Getting partner compensation "right" is an issue I have, and will
continue to, recur to. Why? Essentially because I believe
that the two extreme models (the strict lockstep and the strict
"eat what you kill") each works in only the rarest of firm environments,
and that, simple and straightforward as they may be to implement
and understand (with the concomitant benefit that partners know
what they’re signing on for), they will create a "disequilibrium
condition" in the vast run of firms.
Let’s pause a moment to review the bidding:
- In favor of lockstep models are that they: Promote collegiality;
encourage sharing of clients and assigning work to the lawyer
or practice group most suitable regardless of origin of the "relationship;"
and, by eliminating subjectivity, eliminate second-guessing and
much of the opportunity for perceived grievances about pay. - In favor of eat-what-you-kill is that they: Strikingly
encourage entrepreneurship and business development; have an
appealing meritocratic aspect; strictly penalize slackers and
"free-riders;" and, arguably, spur overall growth of the firm
faster than any alternative model.
The demerits of lockstep and of eat-what-you-kill are essentially
the inverse of the other’s virtues: For example, if lockstep
promotes collegiality, eat-what-you-kill promotes Lone Rangers
whose professional focus is (understandably!) on their book of
business—often a portable asset. Lockstep will work
in firms with exceptionally strong traditions (think Davis-Polk,
with the remarkable, and so far as I know unique, record of never
having suffered a partner defection to another firm). Likewise,
eat-what-you-kill probably works in young and hungry plaintiffs’
law firms (a market segment you have never heard mentioned here
before and, I’ll lay odds, will never hear mentioned again).
So then, what is the alternative model for the vast run of firms?
It is, I suggest, a benevolent and enlightened form of somewhat-secret
paternalism. What?! Am I dissing the new governance
god of "transparency?!" Indeed I am.
The model I’m suggesting has these characteristics:
- the managing committee, or, if that’s too unwieldy, a subset
thereof, sets each individual partner’s compensation annually,
and does so on a subjective non-numeric basis ; - this is based on a full review of the entire spectrum of each
partner’s contribution to the firm during the previous year (aided
by each partner’s own "annual report" on herself); - critical areas of contribution include, of course, billing
and business development, but also associate development, pro
bono or community activities, participation in practice group
or firm management, publications and presentations; - no partner knows the exact compensation of any other partner
(save, of course, those within the managing committee), but the
partnership as a whole is presented with a thorough overview
and discussion of the range of compensation, the factors included
and their relative importance given the past year’s business
climate and the firm’s strategic objectives.
It is a truism that, in the long run, you get the behavior you
encourage. To encourage both business-building (an outward-looking
metric) and cross-firm collegiality (an inward-looking virtue),
one has no choice but to provide incentives for both.
Got a better idea?
