Compensation: Partnering With Your Partners

January 2001

By Edward Poll, J.D., M.B.A., CMC

Trends in the world of legal practice and other service businesses are changing. Controlling client work is out. Collaboration is in. Individualism is out. Teamwork is in. So say a growing number of successful small and large law firms. In fact, one major national firm has more than 40 "teams" consisting of two to five lawyers who work together on client matters.

"All for one and one for all" may be an old concept in musketeering, but it's a relatively new and controversial one for lawyering. Teamwork in a law firm means partnering with other lawyers in the firm to reach common goals. With partnering, it's the law firm, not any single lawyer, that is marketed, and it's the firm that serves as the legal representative of the client. Each individual lawyer brings to the table a special skill or expertise that, when added to all the others, better serves the interests and needs of the client. The result is that the disparate skills of the law firm now better match the disparate needs of the client.

Why would a law firm want its lawyers to team up? First and foremost, it's my observation that team efforts produce greater revenues for both the firm and the individual. And in terms of marketing, it's easier for lawyers to tout the capabilities of their colleagues than to brag about themselves. Another advantage is that the more lawyers who interact with a prospective client, the greater the chance that one of them will click personally with that client. And finally, with more lawyers of the firm touching the client at different levels, the market share of the client's legal business is likely to be much greater. Larger market shares of corporate clients' business usually causes greater growth for the law firms and higher profits per lawyer.

Partnering also contributes to more harmonious firm governance and greater continuity. It makes it less likely that a single partner or practice group will dominate the firm, not to mention dominate the most lucrative clients and take them with when they leave. And the unexpected loss of that dominant partner or group won't destroy the firm. In today's atmosphere of frequent lateral transfers, this is an increasingly important issue.

When it comes to doing the actual legal work, the intellectual synergy among several lawyers working on a matter can result in more creative strategies. This "official team" is more effective and is to be contrasted with calling a friend for advice or walking down the hall to ask a question of a colleague who may or may not be busy and focusing on their own matter. And some employers have found that people working as a team are happier. Happy employees, we all know, work longer, harder and more effectively - and make more money for their employers.

Of course, there are situations where team lawyering is not appropriate -- when an immediate response to the client is essential, the client doesn't want to pay for a team approach, the client culture is at odds with the law firm's culture - or your firm's preferred culture is "eat what you kill" and teamwork just doesn't fit.

Teamwork Obstacles

Teamwork is accepted in other types of business and industry as a way to more effectively meet the needs of customers. But in the legal community, law firms have not designed their compensation systems to provide incentives for teamwork. In fact, most compensation plans tacitly penalize collaboration. Since sourcing, or receiving "credit" for bringing a new client to the firm, is frequently a major element of compensation, sharing a source can seriously dilute a lawyer's take-home pay.

Another obstacle to teamwork is that lawyers are trained from their early days in law school to be independent and contentious, not collaborative consensus builders. They are strongly self-directed, and traditionally have been expected to solve clients' problems without any assistance. They also have been taught to keep tight control over the client relationship -- which is the polar opposite of sharing control with team members. Many lawyers also see teamwork as interfering with the rapid resolution of client problems.

But if a law firm hopes to survive as an institution, it needs to make teamwork an essential element of its firm's philosophy and culture. Of course, this is a very large "but"! Many lawyers see very little value to them or their personal estate in building the law firm as an institution that will survive their ultimate departure from the firm. And some lawyers have been "burned" working for the good of the team only to have an individual lawyer leave the firm with the client originally brought to the firm by the first lawyer.

Changing the culture requires both educating the firm's lawyers and changing the compensation system. The lawyers must be taught how to create teams that are cooperative and effective, how to approach clients as a team, and how to work as a team to deliver the legal services appropriate for the client's needs.

Then, the managing partner or compensation committee must clearly tell everyone that continued employment at the firm requires acceptance of the teamwork . This could be expressed in a policy that other lawyers must be involved in all cases of a certain type, or in all matters reaching certain financial thresholds of exposure or attorney's fees. The firm policy should specify that each attorney's base compensation will be tied to his or her effectiveness in involving other firm lawyers as part of a team (which would still include the originating attorney) delivering legal services to clients.

The distribution of end-of-year bonuses should also be based in part on each lawyer's success in working as part of a team. The size of the bonus pot for team lawyering should be based on how important the firm considers the teamwork objective.

Being the rainmaker who brought in a client usually results in greater compensation. But if that type of compensation system continues, the culture of the firm will remain entrepreneurial and isolated, not cooperative. Thus, there must be a sunset provision for the source credit system -- or the firm will never institutionalize the work generated from that client.

The goal should be to make the client a house account. Successful corporate clients survive for more than one generation. So, too, should their law firms! In order to achieve this goal, the firm must mirror it's clients and become an institution in itself. The attorney originating the business should be compensated for being the source, but only for the first few years. The source compensation system should be phased out over several years. During that period, the rainmaking lawyer should get a bonus for bringing other lawyers into the client's matter. As the sunset bonus decreases, the teaming bonus can increase. This will increase the acceptance of team lawyering.

There are several ways in which the firm's compensation committee can evaluate lawyers' teamwork achievements.

It can review whether tasks have been delegated and to what extent, and how many other lawyers were involved in the matter. It can subjectively evaluate a lawyer's attitude toward partnering, as well as the lawyer's mentoring role of other lawyers in the firm. It can look at whether the attorney has achieved his or her objectives as set forth in a business plan written by each individual lawyer and accepted by the firm's management. In this plan, the attorney commits to meeting prospective and current clients along with his or her law colleagues.

As teams within any law firm grow stronger, the firm will have to shift the emphasis of its recognition programs from individual to team rewards. Even individual rewards should acknowledge people who are effective team players -- people who freely share their clients and expertise.

Law firms need to move away from a star system that rewards only individuals who stand out from the crowd, and also reward people who help bring the crowd up to their star performance level.

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January 2001