' Billing Rates Inched Up During 2009
by Karen Sloan
It's hard to believe but, even during the worst economic recession in over 70 years, US law firms managed to increase their billing rates in 2009. The average was 2.5% according to a recent survey of the nation's largest law firms conducted by The National Law Journal. That increase compares to a 7.7% rate climb in 2007 and 4.3% in 2008. The survey also indicates that a larger percentage of revenue for most firms was generated from alternative billing arrangements.
- Associate Pay Cuts Here to Stay, Say Firms and Analysts
by Julie Triedman
According to this article that originally appeared on AmericanLawyer.com in December, a growing number of law managing partners and consultants say that steep cuts in associate compensation are here to stay. "We do not see any movement to reinstate pre-recession pay levels," says Altman Weil consultant Jim Cotterman. Starting salaries for first-year associates reached a staggering $160,000 a year at blue-chip firms in New York, Los Angeles and Washington.
- Trends in Partner Compensation
by Jane Sender
Compensation is a hot-button topic for almost every managing partner. It is also a critical driver behind the lateral movement of equity partners. This article by placement specialist Jane Sender provides an overview of recent trends in law firm compensation systems, including open vs. closed, and formula vs. subjective systems.
- It's Bonus Time! Rewarding Top Performers with Innovative Incentive Programs
by Steven T. Taylor
Compensation is always a touchy subject...especially in an off year like this one. This article features case studies of what a handful of innovative firms are doing to reward exceptional - often non-billable - contributions to firm goals and objectives.
- Do Law Firm Compensation Systems Drive Profitability?
by Edge International
While there is certainly no such thing as the "right" compensation system, here's an interesting article from our friends at Edge Group concluding that formula-driven compensation systems hurt firm profitability.
- Partner Compensation Systems in Professional Service Firms - Part 1
by Michael J. Anderson
This is the first of two articles Anderson has written on the topic. He asserts that, while there is no perfect system, a good compensation plan supports and aligns with the firm's strategic goals and objectives. Be sure to read Part Two of this article, as well.
- Partner Compensation Systems in Professional Service Firms - Part 2
by Michael J. Anderson
This article, coupled with Part 1, is a great resource if your firm is considering changes to its compensation system. Warning: Proceed with caution!
- Best Practices for Setting Managing Partner Pay
by Peter A. Giuliani
How should a firm appropriately compensate its managing partner for the non-billable time required of the role? Take a look at Peter Giuliani's article that appeared recently in the ABA's Law Practice Magazine.
- Dealing with Tensions Surrounding Partner Compensation
by Joel A. Rose
This article presents a good overview of various compensation systems and poses the question "Is there an ultimate solution to setting a partner compensation formula?"