Case Study / Compensation Redesign

Adam Smith Esq. Mergers

Two-office regional AmLaw 200 firm.

Key Issues
Compensation system that rewarded hoarding, discouraged collaboration—squarely at odds with the firm’s newly adopted strategic plan. Engagement was to thoroughly reform and update the compensation system.

Met one-on-one with every equity partner and key business professionals. Exhaustively researched and created schema of the wide variety of approaches to partner compensation across the legal industry. Based on (a) the firm’s new strategic direction; (b) a nuanced understanding of what the partnership was seeking and was capable of; and (c) the industry’s history of variety in compensation systems and broad diversity of approach, recommended an entirely new system incorporating (a) quantitative, financial-performance driven metrics for approximately 75% of equity partner compensation including measured “imports” and “exports” among practice areas to quantify and reward collaboration; (b) quantitatively defined and capped but subjectively allocated points for the remaining 25% determined by positive, “firm first” behaviors and good citizenship (mentoring associates, raising the firm’s profile in the community, transitioning clients from older to younger partners).

Also recommended the process be undertaken every other year rather than annually and that discretionary bonuses/penalties be used in the “off” years. Urged management at the highest level to exhaustively communicate the goals of the firm, the strategy, and how the compensation system supported both.

The firm will be moving to the new system following one “hybrid” transition year. Supporting the strategic plan’s principles through the mechanism of compensation has renewed the partnership’s commitment to the new way forward.

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Bruce MacEwen, President
direct: +1.212.866.4800
mobile: .+1.212.866.2630
New York

Janet Stanton, Partner
direct: +1.212.866.4270
New York

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