Show me the money

Posted by Charles H. Van Horn on

For more than a decade, our firm has investigated implementing a formula-based compensation schedule. Over the years we have spoken to any number of lawyers and law firm managers about the firm’s respective compensation structure. There are no doubt quite a number of law firms that use a formula-based system in setting compensation, particularly for partners. We have resisted becoming one of those firms.

Our approach remains “all for the greater good”, allowing us to set salaries [many firms use a ‘draw’ method] reflective of a partner’s capacity for revenue generation. We maintain a system that places tremendous discretion among the firm in rewarding productivity on any number of variables, including revenue, new business to the firm, oversight of projects and cases, firm management, mentoring of less experienced lawyers, contributions to the bar and the community in general, and so on. Don’t get me wrong: we measure performance on any number of metrics, many of which are quite detailed. But, we don’t allow the numbers (or, even worse, only certain numbers) provide the answer.

Staying away from a formula has allowed us to consistently recognize performance without allowing the criteria themselves to dictate any person’s behavior. Before implementing a formula for compensation, consider the distinct possibility that an attorney may choose which phone call to return, or which email to respond to, or which project to tackle first, specifically in light of how that particular task directly impacts that professional’s compensation. Instead, consider utilizing a system that rewards overall contributions. Think macro rather than micro.