Keep Your Compensation Structure Effective
Many firms still rely on compensation systems designed 20-30 years ago by partners whose incentives and market realities were vastly different. Today, that approach may no longer be realistic, hurting the growth and future of your practice.
And adding to it, these outdated systems often reveal gaps that lawyers struggle to discuss openly, instead opting to keep the peace and avoid rocking the boat. However, this “eat-what-you-kill” mindset is getting in the way of your success. A good compensation system is more than monetary rewards; it’s a key part of the strategic planning that shapes the behaviors you need from partners and collaborators.
Three Factors of an Effective Compensation Approach
The most important role of a compensation system is to bring like-minded partners who align with your firm’s vision, and this often depends on three critical factors.
- Inputs vs. Outcomes: Input-based systems reward individual contributions, like billable hours, while outcome-based systems focus on firm-wide profitability, focusing on collective success rather than individual performance. Which one is best for your firm is a choice we can help you make.
- Transparency: Determining how much partners should know about each other’s compensation. This depends on your firm’s culture, as neither full openness nor complete confidentiality is inherently superior.
- Balance: Some firms use rigid, objective formulas tied to measurable factors, while others take a more flexible approach with a more subjective perspective. The optimal structure depends on your firm’s priorities, culture and goals.
Our Solution
However, let’s keep in mind that there’s no universal right answer. We’ve worked with successful firms using radically different approaches to navigate these decisions strategically, ensuring their compensation system supports their goals.
One thing remains true, however: law firms have far more compensation options available than most attorneys realize.
Get StartedFrequently Asked Questions
Compensation is worth reviewing if big shifts are happening, such as elevating new partners, hearing concerns about underpayment, or noticing misalignments in how partners view each other’s roles. This isn’t the only thing to consider, but it’s a good place to start, especially if you are losing talent to other firms.
The timeline depends on a few factors, like the number of equity partners and how much the firm wants to adjust its compensation system (bonus structures, etc.). For most midsize firms (typically 3–8 partners), we can usually provide recommendations and wrap things up in 8–12 weeks, or roughly three months.
We stay involved. If you decide to reconfigure your compensation system, we can help design it, support implementation, and even assist with ongoing adjustments to keep up with market conditions. Think of us as an ongoing resource, not just a one-time consultant.