Many law firms spend a lot of time and energy focusing on the form of their compensation system and on the fairness with which they make compensation decisions. That focus is appropriate, because the form of compensation system and the integrity of the compensation process often influence how fairly partners feel they are being treated. There are a great variety of law firm compensation systems, many of which are the product of firm history and the evolutionary path of the firm. If administered with sensitivity and discretion, many different systems can serve a law firm well.
One thing that all firms should have in common, however, is clear and candid system of feedback to partners as to the reason why they have been allocated certain a compensation package or a certain proprietary ownership. At some firms, the performance of partners is within a narrow band of excellence and may not require much explanation; but it is a rare partner who does not appreciate being told by respected colleagues that he is doing a good job. Most firms, however, have a wide range of partner contributions; and often the same partners perform well in some areas and less well in others. If a firm truly aspires to improve itself and to have the highest standards of practice and client service, it must take the time to give feedback to all its people.
One thing that all firms should have in common… is clear and candid system of feedback to partners as to the reason why they have been allocated certain a compensation package or a certain proprietary ownership.
Associate compensation is often on a lockstep, seniority scale; although there is usually bonus compensation which is awarded based on relative productivity, practice excellence, and teamwork. Feedback is critical for the development and morale of young lawyers, even if they are compensated in lockstep. Differences in bonus compensation may be given great significance by the recipients, even though an associate who is substantively performing well may receive a lesser bonus simply because he or she is not as productive as associates who are comparable in substantive contributions. The time invested by the firm in delivering constructive feedback is not only important for the specific message but also for the respect it conveys to the individuals being reviewed.
As for staff, as they grow more senior, they often reach the outer limits of pay for their given function, particularly at law firms where employees often stay for a long time. Feedback is critical, for it is important to recognize contributions even when not much compensation is attached to the favorable comments. And for junior employees who receive comparatively high raises, constructive feedback may be necessary to improve their performance.
A firm should ideally select compensation systems that reinforce the positive values of the firm, but every new management team cannot realistically change the compensation systems to match their sense of the characteristics of the firm they wish to emphasize. By administering the existing compensation systems thoughtfully, however, a firm’s leaders can set the right tone and reinforce the values of the firm. Above all, the compensation decisions of the firm should reflect fairness to every individual and recognize excellence in practice, client service and teamwork. The decisions must also be given candidly and promptly. It is human nature to delay and often sugar-coat a message that someone does not want to hear, but the person delivering the feedback with the compensation message must be sure the message is received and understood, even if the conversation is unpleasant and the recipient disagrees with it.
Too often, feedback is not heard and acted upon. It may be more comfortable on both sides to have a sloppy message that is not heard or acknowledged, but often that just kicks a problem down the road which should be confronted today. If the issue is confronted and acted upon, the person getting the feedback may be a little disappointed today but improve over the long run. If the message is allowed to be misunderstood or ignored, the problem or weakness may undermine future performance—to the detriment of the firm and the individual.