During March, I ran a series of posts from Guest Bloggers.  The following is the last in a series of guest posts from Victoria Pynchon.  Her prior posts and a profile are located here and here.  My thanks to Victoria for the contributions.  She writes the excellent Settle It Now blog, which its a great resource when it comes to negotiations and settlements.  Her topic today continues the theme of negotiating law firm happiness with a focus on partner compensation. 

NEGOTIATING LAW FIRM HAPPINESS

Knowing what we want; what we’d like; and what is important to other stakeholders in the law firm, we’re ready to begin our partnership compensation negotiations, right? Which are really just about money? About our  percentage share of the profits? What party interests will drive these negotiations? Why fear of course. What else would account for the present compensation scheme in which the majority of shareholders reward the minority of shareholders who “originate” firm business most handsomely?

I know the answer, Mr. Managing Partner. “Because we’ll lose our rainmakers if we don’t compensate them for the business they bring in. And then what will we do?

Applying “Equity” and “Fairness” Metrics to Partner and Shareholder Compensation Schemes

Law firms need business originators. How many of them are there in your firm and how many other lawyers families do they feed? Not many and a lot. 

“That’s why we compensate them at the levels that we do!”

 But let’s reframe the problem in the way a mediator might. 

How many high-flying business originators could service the business they bring in without equally high-flying practitioners, skilled in their art, deep in their practice, and concentrated on their case load to the exclusion of rainmaking junkets that could make them rich beyond their present imagining.

 A lot. 

So the working practitioners are also feeding the families of the rainmakers, aren’t they?  And if we applied the metrics of equity and “fairness” to firm compensation decisions, the brilliant practitioners would be compensated as well as the rainmakers. Because they’re just as important to the firm’s bottom line and are working equally  hard to support the firm’s welfare as are the rainmakers.

So why aren’t we giving as many points to practitioners as to business originators? 

Because rainmakers can “walk” with their “portable” books of business. And because someone has convinced the rest of us that good practitioners can be found anywhere within the ranks of today’s mega firms. So we’ve become more afraid of losing our rainmakers than the lawyers who service the business they bring in.  We decrease the working lawyers’ compensation and increase the originators’ income so they won’t leave us.

Putting Our Money Where Our “Core” Values Are

 Someone – and it would be best it that “someone” included the majority of the AmLaw 200 – needs to have the courage to put their money where their purported “core values” are. 

The firm cannot function without its brilliant legal strategists who cut Gordian legal knots to dazzling effect. Nor can the firm function without the few great trial attorneys it has developed or recruited. Nor can it succeed without a supporting cast of highly trained, Ivy League educated associates and junior partners who enable the great trial lawyers to bring home jury verdicts in the $2 billion antitrust actions entrusted to us by our Fortune 50 client. 

I could go on, but this is a post – not a magazine article – and you get the point.  In fact, you already know the point – you just feel stuck with “things as they are.”

What “Fairness” and Equity Might Look Like

 Here’s the pre-negotiation partnership challenge — distribute the pie by metrics of equity and fairness instead of in response to your fear that your rainmakers will desert you. Look at your “mission statement” and firm “values.” If they’re not TOTAL B.S. – and 90% of your attorneys believe that they are — assign “points” to those values and base compensation decisions on those points.

 If you pay lip service to, instead of dollars for, the promotion of these values, you will create a culture of resentment and cynicism, ensuring attrition and the inevitable inefficiencies created by back-biting and low morale.  If you compensate your attorneys for the work you pretend to value, you have and encourage integrity. And when the firm’s shareholders and employees act with integrity, they feel good about themselves and about their mutual enterprise. They become loyal and more efficient. They make more money.

And if some of your business originators leave? You’ll weather the storm. And if those rainmakers are in danger of leaving because you won’t increase their income from $1.5 to $1.7 million per year, they’re in danger of leaving when offered $1.9 million to your $1.7 million by another firm. More importantly, you’re already losing associates in record numbers and you can’t afford that for long. Who are tomorrow’s partners going to be?   

So, let’s assume your firm leadership is able to inspire all of its partners to take a stand. What do you do? 

First you must have a business plan that will ease the loss of those people who are driven only by the raw number of their compensation. 

Second, you must give up as your primary business plan the effort to appear at the top of the American Lawyer’s profits-per-partner list. Profits per partner is not really the metric upon which you and your partners thrive, is it? So why are you letting a legal rag bully you into making compensation decisions that don’t reflect your true values?

Finally, you must have a compensation system that is interest-based rather than fear-based – one that takes into account the true desires, dreams, wants, needs, and yes, fears, of the negotiating parties as well as commercial realities. 

To help you readjust your compensation metrics, I’m providing you with a list of items – in no particular order – suggesting that law firm management prioritize them according to the concerns of all firm partners, remembering that the purpose of a partnership is to support its attorneys through a lifetime of legal practice “ups” and “downs,” in an atmosphere that encourages loyalty, hard work, collaboration and team effort.

  • Community involvement
  • Associate and junior partner mentoring
  • Recruitment
    • Summers and first years
    • Laterals
  • Retention and Promotion
    • Particularly with women and under-represented minorities (see Diversity below)
    • Within the firm and as a liaison outside the firm
  • Management “chores”
    • Case management
    • Firm management
    • Practice group management
  • Public profile
    • Points to the firm’s “thought leaders” by virtue of speaking engagements and publications
    • Points to the  firm’s community leaders by virtue of their participation in pro bono activities such as Board membership with non-profit legal service groups. 
    • Points to the firm’s business leaders by virtue of their participation on corporate Boards of Directors and involvement in industry organizations
  • Diversity
    • Yes, I am suggesting that those involved in the acquisition, retention and promotion of under-represented “minorities” at the partnership level – which means everyone except white men – be given compensation “points” for acquiring and retaining this under-utilized talent
    • Participation in “minority” local legal bar associations, particularly as officers of those associations
    • Business development with under-represented minority and women-owned enterprises
  •  Billable hours
    • Let’s put our extremely well-educated heads together to finally create a “value billing” system so that we can end the practice of compensation based upon high-paid hourly-rate wage slavery
    • We already provide our clients with estimated yearly budgets for particular cases  – why don’t we put our  wallets on our own estimated bottom line and bill by the job, making a larger profit when we bring the project in under budget. 
  • Client origination
    • Points are assigned to the originator for sharing client origination dollars with those who service and thus retain the client for the firm
    • Points are given to those who serve the client
  • Flex-time, Part-time
    • Some people will pay you to be given at least some part of their personal lives back; let them do so without making them feel like second class citizens
    • Whoever is in charge of this program should be given serious compensation “points” for taking on a low-esteem job with high future but low current value

These are just a few of the items that will serve the interests of a wide variety of partners. If compensation drives behavior, then serving your partners’ interests will create a happier, more deeply satisfied and committed partnership. If your resources were firm equipment rather than personnel, you would not neglect their needs because you could not afford to have your equipment break down, rust, go out of service, or perform unreliably. Your human resources are highly calibrated, achievement oriented, value-creating and praise-motivated people. 

Service them well and often. Break the mold. Be great. Be happy.

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