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System Compensation The Ideal Firm

2005

Volume 16

Number Issue

Winders J. Peter

compensation hymn, might has his hours down his heard the

everyone

were lmost so

suffer, generalization "Amazing for similar This Grace":

or reasons.

applies

savings

the dot the and loan

to cases, "Amazing How the sound Grace! com

sweet

and the scandals. corporate

governance cases saved wretch like That me! a

lost, found, but For

plaintiff malpractice The CLE for was now am

courses

blind but see." Was

allegations creative have section

must now

a on

personal gain, because, of in Choctaw: Translated the small into

cases, even

plaintiffs

such motives. While

assert

Shilombish Holitoba some are ma!

arguable,

against

suit others forced. A

pulla cha, are Ish minti an

arithmetic will from for in

accountant pia

copy an error Hatak ilbusha ha

complaints

talking section of the Enron about

yukpalashki.

pi one a Ish

consulting overshadowing business auditors. the the

English: Translated from Choctaw back to

jury for obvious. The The this

Spirit[ Holy may My reasons are

likely mistake,

forgive but less

to excuse a

a are Thou must

come,

bending rules,

deliberate of

decision the

to

suffering

or a We

are men.

by gain. close line if motivated self skate the

too to joy. Bring us

difficulty illustrates This of actual- that exercise the This is of the

loss

pre-

every reasons one

people ly communicating professional ideas from whom have vention in strange

to contact

or come

already compensation with believes the in that who who the in law

agreement, system not

are or see

differently, something problems problem

don't is be the firms be feared. The

system at to or see can

of discussion about motivation that all. Hence the introduction the the

argument to turns

a source a

compensation. patient. simple into abuse of the fidu-

Here mistake Be

system, goes. an a

ciary dereliction, venal

of abandonment the

a

or

trilogy. This is of The the

4 th part

parts

get

a more

profession,

ideals of and the thus make it

more

they actually doing difficult because discuss

some-

plaintiff's likely

greed that the

be rewarded. will

problems simply pointing thing about rather than

Consequences (The See, that those them Unintended The other

loss

out. preven-

e.g., reason

same

fLaw professionals cringe Management).1 they tion when about Essence hear Firm o

compensation certain is

systems very common

INTRODUCTION

exaggerated closely related. self-inter- Even if the

large liability

almost the

In

every

case, claim, does result it in in results

est

not

a an

plaintiff greed.

has been insert element of able

to

by an preventing making increased risk the firm to

or

personal

Whether motivation made

not,

true

or was prevention practices. good difficult loss

more

dangerous in the The issue

was an case. case

FORMULAS WORST

ARE THE

because mistake the mistake there and

was a was

arguably lawyer willing prevention point made because from loss the The

system worst to

was a

lawyer Or,

for the found himself of view is formula the allocates that system cut money.

comers

incoming specialty originations, trying handle dollars based outside his client

to matter

a on

particularly originations,

profitable, it because hours. because and billed

matter or was

those the What's with that? Aren't wrong

Tampa, is shareholder Carlton J, Winders Peter with Fields in Florida. a

Continued 4

page on

from Compensation, 1 it,

if he tempted expects until he hoard work get is to page to

can

deter-

being

the factors that those ? Aren't he fears project lifeblood of because

his be

current to soon, a over

they profit? Of

offifthe

better the firm mine would whether be operates firm month. The "under hours" at

next course a

absolutely essential

speeding

available, &the firm

vital assigned Those lawyer

are! who is

work

up to

concerns are a

were

the formu- is increasing its It that existence, let alone chances firm's the and generation for the of the regenue

success.

compensation that determining that individual client fully for has utilized. lawyer la idea creates B will be Partner each a

problems. finn

would be the $200,000 gives

the but in business him year, a

conflict

restrictive

of its

the client because better off without

credit- agreed will be fee

formula Suppose is

upon

a

a

client, the firm keep but

policy. the interest is waiver B's

to

the client, originated 33%

lawyer the who the ed 33% to

to

C client. Parmer without the better off

would be three times

lawyer originated the and 33% lawyer the

who to matter,

recruiting

assignments,

off avoid committee if he

is better

can

essential doing Each element is work. the create

to

revenue.

benefit consuming the

duties that and other time interviews

argued the

affect things

will, be

of

All

to

sorts

can,

or monetarily.

then He benefit him they do firm because

not

can

they

assuming

firm,

lawyers day-to-day in that

of

choices

anybody, ignoring, the

brings than in

claim he

as money more

the formula.

conscious

of

the if essential are duties does, that the other formula the fact

are

abil- originator figured his sales that of with has Green, thrive. Gray the D Brown, & firm is Partner of the finn In to

develop-

problem. by

litigation business ity is served financial interest has his best is ACME client

Brown. ACME

a

a as

putting only finn busy quality, the regardless with reasonably clients of client litigator. is Green at the Green not is ment,

writing off odds of works claims, originated Green also Every himself. risk of hour but greater he and greater at

matters

doing originator the

of the without 66% than 33% share him fees. Since D

rewards

gets ACME

or a as an no more

on

doing

disproportionately

the he is those and work, his write-off falls

the of

hour value him

spent to on case, own

on

an

plenty in of active

has if becomes

long clients, believes he that he tempted work. E favor "his own"

Partner to one

as

so

belong

priority. clients getting organizations of industry his litigation Brown that to,

is the ACME do. The not to

some

the business of future stepchilding it will be

of ACME this to

doesn't

source

as a

see

recognition only achieve firm, right, she begins if

but

and

him try- either fair i to can

or

That

of con•nittee. chair litigation Work

officer

himself. ing

the

to

a or

manage as

an

commitment significant for

litigation, time

will take being the ACME

done is

a

on now

compensation

firms

system in law [T]he

forego

during income which will E supervised by 3 the corporate but

years,

guy.

