Written by Norman Clark
Published: 16 February 2015
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trees in autumn

Partners in law firms sometimes tell me that their biggest problem is partner compensation. As one lawyer told me recently, "It is the only thing that is holding us back."

There can be a lot of truth to this statement. Frequently, one of the major reasons why law firms fail to achieve their strategic goals, or even deliver their annual business plans, is that partner compensation does not provide incentives and rewards for the business behaviors that the law firm needs to succeed. In some instances, a partner compensation system can actually work against those goals.

In many more instances, however, an inadequate partner compensation system is merely a symptom of much deeper governance and management problems that are embedded deeply in the culture of the partnership. Repairing the partner compensation system usually will not even touch these underlying issues, much less address them. 

This is why an effective inquiry into possible improvements to a law firm partnership compensation system frequently requires a multidisciplinary analysis of all of the factors that drive partner performance in the firm, and not just a manipulation of numbers on a spreadsheet.

There are at least five fundamental questions that law firm partners should consider when changing their compensation system.  

  1. What behaviors do we want to promote?
  2. Are there any significant difference among practice areas, in terms of the economic factors that drive their respective levels of financial performance?
  3. Will the changes actually work -- not only financially but in the context of our firm's professional culture?
  4. Will the system be fair?
  5. What further adjustments must we be prepared to make after we implement the new system?

Click here for more information about how Walker Clark works with law firms to improve their partner compensation systems.

Norman Clark