Maintain an Effective Compensation Structure as Markets and Firm Priorities Change
Many law 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And adding to it, these outdated systems often reveal gaps that lawyers struggle to discuss openly, instead opting to keep the peace and avoid rocking the boat.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 Law Firm Compensation System
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 Law Firm Compensation Consulting Process and Strategic Approach
Keep in mind that there’s no universal right answer. We’ve worked with successful law 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, partners voicing concerns about how they are being paid relative to their peers, when partners roles significantly change, or when noticing significant misalignments between how people are acting and what you want them to prioritize, These aren’t the only thing to consider, but it’s a good place to start, especially if you are concerned about losing talent to other law firms.
Firms also revisit compensation when external data shifts—e.g., National Association for Law Placement (NALP) associate salary benchmarks or partner-compensation survey results—indicating market movement. Aligning your structure with credible market benchmarks can can reduce frequency of turnover.
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, we can usually provide recommendations between 8 and 12 weeks, or roughly three months. Depending on the size of the firm and the number of partners and issues involved, it often takes longer to fully implement a compensation plan than to redesign it. We can give you a more specific estimate before we start working with you.
Reviews that include model changes—such as moving from an eat-what-you-kill approach to modified lockstep or a hybrid formula, typically require more partner engagement and data modeling, which can extend timelines.
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.
We advise on the full spectrum of attorney pay, from first-year associates on up. Compensating associates comes with its own unique set of challenges. We help you tackle them, like building clear career advancement paths, finding the right balance between market competitiveness and firm profitability, and crafting bonus structures that truly motivate performance and encourage collaboration with partners.
Because of our work across firms we can provide guidance about market changes in compensation and calibrate salary bands and bonus thresholds to your market segment.
One of the primary differences between partner compensation and associate compensation is that the former involves questions about how to split profits. This in turn involves broader policy questions such as the extent to which you want to maintain a cash reserve. Associate compensation by contrast tends to be more focused on where you want to position yourself in the marketplace and creating a scalable career path for the firm that is attractive to associates and incentivizes them to stay.
Generally speaking, their compensation options are narrower than partner compensation. For example, most firms tend to fall into a fairly narrow range when deciding what to pay associates on matters that the associate brings to the firm. The range of partner compensation is broader both in purely financial terms and what firms choose to include in their partner compensation models.
Partner compensation plans often incorporate a combination of inputs and outputs to include billable hours, the value of your book of business, and the value of your business. there has also been an increasing trend for boutique and mid-sized firms to base compensation on parameters that have primarily been used by large law firms. these parameters include KPI’s such as: revenues per lawyers (RPL), profits per partner (PPP), and profits for equity partner (PPEP).
Associate designs typically anchor to market benchmarks and performance reviews. We also help evaluate whether lockstep, modified lockstep, eat-what-you-kill, or hybrid points-based elements best support your goals.
Absolutely. We help you create solid compensation strategies for your entire support team. That means your paralegals, legal assistants, business development staff, and all administrative personnel. Compensating these roles well is just as critical for your firm’s success and keeping critical people; it just requires a different lens. We apply our expertise to understand their unique market rates and career progression paths, which are distinct from attorney roles.
We are familiar with employee benefit trends as they impact compensation. We are not, however, employee benefit brokers or providers. We therefore will work with your existing benefits providers or introduce you to people we know if you have specific questions. For example, the issue of whether to change health insurance providers has come regularly in our work, and we can bring in experts who are immersed in those details to help you reach a decision.
Our compensation reviews consider total rewards – base, bonus, benefits, and non-monetary incentives – so that salary structures, benefits, and performance-based components function coherently.
Today’s systems have a much broader picture of an attorney’s value. We help you evaluate contributions like client origination and retention, overall revenue generation, and leadership or mentoring roles. We also consider pro bono work, firm management duties, and how someone contributes to your firm’s culture and strategic goals. Our job is to help you identify which of these metrics matter most for your firm’s unique priorities and culture, so your system rewards what you truly value. A well-constructed compensation system will reinforce the conduct the firm wants its lawyers to prioritize. Billable hours come up as a key metric, but they are not the whole picture, even for firms that primarily or exclusively bill by the hour.
In addition to those factors, many firms track quantitative KPIs such as Revenue per Lawyer (RPL), Profits per Partner (PPP), and Profit per Equity Partner (PPEP)—alongside origination to capture both individual and firm-level value.
We guide you through the entire rollout process. That includes advice on the best timing, how to frame the message, and how to address any questions or concerns that come up. We will help you develop clear communication about your compensation philosophy, how decisions are made, and what behaviors and contributions are rewarded. We are available to advise you on how to communicate about changes to your compensation model as well as discussing it directly with the most affected parties.