something

be feared. is

to

compensated

until

effort is because the

not

servicing practice

Gray niche

has

a

origination, she looks for

it results

in

so an developers,

shopping with major

center

produce

will activities that

revenue more

happy

principal

He is

clients.

two very

of the immediately. welfare

mid The

term

worker, originator and

is

the

he

because

immediate ignored individual's favor of the in Firm is

completely

fees, and is

of

the credited

100%

is

and

occu-

by examples, is driven decision

the of these

income. each

In

slumps client and

pied.

stops Until

the

one economy

is odds decision formula,

compensation in each the and

the

at

bankrupt. is Gray des-

expanding other

and the

goes now

whole. of finn welfare the with the

as a be otherwise will his income clients because for cut perate

compensation least the allows in

salvation in the by finds system So

town, two-thirds. He at worst

person

new a

greed, inef- impression business based help his decisions promotes

lawyer that

looking him

for set to

up on new are a

profit. impedes Then sloppy with and futures and European

in marketing ficient investments management, currency a

compensation

the there be sideline this solution? Gray How

guaranteed what is the

40% sys- return.

a

as can

new sees

perception

though decisions real

that compensation problem, the both

eliminates that

his tem are to

even

answer

background. considera- individual primarily of securities, his because

monetary made investments

estate, not are or

running

firm? better

salesman, but oil time tions, snake and Gray's the

promotes client is

thinks

Brown at a

same a new

Gray tak-

anything

who is it is

since

he

feel doesn't

say

can

COUNTERING

FORMULA SYSTEM

PROBLEMS

OF THE THE

share. affect Brown's ing won't risk and it

the

problems approaches created

the

There to

two

or

are

Everybody minding paid nobody the for

is

And store.

compensation by the exacerbated

system.

wrong

duties, and

administrative

there that

of

are

course,

agrees,

approach

does

This Establish approach:

Rules.

First

they

chores,

the they but divide the

system

are assures

up

compensation "market

such

where touch

the system

not

billable from punished taken

hour for each

away every

the loss

that

"informed self interest"

forces"

worst

only

assure or the that much work, the guarantees and

system pretty

rules

attempted, establishes prevention but

decisions will be

managed

crises. things

that will be

are

that rule Make

decisions.

control

the

put

to

a some on

profitability loss than

interested in

those who

For

litigation.

more are in lawyer, dabble the

Brown,

cannot corporate

compensation

of

prevention,

the formula

systems coun- are handling

the theoretically from forbidden Thus, is

Brown

clearly,

formula

Pretty the terproductive well.

there

sys-

is

he as it litigation, and does if ahead but he

anyway,

goes

members individual of

the

financial interests the

at put

tems

avoided, be Unworthy

doing clients

rewarded for to

are

so.

A profitability of the firm. Partner

welfare

and

with the

odds

Crime in does originating

compensation paid is for but one.

PROFESSIONAL LAWYER THE 4

appointed keep of

the web sites firms with that sound him is

great fact but

statements to

cop person seen pay, as one

(maybe paraphrases of three of the Commandments and since work is under- the Ten of

doing from it. And

cop

course

points Law)

provided of the twelve of the Scout but have non-billable, paid (it for in the four system) and is not no

sporadically.

stands for. only what know the firm temptation like resemblance Enron's do it It is there is to to

we

a

inspirational. published

importation code of ethics That is what drugs by hoping from of Columbia the not stop to was

talking manning about. penalties decreasing law enforcement with and

we are

unpaid

volunteers.

list is harder make of values that the members of It to

a

which, Change commit because of and the approach: other the firm

Motivation. The Second to to

agree

mem-

guide commitment, entity good the firm's decisions. the

for firm bers' But approach what is the is decide

to

can as an

developing compensation

good is compensation first in that reward is what the system and model system step not to

a

inherently

punish destructive values. is decide If the is that still what In for the firm and to not. upon

core way, may

we

important making only thing temptation, temptation is devel- the firm the

but will be have deal with to to to

money,

or

everybody oping work, of then admit it tell right. volume and is do what

a

personal goal lawyer who

The has of service concerned. to

a

PROPOSAL

profession lawyer firm, and both the fit in that the

not

may

approach.

the second

This article elaborates For

they on a better off if it and the firm honest about and end

are are

compensation

work with effi-

system to encourage

negotiations. parties more or All will avoid wasted That firm's

years.

compliance prevention

loss ciency with contribute

and

to

compensation going

and is be differ-

management system to

following

firm,

practices the

welfare of the

and overall

goals. are of another firm with different Louis from that ent

hispro necessary: including work, for bono Brandeis is {:amous his ami-

Brandeis Briefs in which he the individual

put

curiae 1. DECIDE cus YOUR FIRM IS ABOUT WHAT

societal is said Brandeis reimbursed that in It

context.

case a

given

of officer candidates class A

was

his firm for time he those

the in spent

pro

following instructions,

timed

test

on

a

(a) is bono If that

true, matters.

we can

complete

prize with for the first

to

per-

a

conclude his firm did share that

not

pro

read all fectly.

takers

The

to test

were

(b) Unworthy value, avoided, but bono and clients be bet its

to

as a core we can

are

complete beginning, then before

to at

compensation sucked.

system

originating compensation paid

is for

one. couple speed. hundred direc- There

were a

Once has its firm

left, agreement serial from in tions "name

a on core

upper

place things values,

fall into easi-

physical

right" such number to can more

upper

compensation ly, only decisions,

but loudly, saying things standing and "I not

as

achieving

also decisions Discussions about in other

champion

instruction #78. the the first reach

at

areas. to

am am

goals resolving problems intermediate decisions and

following instructions," and Of last the like. the on are

course

productive

the solutions consistent with if be begin-

have read all before instruction that must "Now

more you

was,

applies only

agreed compensation,

This values. but also introduction, ning, the instructed in the not to

put

your name on

as

approval budgets expenditures, style, of management and watch the fun." and sit back to

or paper

expansions, hiring, things. decisions about other and

many

important.

