I had an interesting back and forth on LinkedIn in response to Jordan Furlong’s latest article – https://www.law21.ca/2018/09/how-compensation-plans-are-wrecking-law-firms/
The point I was making about this article is that it doesn’t take into account the market factors that go into determining what individual lawyers are paid. I think it’s interesting to consider what an ideal compensation model might look like at a firm, but in reality, law firms have tough choices to make when it comes to compensation.
The article and some of the comments talk about hours worked as a main driver of compensation. In my experience, lawyers have to show that they are busy enough, but top performers are rewarded for bringing in clients and keeping other lawyers busy.
Jordan thinks law firms are making a mistake. “Law firms seem to believe that by paying lawyers to do almost nothing beyond finding clients and billing work, they’re supercharging the firms’ productivity and profitability. I believe that instead, firms have unintentionally bred a host of negative behaviours.“
I don’t think that accurately reflects how law firms view compensation. In my experience, Managing Partners are aware of the negative behaviours and they understand how their compensation systems encourage those behaviours. They face a more difficult choice than this article suggests – do they reward what the market values even if it’s inconsistent with the firm’s culture, or do they reward what they believe is more important and risk losing talent?
It’s easy to state that law firms place too much emphasis on rainmaking, but what happens when they don’t? Other firms make offers to those lawyers and if the gap is large enough, they jump.
You certainly can elect to hold firm on what you value. Jordan suggests that collaborative behaviour and good client service should be more highly valued by firms and I think most people would agree with that. However if you start to lose talent as a result, are you prepared for that? Will the lawyers at your firm continue to support you if clients follow those departing partners?
Partners who are excellent mentors to junior lawyers are hugely valuable and important to the culture of a law firm. Even if everyone agrees with this, when was the last time you heard about a law firm making a lucrative offer to a lateral hire because of this skill?
Think you can make exceptions to ensure you keep your stars? Good luck with that. Lawyers see what you really value and reward in those moments and you get more of it. Plus nothing erodes a culture faster than saying you value one thing and then doing something else when push comes to shove.
A strong culture helps. Lawyers who believe that they work at a special place where the firm’s values align with their own will elect to stay even if they can make more elsewhere. That might be less true than it used to be though, given that we’re seeing bigger offers and incentives to move.
The New York Times had an article earlier this year describing one Cravath partner receiving an offer of $11 million per year for 5 years. “It was unheard-of for a Cravath partner to go to another law firm,” said David Lat, the founding editor of the legal website Above the Law. “Now it’s happening with some regularity.”
None of this is an argument against reforming law firm compensation plans. It is important for a firm to state what it values, and then to reward lawyers accordingly. We just shouldn’t conclude that law firms aren’t aware of the problem or unintentionally making it worse. Law firms have to make difficult choices and sometimes the market sticks its nose in and forces them to make decisions they would rather not make.