If you are a partner in a law firm you have no doubt experienced firsthand the advantages and the drawbacks of your firm’s compensation plan. According to a recent study, there is a growing tide of dissatisfaction among equity partners with their compensation system. In fact, many firms are experiencing an increase in spinoffs and decline because they kept their head in the sand for far too long.
Bottom line is there is no “one size fits all” system. Your culture, your client base, your people will all drive the type of compensation you incorporate into your firm. Ask yourself (and your partners): do you think the compensation is fair? If the answer is yes, then you need to live with the ups and downs of your practice. If the answer is no, then you need to drill down until you find the underlying cause as to why. The owners of the law firms of today no longer want to see the money they bring into the firm pave under performers’ path to retirement. They want a system that rewards them for their hard work and hours spent on business development. They want to see a system that rewards them based on their profitability.
Even though subjective and lock-step systems are still the dominant compensation systems, there are varying layers within these two systems. For example, the Corporate compensation system model involves partners receiving a base salary and a bonus based on performance and then dividends are paid on the profitability of the firm. The firm still has to determine the criteria for the measurement of “performance,” but the days of the designated pie slicer in the corner office may be moving to the distant past. Developing into an “eat what you kill” system is not the solution either.
Ultimately, you need to make sure your management systems are stable and reliable. Billing and collections, financial management, case management and marketing all should be sound and running smoothly before you implement any changes to your compensation system. The partners need to be able to rely on the numbers.
Whether you need a consultant to review your current compensation system or a back office that delivers accurate and reliable numbers, B2 can help. In fact, we can get you where you need to be by simply implementing regular advisory meetings to help partners keep their thumbs on the pulse of the firm. Knowledge is power. Let B2 help you find the right solution.
Contact Mike Harder at firstname.lastname@example.org