skip

is it the

don't this

Please

most

one, as

goal disagreements

is about the the When the how get to

same,

through

that skim and

think this is article don't

you

an can

costly

begin debating those that there less than with the

are

is, pick point if it this is essential. but

two,

up even one a or

goal again. Some decisions become self-evident

management

requires change,

If it culture fine. See Law be

hard. It

may a

because values the other choice will detract from and

one

core

Importance

Overcome and Culture-

How It. Firm Its

to

specialist will enhance successful who them. choice A

wants

fungible. Large firms alike. firms

Law

not not reputation join firm for its the and but who are support, are

wants to

Boutique firms different from

alike. Small firms

practice independent not poli- wolf continue of firm's lone the

are are

to

a

sole general practice whose firms.

There firms main

regardless cies should be the attractiveness of of

are or

easy no,

an

public profit. interest firms. goal There

is There

important income, because would it

are

are

counter to

more an run

profession, sig- goals include service and the firms

whose to such teamwork. firm value

as

important firms with bono

work. There nificant

pro are

II. DECIDE FIRM'S

VALUES TO REWARD WHAT ENHANCES THE CORE

AND

diverse, they egali- goals be involving

work be how

to to

FIRM'S

FROM DETRACTS

TO DISCOURAGE CORE VALUES WHAT THE

professionalism, tarian, for their firms be noted Some etc. to

hard,

agreed

be because the has This shouldn't firm malpractice malpractice insurance, and

treat on

carry no

White, Redd, firm values. If in the of Black & all

doing risk

of business. Others and

agree cost

core

are averse as a

profession important, Redd, service is who does the that extremely conservative. to

happiest spending service committees and is

like Bar

not

on

adopt something-for-everybody

will list of

Some firms

a

only

work,

time billable will mind all his that not not

on

hot

values, all the members do in fact

but

agree

on core

spends service, substantial time

Black the he will be

on

adopt

is what is needed. is

values.

That It those

not to easy

pleased, of because does the shared value. If Black

core a

platitudes nobody violently disagrees with,

of

that and

list

a

good job it,

of firm's values. does he has advanced the If he

lip everybody willing give service is of have

Most to to. us

PROFESSIONAL LAWYER THE 5

lawyer

is for,

who is it worthwhile. The firm stands it, job, least what the rewarded for mediocre he shouldn't be not at

a

solving problems legal but does is skilled about. all, fima decided it After this is what the has not much. at possess very

succeed in advanc- clients

skills that the different

attract

can

things

values, of

will include

firms'

Some

course,

core

representation of clients. The

ing of first-rate

value the

core

penalty.

susceptible

For less reward than

that

to

exam-

are

reputation of civil

lawyer for gains her advancement

who

a

But, somebody good ple,

is hard

for

it

to extra

pay manners.

public good

rights of service for the values advances the

core

provide agreed

of values of

the finn is

if the

to

a con-

one

approach

professionalism. like

If this sounds

and team to

a

respectful working

be environment, genial, should it

not

efficient,

much should. practice, firm will be it A the

more

acting compensation

for from

hard subtract someone's

to

multiple goals

and achieving much

effective

at

more

more

damaging jerk of thereby real- chances and

the finn's like

a

allowing goals

approaches profitable

its

if it team,

spe- as a goal. izing

that

abilities. members' Few of its

cialization and the best

use

Ill. ASSURE responsi- COMMIIMENT TO SHARE THAT ALL MEMBERS OF THE FIRM of work and division businesses succeed without

SHOULD BE production, THEM designers, CORE VALUES AND THE PRINCIPLE THAT ADVANCING and THE force, bilities the sales between

might value. REWARDED be Teamwork itself

management. a core

the hard, easier but essential. becomes much This is It once V. MANAGEMENT

lawyers

inter-

values, established because firm has

new core

they Everybody just That is

what

do not want. cannot

they

joining share

told

if do in

the firm be that ested not

can

paths The for-

what idea of different

the

to

success means.

sig-

they buy principle

that

values, and do

into the

the not

a

are

simple math do the criticized above is

least

mula

system at

join. compensation, they be

of should It nificant

part

not

may

prob-

enough hope clean the and that make

to

up money

you

existing

if members

commitment from 100% of harder

get to

produce that

values lems. The that rewards

system

no core

change

specific in substantial sharing

values

presents

core a

work; (e.g., bono

immediate income

pro

existing

members But, if the the

status

quo.

requires

management) control. The

central

unwilling commit, iden-

have

to

you

so

are

public

service

fact that

the firm has

as

a

problem, important

and that is the tified

to

a

adopt platitudes

list of that is It to

easy firm

the a

value does

not

can

mean core

adjusts compensation it its filan whether

nonprofit public

people form violently disagrees allow 50 nobody with...

to

a

If member

accept systems

cam•ot not. a

or

under- that the finn has interest to

group

good

values of

the that is the

group,

a core

politi-

allow its Bar write. Or that it

can

Eventually, thing know. there will be to

amok, with half its cians partners to

run

it understood such

that

if is agreement

politics spending the firm val- in because

half their time Bar

around.

important.

members will is

Some agreement

come

profession. values be And

service the

to

core can ues

buy leave

values members who do

in the Some

not to

core

projects.

assigning by achieved other than

partners

to

means

world

through of the attrition realization

that their view

or a

functions firm Management

should decide that

are some lawyers

accepted job. who in Outside will be better another

performed efficiently by lay personnel outside

most

con- or

whose Lawyers

firm attracted. the

values of the share

com-

are

doing might enjoy though them.

