Taking the Lead: The Managing Partner's Role in the Compensation Process

IF, AS MANAGING PARTNER, you are not a member of the firm's Compensation Committee, don't take the job.

Quite simply, when you can only really move your firm forward through influence rather than power, it's critical that you have your hand on the rudder that is compensation. This column explores some of the tests of a good compensation system and the leader's role in that context.

A good compensation system rewards total contribution — objective metrics, subjective behaviors and, indeed, character.

Karen MacKay

by Karen MacKay, MBA, CHIC

There are cases where only the managing partner knows of an incident or a situation where a partner exhibited the values of your firm beyond the obvious measurable achievements. While you may not be able to share the specifics of a situation because of its confidential nature, when looking at the big picture of what partners are in which compensation bands, your knowledge may be critical to fairness.

A good compensation system changes to reward the behaviors required for future success. In the words of famed executive coach Marshall Goldsmith, "What got you here won't get you there." Given the fundamental changes to the legal professional in the past few years, and no doubt in the years ahead of us, your compensation system will need to change to reward what is necessary for the future success of the firm, the practice group, the office and the individual. A big top-line revenue number has for many years created the swagger that has been rewarded without understanding how profitable the practice really is. Profitability trumps swagger now and will in the future, so figure it out and make it part of your compensation plan.

A good compensation system promotes and rewards teamwork. The silo is done. Teamwork requires that a partner work with other partners with subject matter expertise but also with associates, paralegals, project managers and technology wizards. Partners who treat all of these contributors to the client engagement as professionals and trusted colleagues will be more profitable, more efficient and more focused on the interests of the client. These folks should be rewarded for putting the interests of the client first and the innovation and creativity and the impact of this approach on profitability.

Profitability trumps swagger now and will in the future...

A good compensation system should have predictability and transparency — in other words, there should really be no surprises. In your role as managing partner, you will no doubt be dealing with the ups and downs of partner performance. You don't review your management reports for the joy of the spreadsheet; you review them to validate what you already know by talking with your partners. Examples could be: who is trending toward an off-year; who is trending toward burnout; whose practice management is being neglected; who is building thicker walls around his or her silo; who is really hitting their stride and seeing the results of business development and profile-building efforts. Each of these situations must be nurtured, supported or managed. Each of these situations will be an input to the compensation process and will have an impact, and the impact shouldn't be a surprise.

A good compensation plan adapts to the life cycle of a professional career. One size no longer fits all. While the compensation criteria may be the same, the weighting of each criterion may differ depending on where a partner is along his or her career path. Younger partners may be more heavily weighted to new business growth, team leadership, innovation and profile building. Older partners may be rewarded for mentoring, maintaining existing client relationships and involving others.

Finally, compensation must be adapted to directly connect to and support the firm's strategic goals. What are the key performance indicators of partner contribution in your firm, and how do these link to the firm's strategic goals? If you cannot explain how compensation decisions and outcomes tie directly to the firm's strategic goals, you must question the gaps in your reward system and consider what needs to change.

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You make progress through influence, and one of the most important arrows in your quiver is the compensation system in your firm. You get what you reward.


This article was originally published for the May/June 2016 issue of Law Practice Magazine. Copyright © Phoenix Legal Inc.