Integrating Business Planning, Compensation, and Career Advancement
The competition for legal talent has never been fiercer. One strategy stands out for its clarity, simplicity, and effectiveness, especially for small and midsize law firms: integrating business planning, performance-based compensation, and career advancement into a unified career management path for senior associates and partners.
This post explores the structure and benefits of such an integrated system, how each component can be tailored to your firm’s unique needs, and why it is a transformative force for law firm performance and long-term lawyer retention.
There are three basic elements of an integrated approach: individual business plans; performance-based compensation linked to individual business goals; and career advancement based on demonstrated performance.
Individual business plans: clear individual goals for performance the firm needs
At the heart of an integrated career management path are annual, individualized business plans for partners and, in many firms, senior associates. These plans are much more than generic checklists—they are living documents tailored to the firm’s strategic objectives and each lawyer's needs and preferences for career-long professional development. A well-crafted business plan typically includes specific goals in areas such as:
Fee production
Client origination
Development of new work for current and recent clients
Career-long development of specialized expertise
Professional supervision responsibilities
Marketing activities
Profitable management of one’s practice
Successful performance of management responsibilities and leadership roles
Every element of the business plan should be defined by and tailored to each firm’s needs, culture, and market realities—not just copied from the latest industry trend.
Law firms that use individual business plans well usually experience three strategic benefits.
Clarity and accountability: Lawyers know exactly what is expected and can readily measure progress throughout the year.
Customization: Each plan aligns the lawyer’s personal strengths and interests with the firm’s strategic priorities.
Agility: The business plans respond flexibly and at the working levels of the firm to changes in markets, client needs, and legal landscapes, unlike rigid annual plans that quickly become obsolete.
Compensation: clear links to individual performance
There are an almost-infinite number of structures, patterns, and firm-specific features for lawyer compensation. Walker Clark LLC usually recommends that lawyer compensation should be based, at least in part, on demonstrated individual performance.
One of the most reliable indicators of individual performance, and one that is becoming increasingly popular among small and midsize clients, is to base a portion of a lawyers compensation — and the percentage can vary widely among different firms — on the extent to which an individual lawyer delivers their business plan. There are a variety of specific mechanisms to do this, such as a bonus that a percentage of a senior associate’s salary determined by the extent to which they met or exceed the goals in their business plan, or by the allocation of shares in a performance pool that is set aside for all non-equity partners. The performance pool concept also works well with equity partners.
Although the structuring of the link between the business plan and performance-based compensation can vary among firms, our clients who use this link have observed two big benefits for the long-term career management and retention of their lawyers.
Transparency: Each lawyer knows precisely what actions, numbers, or results trigger performance-based pay and how it will be computed.
Fairness: The evaluation of each lawyer’s performance relies on objective markers, tailored to the individual economics and capabilities of each lawyer, thereby limiting bias and subjectivity
Moreover, these structures are self-funding. In other words, it a lawyer delivers their business plan, they will also produce, or materially contribute to the production of, the money needed to fund their performance pay.
We have also observed that that linking compensation to individual business plans, at least to some extent, is a simple, cost-effective way boost morale, motivation, and commitment to one’s career. Lawyers are empowered to shape their own success, with no ambiguity over what the firm values and expects from them.
Advancement: clear markers along career path
In firms with traditional equity partnerships and in those adopting tiers (such as non-equity and equity partners), promotion should be neither arbitrary nor opaque. Every lawyer has a professional right to know clearly and specifically:
What are the requirements for eligibility for consideration for promotion to the next level in my career?
What are the standards and guidelines that will be used to determine which of the eligible candidates should be promoted?
By linking eligibility for promotion, as well as guidelines to the selection process at each step, every lawyer knows what they must do to advance, ultimately to equity partnership.
By linking at least some of the eligibility requirements and selection criteria to individual business plans, the decision-makers (usually the equity partners) can make fairer, better-informed, and more reliable selections of people who have already demonstrated, through the consistent and sustained delivery of their individual business plans, that they can deliver the level of performance that the firm needs from them in their new position.
Three compelling benefits of an integrated performance management
Firms that have integrated business planning, individual performance, compensation, and career advancement into a single system have observed at least three significant, lasting benefits.
It is the simplest approach to administer. Setting up a system — with business plans, calculations of performance-based compensation linked, in part at least, to individual goals, and better defined, more transparent promotion requirements — does require a significant amount of work at the start. (Fortunately, your law firm does not need to design and document your improved system from scratch. With almost a quarter-century of guiding law firms through this process, Walker Clark can help you efficiently customize the structures, policies, processes, and documentation that are right for your firm. This initial investment of partner time, management attention, and resources is minimal when compared to the measurable benefits such as less bureaucracy, fewer disputes, better individual performance, and greater retention of the lawyers your firm needs for its future.
It provides unusual clarity. Lawyers are not left to guess what constitutes “success” or “value,” as reflected in the firm’s compensation system and their opportunities for advancement. Moreover, practice groups and the entire firm can develop and execute better-informed group and firm-wide business plans partner and senior associate has a clear understanding of what each of them must do to support their collective success.
It supports long-term retention in ways that most law firms overlook. Focus groups conducted by Walker Clark over the past 23 years have established that one of the most important considerations in the retention of legal talent is whether there is a clear path to professional advancement and personal rewards. Senior associates and junior partners, especially, tend to see their futures in the firm in terms of whether the “business case” for them to remain at their current firm is stronger than the reasons to leave and seek better opportunities elsewhere. An integrated system, such as is described in this article, can provide solid answers, not speculation or aspirations. to that question. It also can help the firm’s management identify, with great specificity and individuality, areas in which the “business case” they offer is a risk, rather than an advantage, in the competition for legal talent.
For law firm leaders who want to build sustainable, high-performance practices, supported by the best legal talent in their markets, the case is clear: adopt a performance management system that integrates business planning, compensation, and career advancement.
Norman Clark
To learn more about how Walker Clark can help your firm integrate business planning, compensation, and career advancement into a compelling business case for retention of your most-talented lawyers, use the secure e-mail button at the bottom of this page to contact us to set up a complimentary 30-minute discussion of your firm’s needs, plans, and aspirations.