member

tractors,

even a detracting adversely welfare

pensation from the

is affected for

Assuming making living the immaterial

that is

not to

a

change

they

fit.

either decide

do of the firm will

not

or

firm members, will enable the there be balance that must

a

point, been and who have This is serious

part

most profit,

and Without substantial income very income.

a

to

none

earn

easi- would be lot firm will k•aow that it of

law

Management goals firm governance achieved. of the other of the be a

can

there better, and morale of the firm would

be

and the

just hard, it is of formula-driven is the finn er,

stress- not

very

problems

levels, personnel and there all would be fewer at part-time and cri- ful and inefficient since will it tend be

to

would time, wasted

and there would have been much less

broad of

Management sis of finn with driven.

range

core

a

a

profit of times left the and fun if Fred had have been

comprehensive,

any and difficult, values will be

more

more more

firm. with the threatened the last 10 he he

everything

to Somebody how years businesslike. has

was

over

to

can

more

see

large

Florida nonlawyer firm administrator of

One

together fit maintain the balance was and a to try to necessary

history he firm the 15 write

the of the asked

to years

agreed goals values. The based the

achieve up

over

accom-

core

on

the served, stories about

and when finished 90% it

had

service plishment goals the such

of diverse in

was to

as

areas

joined that.

problem allow in five. Don't who

partner diversity profession, public, commitment year service the

to to

compensation

values, of

enforcement of

The

matter

product requires superior legal

production and of

core as a

team

a

a

problem

probably otherwise, corrected the

would have

and

approach, essential that is and effective management

to

see

departing problem resulted in the of the

behavior

positions being

all covered. source or

are

off.

Everybody

better firm. would have been the

therefore itself be of the Effective

management must

one

COMMIT IV.

recognized PATH TO properly rewarded, THAN ONE and PRINCIPLE values, THAT THERE IS MORE lO THE

and be must core

FIRM also for service MEMBER OF THE but only SUCCESS ON THE PART OF AN INDIVIDUAL for full the time to not

managers,

mentoring,

leaders, practice business by fu•n

the

than that there is group This of

one core

more

course assumes

administering bono things the intake,

such

program, requires from the pro achieve. then follows that work It value as

to

and the like.

advancing rewarded. If it is should be that values

idea core

PROFESSIONAL LAWYER THE 6

Unworthy major VI. INFORMATION for is clients it harmful.

loss

preven-

are a

problem. Origination

credits of tion reward the intake

an

billings statistics such and Some hours recorded and

as

unworthy client, least until falls is the roof in. The firm

at

collections assemble. Information such

contri-

to

easy are

as

profitable

unworthy the if

screened client is There

out.

more

subjective, bution and harder

col-

management

to to

are more

origination.

of

Some clients different attracted

sorts

are are

lect. be devised Some collect the

system systems

must to

or

by reputation firm, with of the retired the

part-

contact

or a a Lawyers describe activities latter. be asked their

to

may

lawyer

origination The whom the switchboard finds

gets

ner. goals, department toward firm's be heads the would their

as

development firms. Business

should be credit in

some

practice they leaders, graded and would be

group pro-

or on

origination distinguish rewarded,

credits do between but

not

jects assign- by firm, undertaken the such

management

as

development hap- lawyer business efforts of the trial the who

questions lawyer's

The should asked of the be

ments.

same

working

pened antigravi- late when be the inventor of the

to

practice

information, leader, department head and

group

or

machine window because he had heard of knocked the

ty

on positive negative, requested both and should be from admin-

department (none

present), firm's of the whom

patent

were

impor- istration, human and

If it is

management.

resources,

posi- lawyer who has

firm's and the the

spent request

at

years

organiza- lawyer's overall contribution value the

tant to to

a

tioning organization herself enhance the firm's in that will

an tion, effort worth information. it is the collect the

extra to

industry.

origination clients in desirable

The

to

exposure

a procedure that is

the

Beware

argument management

to

easy a

lawyer. of firms credit

will reward the

system

wrong

some administer if fairness. it does also and

promote

not accuracy

thefirm's

reputation belong Business built should the

to

on

LEVELING

VII.

EfIbrt the firm's direction should firm. be rewarded at sepa-

rately belong rewarding should from the result. Luck the subjec- Since of the information be evaluated much to must

firm. clients conflict situation should choice between in tively, consistency A imposed

valuation there be

must

a

some on

depend personality the of the subjective contributions. of the not on

long-term lawyers involved but the

Department

head Williams is enthusias- on

an

firm. benefit the lawyers tic for cheerleader all his and eval to

superior,

all what. them

uates matter

somebody

[I]t as no Similarly, is hard

logs extra

to the who the most

pay

person

only give Department

head Jackson will

genuine, high quality hours, billable all all

good

for

manners.

praise charge lawyer

if

credit has taken

or a paid expected the is and

rate asset. at

an

project something of and invented

extra-

a spending

work But all her time billable

on

ordinary. managing firms,

the

In

some lawyers handle that other the

must

means

president

interviews

partner every or mentoring responsibilities, recruiting, the work for the the

yearly, member of least differences in

the firm that the

at

so profession, running

the of the firm. All these functions

are

the evaluators be leveled. evaluation of all members The

can

singling essential, and for tbrmulaic is reward nei-

out

one a

by

single help

will address

issue

the universal of

person

a

positions good

business. all

ther fair On team, must

any nor

grader/tough grader" subjective "easy

burdens the that all paid.

be filled and

valuation elements.

