Structured Approach to Fairly Compensating and Promoting Lawyers

Fairly compensating and promoting nonowner lawyers (associates, income partners, counsel, of counsel, etc.) is best accomplished using a structured process. The process should be transparent and include:

• a consistent application of rules and guidelines
• adherence to policies
• practice relevant evaluation criteria
• rewards for lawyers who contribute economically and strategically

Additionally, a rewards system is most effective and credible when lawyers and firm members can easily comprehend the results of the process. Everyone should be able to understand who is getting ahead and why. 

TO START

For starters, we recommend developing compensation and pay plan policies coupled with advancement criteria. An important group of subset policies and processes includes practice planning, management reporting, and performance improvement support.

To Note

It is worth noting that implementing these policies can result in a negative reaction initially from some lawyers. Typical sentiments fall into the following categories:

• Overly structured policies;
• Complexity of policies;
• Extreme changes;
• Too “big firm-like”; and
• Discomfort with profitability concepts.

The best way to address these concerns is to provide detailed explanations, provide helpful examples, and allow for input from those impacted before adoption.

As mentioned, we recommend creating two main policy documents that address compensation and career progression. The main elements of each should document include:

Lawyer Compensation Policies and Pay Plans

1. Compensable factors
   1. Objective
   2. Subjective
2. Timing of salary evaluations and bonus payments
   1. Evaluation periods
   2. Timing of bonus payments and salary adjustments
3. Setting base salaries and salary adjustments
4. Subjective and objective bonus types, formulas and rewards
5. Guidelines and policies regarding any adjustments to objective formulas
   1. Maternity and paternity leave
   2. Short-term illness
   3. Death of a close family member, etc.
6. Alternative compensation plans
   1. Fee sharing
   2. Profit sharing
   3. Hourly compensation
   4. Other pay plans
7. Available support tools
   1. Practice plans
   2. Marketing plans
   3. Mentoring
   4. Regular and ad hoc meetings
   5. Performance reporting

Lawyer Advancement Criteria

1. Attorney progression levels, and eligibility timing
   1. Job titles
   2. Eligibility time period
2. Service requirements
   1. Contiguous service with the firm
   2. Credit for lateral service
3. Qualitative Factors
   1. Quality of legal work
   2. Ability level (Expert, Advanced, Intermediate, and Novice)
   3. Demonstrable participation in bar, professional, and civic associations
   4. Publishing, content contribution, and speaking
   5. Business contributions and competence
   6. Client relations and service
   7. Management of the billing relationship
   8. Training and supervision
   9. Work ethic
   10. Recruiting contributions
   11. Pro bono
   12. Firm-specific contributions
4. Explanation of equity membership
   1. Responsibilities and benefits
   2. Expectation setting
5. Equity membership admission and progression
   1. Admission criteria
   2. Progression process
6. Lateral hiring considerations
   1. Credit for lateral service toward partnership
   2. Direct admittance to membership

Organizational development on this scale works best for firms who have transcended the start-up phase and desire to build long-term organizational value. It is hard work, often resisted in the early stages, and threatening to some. Investing the time, however,  to write these policies, customize them to the firm’s culture, consider best practices and market influences, and apply them consistently can result in a more productive and satisfied lawyer group.

For additional information on law firm compensation or admitting new law firm partners, check out these resources and articles. Or contact us to schedule a time to answer your questions about admitting new partners

• Determining Attorney Bonuses: Subjective and Objective Considerations

• Slicing the Pie: Paying Originators, Managers, and Workers

• A Sound Process for Admitting New Law Firm Partners

• Law Firm Managing Partners Compensation