Full Description
The legal industry has undergone massive change due to economic conditions, changing client behaviours, and technological advances - to name but a few of the major sources of disruption to traditional legal practices. Possibly for the first time in several decades, a comprehensive rethinking of how legal work is priced and staffed and how lawyers should be evaluated and compensated is underway amongst US firms. Partner compensation, as well as proper pricing and budgeting of work, must be brought into line with what delivers the best results for clients - yet firms are often confused when it comes to aligning compensation with firm goals and client expectations. This report provides expert views from well-known industry experts to answer important questions such as: How a law firm can align a compensation system with strategic goals; How to align profitability and compensation plans; How to align compensation with client priorities; and How different pay for performance schemes can be used. Unique selling points: The report contains articles from well-known and respected experts who are regularly consulted on law firm compensation - the report brings together their thoughts and advice in one publication The articles have been specifically written for senior partners/management who wish to examine the effectiveness of their current compensation systems and it will help them understand: o How to measure the firm's compensation acumen o The questions that need to be asked and the main criteria the firm needs when setting a compensation plan o How to align compensation with firm goals and strategy o How to align compensation with profitability o How to align compensation with client priorities Suggested approaches to compensation have been provided by different contributors - as one size does not fit all - and firms can review the options available to them The report places compensation alongside another crucial issue in law firm management at the moment - pricing -- - and provides advice on ways to adapt compensation with pricing As a comparison, the report provides insight into compensation schemes in accounting firms and shows the methods that are effective in other professions
Contents
Executive summary ...VII About the authors ...XI Partner compensationAn in-depth survey by Major, Lindsey & Africa ... 1 By Jeffrey A. Lowe, Global Practice Leader - Law Firm Practice at Major, Lindsey & Africa The survey ... 1 Compensation and other practice metrics ... 1 Compensation satisfaction ... 3 Perceived change in importance of factors ... 6 Desire for change in compensation methods ... 6 Predictions for the 2014 partner compensation survey ... 6 Compensation: You may just get what you pay for ... 9 By Thomas Berman, principal at BERMAN & ASSOCIATES The downside of a compensation scheme ... 11 Sizing up your firm's compensation acumen ... 11 Conclusion ... 13 Compensation: Ask why, not how ... 15 By Julious P. Smith Jr, chair emeritus, Williams Mullen Introduction ... 15 Mixed messages ... 15 Issues in strategic planning ... 16 What do firms need to do? ... 17 Conclusion ... 18 Identifying and defining criteria for determining partner compensation ... 19 By Joel A. Rose, president of Joel A. Rose & Associates, Inc. Partner compensation criteria ... 19 Origination credit ... 21 Responsible partner credit for a client or matter for minding of clients ... 22 Matter proliferation credit ... 23 Production credit ... 23 Inherited clients... 23 Discretionary subjective credit ... 23 Tracking client/business development credit ... 25 Allocating credit for new clients and matters ... 25 Conclusion ... 25 Compensation systems: Integrating partner incentives with firm goals ... 27 By Arthur G. Greene, principal with Boyer Greene LLC Achieving an integrated approach ... 27 A point to keep in mind ... 30 When change is necessary ... 30 Pricing, profitability, and compensation... 33 By Toby Brown, director of strategic pricing & analytics at Akin Gump Strauss Hauer & Feld The legal twist ... 34 A modest (and high-level) compensation proposal ... 34 A leap of faith? ... 36 Aligning your firm's compensation system with client priorities... 39 By Michael Roster, co-chair of the Association of Corporate Counsel's Value Challenge Steering Committee (previously managing partner of Morrison & Foerster's Los Angeles office and then general counsel of Stanford University and Golden West Financial Corporation) 1. Focus on practice groups, industry groups, or similar units ... 40 2. Measure profitability, not inefficiency ... 40 3. Distribute profits/partner compensation in a combination of practice group and firmwide ... 40 4. Consider other factors ... 41 Some benefits of a universal model ... 41 Client perspectives ... 42 Moving to a client-driven budget process ... 43 Some risks ... 43 Conclusion ... 44 Compensation best practices ... 45 By James D. Cotterman, principal with Altman Weil The evolution: 25 years of law firm compensation ... 45 The best practices ... 47 Equitable compensation decisions ... 48 The importance of Pay Proportional to Performance(R) ... 48 The power of external competitiveness ... 49 The 2014 compensation tune-up ... 50 Conclusion ... 50 Aligning compensation to firm initiatives - What can law firms learn from accounting firms? ... 53 By August Aquila, CEO of Aquila Global Advisors Only performance is reality ... 54 Aligning compensation to strategic goals ... 54 Example 1: Tiered reward system ... 54 Example 2: Compensation system in a mid-sized firm ... 56 Example 3: Using the balanced scorecard ... 57 Final thoughts ... 61