recurring just reference The the firm is

to team not

as a a

VIII. ADMiNiSTRATiON

particular- thing. firm, motivational formula morale The

or

ly origination credits, competi-

because of the given problems Consideration various of has be the to encourages to

rivalry firm, internal the

tion who compensation administration of and refine- the to to system, to a as can earn or

manipulate share

firm's the of the The Setting ownership will make work. income greater it that and ments revenues.

firm than of its in that be the example,

lawyers

advance, system in for will greater the

to can no sum encourage

max-

organizes, itself and if the firm But opportunities parts. operates of knows in imize the their If Jones partners.

manages

pursuing identifying specific goals and profits advance that he 1% of of the firm for will receive the team, team as a on a

long

bearing basis, firm of

with the the the then he should do much he maximize

term

expense pro- to

a

year, as as can

ject getting reward, the firm whole will but the firm the firm If in formula the income of the whole. the firm he

as a

as a

profitable. successf•d, be The firm

will have tempted anticipated

would be hoard work down for to more more an

practitioners from of individual busi-

evolved time,

in where will he he be to

percentage, system gets group

a a

a a

organization, advantages brings. nesslike that with the encouraged who the

the work has the time to to pass

one

Similarly, might better, firm will do it be and will he.

4

so

X. EDUCATION

PROBLEMS AND THE OF PERCEPTION

pool exceptional service, wise have bonus reward and

to to

a

extremely important. will Education is The firm have

penalizing provide of who from detracted

anyone

a means

maybe worked,

records of hours of clients and and

matters goals by inappropriate conduct. the of the firm

produced. The fact that the numbers exist allows them

to

IX. ELIMINATE

FORMULA

THE importance

might that excessive take be in the firm

on an

intends

contributions that reward all the firm. hard, This be but it be e'asier than think. to to may you may

important Education This is that.

credits, Origination they

prevent

firms least treated in

at

manage- can an

as are some

explain repetition function. take the chron- will

It easily of law firm the destructive

ment to to aspect most

compensa- are

hoarder of work that his income will if he ic increase instead Origination tion. business is vital. The formulaic of reward

PROFESSIONAL LAWYER THE 7

assigns

others.

He

eventually will to

it,

but he get has

Some with "billable credit," which is good,

merely but

already

proved short-sighted,

be

will

and it to effort. take adjusts

formula

eliminating rather than it;

subjec- a

some

tively,

significantly, but XI.

DOES

good

businesses

do. THIS WORK REAL IN LIFE as

Some

firms assign

ce.rtain

it

Everybody does. tasks such how client

this to

works am persons sure

at can see as

development,

the

small with idea they the Angus level. that will be

extraordinary is compensated

developing group

at

on

their

business but loves with and

the it. Hereford

lawyer's

that others is the not success, lawyer tests

who

same

are.

This is

adds good

example value

identifying

of

he advises separately to and

very he and a is every able case to

on

valuing

supervise contributions

deemed

be in than the Santa best interest Gatrudis has the of to been most. asked more

to

firm.

A is

the

made

Bar's of board different

team performing of

judicial and the in

serve up on

persons governors,

nom-

inating their strength. of committee,

the and finn believes areas he should accept

both.

Each

is

successful what does,

he

these

and at

One represent adopts firm

"article

faith"

of

that records

as an

no

three of

the

shared

values.

They

will have problem

kept

core

"originations."

of

big This no by is deal itself,

are

a

as

agreeing

compensation.

recognizes Each

that without

the on origination "client

is

credit" of the

pervasive

and most

one

others, they would

nothing

done,

instead

get

of the worth-

disruptive

compensation

elements. know

of

least

at

two

while

they that work

do

serving

variety

of agreed

team

firms

with as a formulas in which a the fact individual that part-

values.

"origination"

numbers entitled them

large ners to

very

incomes,

they

when

problem The doing

is little in

fair work, administration

the caused hundreds

of were

or no

over

breakup

the of partner-level lawyers. finn.

will It hard be work. But is it hard

so

living

with

formula

its and

fallout.

a Several firms have

full time positions, management now

lawyers where

large the holding

firm them

follows that cannot have

name

a no

exactly .:

principles budget billable all

the here, and :.i.: but compensated know for are

of

follow

that several, contributions

management alone.

This some

most.

many or

And with Toamwor/r be

principle managing each might

itself implemented,

be CEO value, partner and it may

a

or core a

there improvement is

general be

in counsel satisfaction func- another may an

a

or

with the tion.

Others provide compensation

reduced a1,d expectation

safer system

a a

and of billable

organization.5 work

assigned view in of

more secure man-

other tasks.

agement Valuations for

or

least At major

pledge firms

keep two

individual

to

com-

these

full jobs time

from

negotiated,

being depen-

vary

to

pensation

and

compensation secret, by is

set

two

per- one or

dent

what

compensation

before the upon

management

was

who

compensation

based set

sons,

overall contribution.

on

job

undertaken,

subjective

valuation

quality to of the

was

of

By large,

and the

quite

satisfied partners

with the

are

sys-

performance.

the

Every

finn

that

have that encountered

has

Since

the

compensation tem.

is have

I clue secret,

no

employed

full

time

believes

that

it has

benefited

a manager

whether formula

does

play does

the in

not a part

or

any set-

substantially

having from

one. ting of

compensation, but,

since it is it doesn't secret,

mat-

Anecdotal

information If finn

is members all don't have ter. offer know in this piece. the they to

can't try

process,

manipulate

polls of

they it.

