Definitely Mabey

How to tell if Your Firm's Compensation is Aligned with its Strategic Direction

In August 2012 my column in Canadian Lawyer raised the issue of compensation systems being under siege. The column identified the following as some of the reasons why they were under siege at that time:

Stephen Mabey Author

  • A change in weighting of firm mindedness versus autonomy
  • A generational attitudinal change in how and when to compensate
  • Flattening of the marketplace putting heavier emphasis on business development
  • An increased importance on managing for profitability

The siege has not only continued but in recent months the frequency with which systems are coming under scrutiny has risen. In addition to the above reasons some new ones have gained prominence including:

  • Client succession, general aging of the profession
  • Transparency, particularly to lesser earning partners
  • Generational bias towards objective versus subjective criteria by the millenniums
  • Credit for referral (no involvement in handling the matters a.k.a. cross selling) versus origination of work (likely involvement in also doing the work to some degree)

While Canadian law firms report on an accrual basis (billings are revenue whether collected or not) in the absence of aggressive write-off policies there is a growing trend in compensation systems to ignore billings in favour of collected productivity (cash receipts).

While the above are a cross section of the reasons as to why firms are actively reviewing their compensation systems, the end goal of all compensation systems should not be lost - to reward the behaviours that align with / support the firm’s strategic plan.

While there are a myriad of approaches to reviewing compensation systems there has historically been less of a focus on the behaviours driven by these systems. Likely in large part due to:

The rest of this article is available in Stephen Mabey's new Book

Book Cover - Leading and Managing a Sustainable Law Firm - Tactics & Strategies for a Rapidly Changing Profession by Stephen Mabey

Available for purchase on BookBaby.




Remember in the absence of a formal strategic plan your compensation system is your strategic plan! Is it worth following?


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