Compensation

Articles

• Law Firm Partner Compensation for Laterals 
  by Dan Binstock
  

  Everybody seems to be on the prowl for laterals these days, but how much to compensate them? Dan is a Washington, DC-based headhunter and was on the faculty of our most recent Fall Symposium. He is the former President of the National Association of Legal Search Consultants, and is one of the best in the business. In this article, Dan outlines key metrics, how compensation gets paid, transparency and other important factors to consider.

• Partner Compensation Systems in Professional Services Firms 
  by Michael J. Anderson, Edge International
  

  At ten pages, it presents seven common systems, with a brief analysis of the pros and cons associated with each of them, including:  

  • Parity
  • Lock Step
  • Modified Hale & Dorr
  • Simple Unit
  • Subjective/Objective Blend
  • Team Oriented
  • Eat What You Kill
  This article has a good overview to share with your colleagues if compensation is on the agenda.

• Testing for Compensation Biases 
  by MesaFive LLC
  

  Law firms, like most organizations, are increasingly aware of the potential for unintended bias issues in their compensation decisions. And almost everyone understands that eliminating bias is important for legal, social, and moral reasons. Law firms face unique compensation issues, because partner performance tends to be more multifaceted than roles in other businesses that are defined by singular functions. This article addresses some of the common questions about bias testing of partner compensation. Highly recommended reading!

• How to Properly
  Compensate Managing Partners 
  by Drew Amoroso, Legal Management Magazine
  

  How do you get paid for all the time and effort you invest in your role as law firm leader? This article reviews the variety of ways law firms compensate their firm leaders, and it's chock full of data we've compiled over the years at Managing Partner Forum. The tips in this lead article will help ensure that your compensation package is fair and competitive.

• Meaningful Compensation for Practice
  and Industry Team Leaders (and Teams) – How Important Is It?
  by John Smock
  

  John Smock believes that well-run, focused practice and industry teams offer the best opportunity for consistent and continued growth in revenue and profitability. He further maintains that it’s critically important for law firms to reward and compensate team leaders based on the performance and profitability of the team.
  
  The problem is that far too few firms do it in a meaningful way, as compensation systems typically focus on individual, not group, performance. In this six-page article, John describes an approach that rewards team leaders without upsetting the existing compensation system at your firm.

• 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.  

• 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.

• 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.

• 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

• 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.

• 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. 

• 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?"