If

in to think they this

fairly is paid, It am they

aware no will surveys or

to area. easy

are

imagine

be that

tempted

would hoard be useful. "Q. not

work dabble Does

in to not the some

field

your or wrong

firm's despite

compensation

policy. firm have

The substantial system subjective effect

is

achieved

if the

a

same

as

element?"

could compensation truthfully be

totally subjective

answered in

but wide fair. vari-

were yes

a

of situations

for

ety

example,

complaint

about inven- the

a

Some keeps firms

of track

"the

numbers" inform and the

tiveness

of

origination the client partner

form;

the

a

on

them,

of or

but partners also inform them

that major there is

a

situation

where

controlling the

fixes compensation partner

element subjective of adjustment, including

adjust- negative

because

he

interesting,

It

would

however, be

can.

to things

for

more

that

do ment reflect

finn, well the

failure not

on

systematically

major

ask firms

they

how

deal in

compensa- follow

firm policies,

Convincing to

members etc.

that

the

tion

with

problems who matters partners of morale,

create

numbers

given

weight undue

not remains

education

are

an

with

originators historic

who

tend

"rest

laurels," their

to

function. on

Some members

refuse

believe subjective that

to

and with powerful

income producers

who

factors poor are prevail,

they man- but

do prevail

those

in

firms.

then,

But all

have would

would agers.

be

you

Satisfaction

more

increases anec-

the education

emphasizing

effort

as

dotes.

they doubt

would differ

from nmch these.

subjective the element of compensation has increased.

CONCLUSION

Several firms

have managing the partner firm another

or

reading

Some leader interview

this

will

all have reacted,

"What

least about

partners

at

matters

once year my

a

on

origination

of including credits?" Others

thought, will

compensation have

"Well, issues,

concern,

purpose one

maybe

being

origination have

insure

opportunity credits

decrease to

have

fair

can we consideration

of to an

over

a cer-

tain things number all of years."

that

know difficult, believed this is but be relevant don't to overall contribu-

are

to

you

abandon

formula tion firm,

the by approach changing and formula. provide another the to leveling the The a function. to

that

"we have argument

done it

this before"

is

never

way not Several finns specifically

reward efforts. management

8 THE PROFESSIONAL LAWYER

fairly statistic. This intended and well but is list of

argument not sate an a as a

pointers,

approach the but different of

management

to

as a a

provide legal services, services and

rather than related

To

extremely firm, compensation important of which is

part.

an

entrepreneurial

activities in

to

engage

requires Yes, of

it deal but for with

great trust,

group

a a

A. WITH

MIND,

THOSE VALUES ADOPT CORE IN THE FOLLOWING MAN-

goals above) (see shared and values

trust

common core can

POLICIES AS BEARING AGEIVlENT ON THE COMPENSATION OF THE confidently expected. be

more

LAWYERS:

preceding Actually, paragraph. exaggeration there is in the

expected

Every lawyer is devote full time the 1. to to profit identifying enormously firm from

and The will in fact

firm,

being

full business of X hours. X the time Assume adopting sincerely by by making

all, values and the held

core

is fixed 2400.

at

they decisions based whether in accord with those

are on core

necessarily affect for- values. Even that will almost the everybody everybody step

This that has that

to

agrees assures

compensation necessarily

for better because almost mula the performance, for

is work. You but there get extra

may

no

subjective

element of valuation will intrude. If service the

resting budget, billable that but laurels. Note this is to

not

on a

community exception

value, the firm is the will make

full time definition of business. to firm It should also

a an

on a

lawyer encouraged for who the formula the the firm take encouraging timekeeping achieve the bonus of better to

on

president be of the Chamber of the time Commerce. Or if things keep firm needs of. bono time that the track to Pro to

recognizes managing lawyer, the firm the full need for time

reporting records various bar and also for needed for a

are

negotiate

it

value for The will have tracking management. system information about value. Time to

spent

core a on con-

points eventually,

evolve. each of the above is But

might flict resolution that firm the suggest can as cov-

efficient with additional would be

more

practice productive, safer willbe andmore

will aid of and all in the

systems operate

choice between clients in conflict situ- A

a

non-billable 2. All

activities for the

aspirations.

firm's

depend personality

ation should the firm, recognized not

benefit of be the

to

on

as

ADDENDUM

business, approval firm of have the must lawyers of involved the

Harry

convention of the firm. The the

Give illustration. Holy would it

me an

Hobbyists Association Potter the

work? • or ......

Mountain Experience

won't Man

count

This addendum reflects the reaction of those asked

to

might

knows, potential just because, who into

you

run a

review the draft. would it work? How

approved by client; for non-billable firm be work the must

a

foregoing application designated [practice president, leader, is theoretical. need decision The Practical maker group

precise, depend committee, development committee] values business be and will what the

management not

on core are.

hypothetical application, suggestion,

pre-authorized this within list. So is be

not test- must

a a a or

ed,

hypothetical of refinement. and in need It firm

assumes a

of time

3. The non-billable activities

spent

amount

on

number, is

100 and with because that

owners an even

through by be authorized firm similar the

deci-

must

a

following

values, stated, that the however and

assumes core

be brilliant have sion It

maker.

management

to may

one

particular

adopted

sincerely order, in have been and

no are

presi- lawyer opportunity advantage of

take

to

an serve as

by held firm: the

prestigious charity dent of national consistent with the

a

public Reputation highest bringing prestige for dedication standards of service value and and the firm the to to

even

professionalism though ethics and take three of time for it will his

It quarters

year. a

extremely assign wise be suited the

to most to

may

person

Reputation legal prod- for dedication first and class

to

a

spend investigating virtually identifying full time and the

uct

potential existing business from business It

contacts.

new

place Reputation being congenial

for and for

work

to

a everybody practice foolish

do also be let in the to

may

area

employees both

and

owners nobody legal and work for six months. that leave do the to

Using good

talent for needs be done is what Reputation being leading for service the and firm in to management. to

a

legal striking done, the vital bal- But work has be and the profession to

requires

management.

