With this column we inaugurate a new and, we hope, long-running feature on Adam Smith, Esq.: A question of the month. Questions will vary, widely we suspect, and we invite readers’ suggestions for suitable future questions. We prefer them to be–and will strive to do this with our own questions–serious minded but also slightly unorthodox in the explicit or implicit perspective they adopt. And of course if readers don’t respond much to this feature, we can always kill it! (That’s the nice thing about being the publisher.)
So without further ado, our first question of the month:
Is “origination” just a nicer term for “sales commission?”
If so, does it matter?
And are there implications for Law Land?
In Corporate Land, people at companies, be they salespersons or in some kind of business development function, are often award a % of the sales they generate. In some cases, their compensation is entirely commission-based and in others commissions are one element of their overall compensation package. Generally, the commission sunsets over a period of three or so years.
Does this sound fundamentally different than origination credit?
We ask because origination, be it for new clients or new matters from existing lients, is increasingly a key criterion in law firm compensation systems. We say this based on our extensive work with firms redesigning or fine-tuning their compensation systems; this is one of the most frequent issues (“pain points,” if you will) we’re asked for guidance on.
Origination credit is not a key ingredient for all firms, to be sure–for example, this is generally less so for UK-based firms. But as for origination/sales commission credit, of course there are some economically rational and very understandable reasons for this. Within an overall no/slow growth environment and a battle for market share, increasing revenue is ever mroe challenging. So, more aggressively valuing and rewarding origination over, say, personal billable receipts, could make sense.
Please use the comments box below for your further thoughts.