Improving Compensation Decisions in a Mixed Economy

However, again like the economy, not all is right in the legal profession. Law firms struggle with competing interests of survival versus preservation of long-held values. One long-held value beginning to fall is the lock-step compensation arrangement for associates. Rightly or wrongly, it is giving way to “merit” based approaches where pay is tied to skills, competencies, and contributions. Another mainstay at risk is the role of recent law school graduates in law firms. Client push back on paying for first and second year associates has brought about renewed interest in apprenticeships. This is a worthy, albeit expensive, proposition for firms and associates alike. Firms continue their evaluation of partners ' equity and non-equity alike ' striving to maintain the key players for what they expect (some might say hope) to be the dominant post-recession practices.

Through all of this, partner compensation decisions have become even more challenging. When dollars were plentiful, it was easy to be generous to all and to satisfy the high producers; but when dollars tighten and practice fortunes vary dramatically, internal equity and external competitiveness become increasingly difficult to achieve. If key business generators perceive their compensation to be inadequate, they may defect along with their clients. Other highly skilled lawyers with sought-after expertise may also be recruited with offers of higher compensation or more stable environments. Many firms understand the risks, but few have the ability to assess them in a systematic way.