ance

leading

Reputation being firm service the for and in to

a

development 4. Client is business of the firm. the public

is choose between client and When there

to

one a reason

Reputation principles

diversity for and dedication of

to

another, class of clients and those another and firm

one are

good active Dedication

and

management by designated decisions, to Hopefully, made decision maker.

a

problem good this will of the client for eliminate the

Operation firm; firm's interest with the

one

team;

as one as

a

gives business, his but conflicts who him half

who partner important

than individual interest

more

business from and similar

twice the others in the firm

out

profitably,

in

businesslike To

operate operate to

a man-

origination problems

Likewise, attach client

credits. that

to

provide good members, for income

to to compen- ner, a

PROFESSIONAL LAWYER 9 THE

position previous might partic- leadership recognized category] in and added it be reduced that the

to

a a

industry develop both desirable business ular and will

group points. 100 1000

Assume

partners,

public, be service of but the that it will take minimum

to

a a

points assigned

those 100 500 will be

partners

among

significant expenditure of of time for indi- three

years

a an

recognized positions

based

historic in the

matters,

position. Thefirm having approved

on achieve such vidual to

a

points

firm, experience,

divided

The 500 be

etc. to

may

fi•'m lawyer endeavor, so effort, should the for the the the

pay

points

junior points

from the

2 7 partner to most to range thefirm

project failing, and takes risk the of the but also the

largest

[An historical contributor. alterna- for the

belong or more rewards the firm. to

getting

year's the started take last tive for

program

com-

5. There is achieve than

to at

way

one more success

pensation, fair,

is determine how much it

assume was

lawyer, this The successful successful firm. trial the

trans-

extraordinary,

points.] base,

translate arrive and into

at

a

lawyer, developer

successful action of business and the

may

perfor- points assigned extraordinary

for

250

paid now are be the all the does One need "touch

not to

same.

assigned mentoring

tasks. If head of in the the the

filling variety bases", mance by achieve of the

but

may

success a

profession has

for and turned it into model the

program of fir•. a needs the

relating thus firm's

has advanced the values

to

core con-

B. COLLECT

REGARD TO CONTRIBUTIONS DATA WITH OR PROBLEMS OF

genial diversity, envirol•rnent, fairness,

work and the firm

EACH

EACH OWNER REGARDING CORE VALUE.

points entity, his increase. If has total should he

as an

position merely co•rcrnittee, data is collect. recorded filled the of of Some

Hours chair the but to anyway,

easy are

Everybody serving nothing nothing track. knows who is done he little from and this

gets to easy

more, are as a or

practice department paid by paying stuff has been for for his hours leader and head. Other is That in group group.

probably points. Similarly, but first chair of the efficient the the 500 secret, most not

provide development, collect

business who has achieved it is form and

to to way

a a

lawyer significant improvement quality each information have of the the put to

together perfor- base, for reviewers. efforts for the

is "What the client rewarded that

If firm members don't know the

process,

points by development

business behalf of from toward level. additional this

on mance

they manipulate

can't try it. to

firm lawyer in, involved is is the how The done with the whose

you

your are same

plan quality progressing, legal and of has enhanced what work the

successes or

reputation milestones achieved?" fim•'s for excellence

have who has you or

achieved notable There is

success. room

Similarly,

negative contribu- be collected data

must

on

here

the full time of finn

well for the

manager

as man- sloppy lawyering endangered tions. Has the finn? Note that

aging president only who has filled the

partner

not

or necessarily what should is

be considered bad

not

exposure,

position

but has smoother has excelled it and achieved

at

a results. the finn of If has suffered loss because Jackson's

not

a

running,

prot•table operation. is

There also

more room frequent good deadlines, missed of luck but that is because

or

problem partner's compensation. here detract from

the

to

work, corrective the considered and for- be must not

exposure

assigned given dodged. points special because the bullets values 250 for these Some

were core are now successes

positive positions plenty contributions, repeated, compensated

for but for be have few for ad be not cannot

may so

negative assigned infinitum, recognition. contributions. If the head of but deserve the

The three

person years

as

diversity performed admirably, working

has firm has been in the committee value Partner advance A to construc-

a

industry organization joined approval has been the whose he with finn enhanced. attitude and behav- tion is But

person

something paid working assignments ior has for the 6 floor uncomfortable has been for of his made he

th part

on as

negative by categories has the firm from values first for last subtracted and the under the the

three

two women core con-

paid tribution have this effort has off. Under this But the

must consequence. year years. a

develop

his rela- he did take time the

system, to not

own

C.

WITH

MIND, THOSE COMPENSATION MANAGEMENT POLICIES IN WILL

tionships

and the

business he the last three

years,

over

[IN

ADVANCE, DETERMINED,

AS PERCENTAGE POINTS BE APPLIED TO AND

assigned paid effort, it, for

and the firm him the

to

was

90%

YEAR]

ASSUMED FOR WITHIN THE FOLLOWING

OF PROFIT NEXT

and the firm

the whole is entitled the reward.

But

to

as a

[3? 57]

GUIBELINES,

EVALUATED ROLLING BASIS. ON A YEAR

might specially successful effort firm well. reward the

as

Profit, this less other in

context

expenses Repeated means revenues

first will reward Partner A under the

successes

compensation. owner's than

categories in the future. two

assuming

50% base full time

base draw

as

dividing or point by of the is The value 90% of determined

magic. budget. work.]

