Walker Clark
Worldview Archives
Is your compensation system being stress-tested in 2023?
As the legal services world has emerged from the disruptions of the COVID-19 pandemic, we continue to observe an unusually high degree of "churn" in associate and partner movements in legal markets worldwide.
In most instances, compensation has been a significant factor in these departures, although not the only one. Remote working during the pandemic opened new opportunities for discrete lateral recruiting, with the "losing" law firm not finding out about someone's decision to leave until it is too late.
The Law Firm of the Future: Sustainable Profitability
Your law firm is making money today.
But what about next year?
What about ten years from now?
Do you even know how you are profitable today?
Associate Career Management: a Critical Strategic Issue for Small and Midsize Law Firms
Does your law firm have a documented career management strategy for your associates? Is it more than "each year, we pay them a little more."
The truthful answer for the vast majority of small and midsize law firms, everywhere in the world, is "no."
There are few issues in law firm management that have greater strategic importance for law firms today.
What should we work on now to get ready for 2022?
Notwithstanding all the breathless headlines in the legal press about ever-higher first-year associate salaries in the so-called "BigLaw" firms, most lawyers work in small and midsize firms.
Research conducted by Walker Clark LLC over the years, as we work with law firms worldwide confirms that salary alone is a relatively unimportant -- yes, unimportant -- consideration in associate retention.
Newly admitted lawyers tend to prioritize opportunity over cash: the opportunity to develop expertise; the opportunity to do significant client work; the opportunity to advance in the legal profession, to name a few things that most associates tell us are more important than salary. Salary is important, to be sure, but it seldom is the decisive factor between remaining at one's law firm and moving to another one.
So, will your law firm’s compensation program for associates next year give them more than just more money?
“Black Box” or “Black Hole”
Some law firms use "black box" systems for partner compensation because they want to avoid internal disputes among partners.
A former partner’s case against a major U.S. law firm points out how these systems often can make things worse.
Why don’t they want to become partners?
This is not just something that we can blame on "the Millennials."
For the past 20 years, partners from law firms of all sizes, in almost every part of the world, frequently have told me that they can't understand why so many of their best associates and non-equity partners decline the offer of equity partnership.
Partner Compensation and Individual Partner Profitability
Even the most effective partner compensation systems sometimes have difficulty basing a partner's remuneration on the profitability of each partner’s practice.
This is because they try to take too simplistic an approach to a complex and highly individual concept.
“Eating” Without “Killing” Each Other: A Performance-Driven Lockstep Model for Lawyer Compensation in Law Firms
In a previous posting in this blog, we pointed out how an “eat what you kill” system of partner compensation can introduce toxic elements into a law firm, which frequently counteract any motivating effect on lawyer performance.
This short article outlines the features of an alternative to "eat what you kill" compensation in law firms. It works well in any size law firm, but is especially suited to small and midsize firms.
“Salary Plus” Compensation Structures to Promote Better Partner Performance in Law Firms
In a previous posting in this blog, we pointed out how an "eat what you kill" system of partner compensation can introduce toxic elements into a law firm, which frequently counteract any motivating effect on lawyer performance.
This short article outlines the features of an alternative to "eat what you kill" compensation in law firms. It can work well in any size law firm, but is especially suited to small and midsize firms.
Is “eat what you kill” killing your law firm?
An "eat what you kill" system of partner compensation does have some good points for some law firms.
For most law firms, however, "eat what you kill" can kill the partnership.
This is the second most frequently read post in the Worldview Archives, with more than 22,000 views since it was first published in 2018.
Partner Compensation: a Small Law Firm’s Biggest Risk?
Smaller law firms have much less tolerance for poor management. The loss of just a few clients or even one partner can have a disproportionately larger impact than in a larger firm.
One of the biggest risks to a small law firm — and one that is frequently overlooked or, in some partnerships, deliberately ignored — is its partner compensation system.
You have decided to change your partner compensation system. What’s the next step?
It sometimes seems as if there is an almost infinite range of structures and options for partner compensation systems in law firms. Choosing among them can be a challenge for anyone.
The biggest challenge for most law firms, however, is actually making the change, once they have decided what it will be.
Are American lawyers getting “poorer?”
The ABA Journal reports that lawyer salaries in the United States have fallen behind those of other professions.
It does not have to be that way.
The International Challenge to Asian Law Firms
As international law firms from outside the region become more deeply embedded in the legal markets of Asia, the leading local and national law firms, which previously may have held relatively secure market positions, must respond quickly and accurately to these new competitors, or face relegation to the lower, less-profitable levels of the market.
The “Freshfields Checklist”
Freshfields has announced a significant decline in profits, even as fee revenues increased slightly. Moreover, members of the firm's management team are taking an increase in their compensation.
Is it time to panic? Has the firm management gone mad?
We don't think so.
Is your partner compensation system a strategic liability?
The legal press this week gave us two interesting examples of how partner compensation systems, and the cultural assumptions and values that they represent, can thwart the efforts of excellent law firms to achieve their strategic objectives.
Is your law firm's partner compensation an asset in your efforts to achieve sustainable business success, or is it an obstacle?
Are you a law firm or a condominium?
This is an important question, especially for small and midsize law firms that want to have a future.
Many smaller law firms are firms in name only. The partners share a common brand, office space, and expenses, but almost nothing else.
What is the ROI for your partner compensation system?
At Walker Clark we view partnership compensation as a strategic issue. Our experience advising law firms worldwide demonstrates that a fully informed, well thought-out partner compensation system can produce a clear and measurable positive return on investment in less than two years. A good compensation system is also a major factor in creating long-term sustainable profitability.
A bad system, however, usually produces no ROI at all, and sometimes even a negative one.
Partner Compensation: a Symptom or a Cure?
Partners in law firms sometimes tell me that their biggest problem is partner compensation. As one lawyer told me recently, "It is the only thing that is holding us back."
There can be a lot of truth to this statement.
Spin-Off: A Little-Known Strategy to Improve Profitability
Freshfields Bruckhaus Deringer has left Barcelona.
The restructuring of their Barcelona-based practice reminds us of an often overlooked strategy to manage the profitability: the spin-off.
