Origination Tracking: Findings From The A-W Survey

[Editor's Note: As a counterpoint to the September edition's commentary by Joel A. Rose on tracking of partner contributions, here's a statistics-based line of thought from Jim Cotterman; this article expands on his introduction to Altman-Weil's 2003 Survey of Compensation Systems in Private Law Firms. For a broader statement of Cotterman's philosophy of law-firm compensation, see his article "Is Your Compensation Philosophy Fair and Defensible?" in our February 2004 edition. For an in-depth analysis of the concept of origination and the effects on a law firm of different kinds of origination credits, see Cotterman's article in the September 2004 edition of Altman Weil's Report to Legal Management.]

In Altman-Weil's 2003 Survey of Compensation Systems in Private Law Firms, participant firms were asked to rank a list of 17 compensation-related factors, from most important (1) to least important (17). The survey found that the two most important compensation criteria in law firms remain a lawyer's personal productivity, measured by fees collected as a working lawyer, and his or her ability to bring new clients to the firm ' ie, origination.

As shown in Figure 1, below, these two top-rated factors each had an average ranking between 3 and 5. (The next-highest two factors, case responsibility and client responsibility, had average scores of around 7.) Note that, in this graph, a factor deemed more important by survey recipients got a lower average number.

[IMGCAP(1)]

Surprisingly, although business origination consistently ranks as the #1 or #2 compensable factor, less than half of the participant law firms grant “formal” origination credits. Again, firm size significantly influenced the response. 72% offirms with more than 100 lawyers do provide formal credit for new business, while only one-third of small law firms formally allocate new business credits.

It's understandable that many small law firms do not formally track business origination, since each partner is probably very familiar with each other partner's contributions in this regard. But how to explain the responses from large firms? In those firms, many partners may not even recognize another partner's name or face. Yet 28% of larger firms said they do not formally track origination, even though it is one of their top two factors in compensating partners.

Among other explanations of this large-firm preference for informal tracking, the following are most frequently offered:

• In larger firms, the way business is derived, nurtured and maintained is more complex than in small firms. Origination credit must therefore be applied in a less mechanical way.
• A related reason: Managing partners and practice chairs play an important but informal role in the credit-awarding process. Essentially they drill down to smaller groups where there is first-hand knowledge of what each partner is doing.
• In some large firms, there is a strong belief that formally tracking origination instills an internally competitive environment that is harmful to the firm's culture.

[Editor's Note: This last point brings us full-circle to the published position that Joel Rose critiqued last month. Cotterman's distinction between formal and informal tracking seems useful for resolving these differences of opinion on best practices.]

[Editor's Note: As a counterpoint to the September edition's commentary by Joel A. Rose on tracking of partner contributions, here's a statistics-based line of thought from Jim Cotterman; this article expands on his introduction to Altman-Weil's 2003 Survey of Compensation Systems in Private Law Firms. For a broader statement of Cotterman's philosophy of law-firm compensation, see his article "Is Your Compensation Philosophy Fair and Defensible?" in our February 2004 edition. For an in-depth analysis of the concept of origination and the effects on a law firm of different kinds of origination credits, see Cotterman's article in the September 2004 edition of Altman Weil's Report to Legal Management.]

In Altman-Weil's 2003 Survey of Compensation Systems in Private Law Firms, participant firms were asked to rank a list of 17 compensation-related factors, from most important (1) to least important (17). The survey found that the two most important compensation criteria in law firms remain a lawyer's personal productivity, measured by fees collected as a working lawyer, and his or her ability to bring new clients to the firm ' ie, origination.

As shown in Figure 1, below, these two top-rated factors each had an average ranking between 3 and 5. (The next-highest two factors, case responsibility and client responsibility, had average scores of around 7.) Note that, in this graph, a factor deemed more important by survey recipients got a lower average number.

[IMGCAP(1)]

Surprisingly, although business origination consistently ranks as the #1 or #2 compensable factor, less than half of the participant law firms grant “formal” origination credits. Again, firm size significantly influenced the response. 72% offirms with more than 100 lawyers do provide formal credit for new business, while only one-third of small law firms formally allocate new business credits.

It's understandable that many small law firms do not formally track business origination, since each partner is probably very familiar with each other partner's contributions in this regard. But how to explain the responses from large firms? In those firms, many partners may not even recognize another partner's name or face. Yet 28% of larger firms said they do not formally track origination, even though it is one of their top two factors in compensating partners.

Among other explanations of this large-firm preference for informal tracking, the following are most frequently offered:

• In larger firms, the way business is derived, nurtured and maintained is more complex than in small firms. Origination credit must therefore be applied in a less mechanical way.
• A related reason: Managing partners and practice chairs play an important but informal role in the credit-awarding process. Essentially they drill down to smaller groups where there is first-hand knowledge of what each partner is doing.
• In some large firms, there is a strong belief that formally tracking origination instills an internally competitive environment that is harmful to the firm's culture.

[Editor's Note: This last point brings us full-circle to the published position that Joel Rose critiqued last month. Cotterman's distinction between formal and informal tracking seems useful for resolving these differences of opinion on best practices.]