[50%

60% would

is

at not profit by year's estimated 10% 1000. The other next

(assuming materializes) will either increase the it of value performance quality assigned 25% of duties advanc-

at

point,

special including the

could be used for ing negative affect, provide [To interests of the firm. the purposes,

or

you

special bonuses,

extraordinary advance, but for

in adequate performance 12.5%, could assumed of not

start at

an

performance

might Or, results materi-

in the it down.] and evaluate

not year. or

up or

might alize, be

the better used

etc., to

at

prepay expenses, or

extraordinary performance provides

for

This 25% the

governing discretion of the board.

again, [Here contributor. this could be superstar amount

10 PROFESSIONAL

job, is outline. Of That the be refinement. there recognizes job thus do the and

is that the must to

sary course

neces-

nothing

example, using inconsistent For only with there is the of compensation. but that is 50% The is deter-

rest

sary,

classify lawyers above "categories" criteria qualitatively by into instead evaluating mined he has how well to done that

"pay grades" please job for firms such who

others. practice But well The

leader systems. who has or use

group as as

following: the developed

plan bring and practice executed note the to

a group

into forefront recognized sophis- "go the

for

to"

as a

source

This is effort share of decrease the rain- the

to

not

an

high

marks,

clients ticated

through while

who

gets

goes

one outstanding performers makers of other firm. The the

or

the motions does practice

100-person leader of The

the

not.

antipathy origination

for of credit formula is

part

not

as a

job

than

has harder

members,

with the

and 15

group

a

one recognize origination

refusal client vital

of

part to

a as

a

that will affect the

consideration.

But the

saddled

person recognition firm, the of that the but time

it

success over

job with the dislikes he

is

stuck. There

management

not precludes are fair administration and discord. Partner

creates

paths

different

and he

firm and the

well to success may extremely developing business, B, who is talented in will

handling that his contribution decide

is

busi-

client greater

recognized doing be for and will make less

than

so no

leaving and

the

duties

another. management

to

ness prior assuming under the

continues the firm be system

to

Similarly, diversity head of the the elect, committee

may

successful.

as

approval, spend firm

with couple for time of

to

years more a

this should do What reduce friction such is

in

system

a as

implementing creating, educating and about the firm

sys-

efficient,

and make profitable, the firm it

and

more more

procedures integration and minority the of

tems

to

assure

brought safer. they Industries the firm "I when Acme

to

provide early members into the firm possi- and alerts for

to

doing nothing manufacturing jet but instant holes and

were diversity problems. simply ble is

hold-

It

not

powered

shoes for the sale

coyote

to ing position paid the for, that is she is

it

they market. Now have the

comer on doing

good job

it.

at a

high

businesses don't under- tech

even

"[W]e compensation

perfect. have

before"

done it this No is

But system

way

never origina- will with it the stand"

not

carry

awful.

based A fore- the

system

some are subtracting

on credit, tion iS but statistic. from funds the argument not

an a

principles going

impedi- (a)

should

lawyers remove firm needs the who do

to

pay

good

(b)

ments to management,

business, remove understand who the and

are

impediments increasing

quality

of the the

to

expand

vital work is and the if the

to

base, impediments firm's client (c)

remove is with the firm. client business Additional devel-

stay

to

long planning, (d) firm

fairness and

impedi-

to term

development remove continued of work is of Acme

opment,

or

good

prevention practices, loss

(e)

cohesive-

to ments

concurrently recognized. assure

is value and

more

agreed of values, (t) because the be flexible

and

ness

core

subjective, subjective but This is

within limits of the

very enough address needs the firms with of different values.

It

to

values, contribution

between and divided

levels

of

to

core

good

will take it. management

to

mn

they

math, really Formulas look but like

not

success.

are

Endnotes

people "play formula" manip- because tend the by to exact

Winders, input. Consequences ulating approved of the Unintended (The 1. Peter J. this undesirable "I Essence client

Management), 14, Vol. Law Firm

No.

3 T• PROFESSIONAL develop because business" Joe needed is the char-

to some

(2003). LAW¥:•R

made, itable while, bad decision is originated "I

reason

a

fair, imposed 2. To be there

be that

enforce systems giving client,

this but him to senior

devel- associate

are can

to to

am

policy, particularly

gatekeeping

there is opportunity. where

and handle" a that is the uncharitable clients difficult

op

way

business intake requiring approvaI A

of unin-

system

new

unsuspecting.

foisted the bonus There is under

are on no

volved example.

is is still

It

this is in addi- better if

persons

an

proposed

taking

the

for client, undesirable and system

an

aligning

interests the tion

individuals of the good

with loss to

subjective points fact the in of allocation

allows for also

prevention, doing rather instead of

than

so.

subtracting

negative

contributions such them for these.

as

Winders,

Importance 3. Peter J. Law

Firm Culture- and Its

How

point. That disincentives is There should be the

for and bad

It, Overcome 2004

SYMPOSIUM

ISSUE

PROFESSIONAL

to

OF THE

longer

unwise decisions. reward last A should than it is

(2004). LAWYER no

deserved. managed

firm, The firm should be

and

not

as a

by The has

derived 4. 1% been

that

not

process may a may

or

develop,

be allowed consolidate

and divide

of result

to

compensation formula but since involve is

as a of share

set

a

as a

random decisions of self-interest. distribution, available self interest the of the individual tends

be co-extensive the welfare with of the firm.

to

flexible, provides such this is in that A it method

system

as a

permission do have

5.

firms the General whose

not to rewarding lawyers

for service of other the firm than name

to

per-

Counsel Prevention spoken Loss with, Partners have

and forming legal developing Management and business. work or

of information the

from

who did

simply not large essential, of want is law firm form some in the sources of came

not

a

a

particuiar publicly. firm identified

Besides, with

of

most CEO, practice full but also the time

level

a and at

group

cer-

these conversations did going

know

later

try not to

to give

practice other functions. this tain does But was

system

not

a

synthesize experience information the

about various with

by allowing

leader "free him ride" his bud-

to meet

group

a

approaches compensation

into this, article like and nei-

to

logging by hours. an credits hours It get management

neces-

those talked ther did with.

PROFESSIONAL THE LAWYER 11