Most law firm partners can't answer this question.
At Walker Clark we view partnership compensation as a strategic issue. Our experience over the past 13 years, advising law firms worldwide -- and especially in the emerging markets in Latin America, Eastern Europe, and Asia -- demonstrates that a fully informed, well thought-out partner compensation system can produce a clear and measurable positive return on investment in less than two years. A good compensation system is also a major factor in creating long-term sustainable profitability.
A bad system, however, usually produces no ROI at all, and sometimes even a negative one.
The point that some law firms -- and even some law firm compensation consultants -- sometimes miss is that there is no single set of "best practices" in partner compensation systems. "Eat what you kill" is not inherently better nor worse than a traditional "lockstep." What works brilliantly in one partnership can be toxic in another firm. This is why our unique multidisciplinary approach, based on economic and market realities, as well as the strategic goals and professional culture of the firm, looks for the partner compensation system that is "just right" for each client.
Of all of the compensation-related issues that we investigate with our clients, there are two that often are the most difficult -- and also the most important in terms of the probable ROI from improvements to the partner compensation system.
- What specific behaviors do the partners want to incentivize and reward? In some firms and some circumstances, fee production might be the paramount consideration. In others, long-term creation of value for the firm might be more important than short-term financial performance. Therefore Walker Clark compensation projects often begin with an in-depth review of the basic strategic objectives and tactics of the firm, to confirm that they are still relevant and realistic. Few things can be worse than a "new" partnership compensation based on "old" assumptions that are outdated or were flawed from the start.
- What do we need to do to ensure that partner compensation is fair? Fairness is one of the foundation stones of partner relationships and law firm governance. The definition of fairness and the application of specific values of fairness to the fast-changing, demanding business and professional environment of law firms today often are some of the toughest -- and most emotionally charged -- questions that law firm partners must face. A thorough review of partner compensation sometimes requires that partners learn how to manage conflicts among themselves more productively. In our experience, when a partner compensation system fails to produce a good ROI for the firm, it is almost always due in part to the partners' failures to move past denial and to confront difficult, uncomfortable issues openly and honestly.
Unfortunately, most law firm partnerships -- and many of our firm's competitors -- are unequipped and unprepared to facilitate these sometimes emotionally charged and intellectually demanding questions. These are not the only issues that will affect the outcome of a partner compensation project; but clients often tell us that, in their particular cases, our ability to guide them through these challenging matters was essential to their successful results.
Click here for more information about Walker Clark partner compensation services; or contact us at the e-mail address or telephone number at the bottom of this page.