When Law Firm Compensation Plans Work Against the Firm’s Own Interests
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Steve Nelson, my longtime friend and legendary recruiter, invited me to join his Steve’s Rules podcast to talk about one of my favorite topics: law firm partner compensation! And by “favorite,” I mean the thing that makes my phone ring most often, because when compensation systems go sideways, they take culture, collaboration, and profitability down with them.
We covered a lot of ground in the brief episode, but here are a few themes that may resonate:
Your compensation plan tells the truth that your website won’t. Nearly every law firm claims to value collaboration, client service, collegiality, mentoring, and diversity. But if the comp plan rewards only billable hours and origination credit, don’t be surprised when partners focus on… billable hours and origination credit! What you reward is what you get.
Variability is a feature, not a bug. Law firms tend to be recession-proof because disparate practices tend to operate at different points in the business cycle. For example, a high-rate corporate practice may be soaring while litigation faces a lull, and vice versa. Stop treating variability in financial performance like a problem to be fixed.
Laterals aren’t a strategy. If your “strategy” is to fill empty offices with warm bodies that can bill time, you don’t have a strategy — you have a real estate problem! Successful lateral hires are the result of a clear business plan, intentional integration, and firmwide accountability for making the marriage work.
Transparency beats perfection. There’s no such thing as the perfect compensation plan. But there is such a thing as a transparent one — where partners understand the rules, see the link between what’s valued and what’s rewarded, and can make informed choices about their own behavior.
Reward the whole orchestra. Not everyone can (or should) be a rainmaker. Or a tireless producer. Some bring in the work, some do it brilliantly, some mentor the next generation, and some keep the firm running. A good comp plan pays each in proportion to their contribution without forcing everyone into the same mold.
The punchline? If your firm strategy or stated values are in conflict with your partner incentives, you need to either change the plan to match your values, or be honest about your real values and own them.
You can listen to our full conversation here. Enjoy!
Tim Corcoran guides law firm and law department leaders through the profitable disruption of outdated business models. Tim is a former CEO, a Fellow and past Trustee of the College of Law Practice Management, past President and Hall of Fame member of the Legal Marketing Association, an American Lawyer Research Fellow, a past Teaching Fellow in the Master in Legal Business program at the Australian College of Law, a frequent presenter on business of law topics at law firm retreats and legal conferences, and a writer whose articles are published regularly in leading publications. Contact Tim here.
