Innovating your firm’s compensation model can be a herculean task - especially if your existing framework has been in place for decades – but it’s a vital job to undertake if you want to future proof your firm, retain your star players and ensure you have as strong pipeline of top legal talent for the years ahead.
A good place to start is by asking yourself these 10 key questions:
1. What are your firm’s financial goals?
Your first step should be to identify the financial results you want to deliver so that your compensation mechanisms is linked to these by design.
2. How does your compensation system align with what your clients need?
Consider what performance criteria your clients use to rate your lawyers ─ are they the same as yours?
3. What cultural values do you have in your firm and what behaviors do you want to encourage?
Sometimes a focus on revenue can mean that cultural values are compromised so you should make sure your compensation model drives the right behaviours from the outset.
4. Does your proposed reward mechanism encourage or discourage undesirable behaviors?
Compensation systems can unwittingly create a focus on the wrong deliverables ─ not through any deliberate action but by natural outcome ─ so it’s best to check for this.
5. Does your compensation system accommodate differing career goals?
Is your rewards package motivating for a high-performing, technically excellent lawyer who isn’t a rainmaker and has no wish to become partner?
6. What activities do you want to reward ─ just earning fees?
Some firms reward support activities such as knowledge management and compliance as well as other team working.
7. Are there non-financial rewards you can build in such as work-life balance?
Socio-demographic changes mean those joining your firm in the future will be more likely to seek flexible working arrangements – plus these will likely be offered by your competitors!
8. Will you allow your lawyers to flex their benefits so as to hand pick their own compensation package?
Different people are motivated by different things so ideally you would tailor your benefits package for individual employees─ or at least segment your approach for different groups
9. Are you going to innovate your compensation system with a complete overhaul, or will you go for an evolutionary and piecemeal approach?
To a certain extent this depends on what you have in place already. Either is fine, of course, but the extent of the change will in turn determine the scale of buy in you’ll need to achieve.
10. Once you have decided upon your new compensation system what follow-up actions will you take to ensure that that it delivers the financial results you need?
Published by ARK Compensation Innovation: An in-depth exploration into the future of law firm compensation offers thorough and practical advice that enables firms of all sizes to develop fit-for-purpose compensation systems that can be effectively managed to drive the right behaviors and, in turn, financial success.