General Practice, Solo & Small Firm DivisionTechnology & Practice GuideAmerican Bar Association
General Practice, Solo, and Small Firm Division
The Compleat Lawyer, Fall 1996, Vol. 13, No. 4
The Business of Law
Using Compensation to Stimulate Team Lawyering
Edward Poll is a Los Angeles law practice management consultant. He is the author of Attorney & Law Firm Guide to The Business of Law: Planning & Operating for Survival & Growth (ABA General Practice Section, 1994). If you have comments about this column, call 800/837-5880, fax 310/578-1769, or send e-mail to EdPoll@LawBizPoll.com. This column was co-authored by Lawrence M. Kohn, President of Kohn Communications, who specializes in law firm marketing.
All firms of two or more lawyers search for workable systems for dividing firm profits. Senior partners and associates vying for future partnership are challenging current standards. New systems with different criteria and rewards are being considered. At the heart of this examination is the very definition of the firm itself: Is it a firm, or is it just a loose configuration of professionals who share office space and expenses while pursuing individual rewards?
"All for one and one for all" is an old concept. While most lawyers are taught to be independent and contentious, not interdependent and conciliatory, even the legal profession is examining the benefits of "team lawyering," today's buzzword.
Team lawyering is not always appropriate: when an immediate response is needed, when the client doesn't want to pay for a team approach, when the client culture is different, and when the preferred culture of the law firm is "eat what you kill." However, for the law firm to grow successfully and become institutionalized so that "the firm" survives (in contrast to individuals within the firm), teamwork clearly must be an essential element of the firm culture.
By definition, teamwork means "partnering with other lawyers in the firm to reach common goals." With partnering, the firm is promoted and the firm is the legal representative of clients, not any single lawyer.
Some of the benefits of this approach are obvious. For example, two minds are frequently better than one. The intellectual interaction between lawyers working on a matter, especially a contested matter, can provide the fuel for very creative strategies that might not otherwise have surfaced. Some benefits may not be quite so obvious. For example, internal surveys about teamwork led a company in McLean, Virginia, to conclude that not only did workers make more money for the company, but also they were happier. Since a law firm's assets wear shoes, the work atmosphere is important. Happy employees work longer, harder, and more effectively.
Partnering or "teaming" may also be the long-term salvation of the firm. No one partner or segment of lawyers (such as a "practice group") can control the firm; the departure of any such partner or segment will not destroy the firm. In today's atmosphere of frequent and easy lateral transfers, just surviving is a serious challenge for the firm.
Obstacles to Teamwork
Teamwork is accepted in industry. Our clients have learned that in the long run, teaming meets the needs of their customers more efficiently and effectively. In the legal community, obstacles have hindered the implementation of this paradigm. First, there have been no rewards for teaming with colleagues. Compensation programs have not rewarded the team approach. In fact, most compensation plans disfavor teamwork. Sourcing is frequently a major element of compensation, and to share one's source is to dilute one's own compensation package.
Lawyers are accustomed to being self-directed, and are confident about their ability to solve clients' problems without assistance. The concept of client control, which is taught at the earliest stages of law school, does not provide for "shared" control. Often time-consuming, teamwork delays the rapid resolution of problems. Finally, the historic lack of interaction among lawyers results in an inability to think as a team member.
How to Change Firm Values
Firms need to get away from a star system that rewards only the individuals who stand out from the crowd, instead rewarding people who help the crowd perform better as well. Even individual rewards should acknowledge people who are effective team players--people who freely share their expertise, help out when needed, and challenge teams to improve.
If a firm has a formulaic system for compensation, then origination or "source" is normally very significant. In most systems, rewards go on forever. But if the firm wants to promote partnering or teamwork, law firm culture must change. At the very heart of every decision in the law firm is the lawyer's compensation. In order to change firm culture and the way lawyers think, the firm must change the compensation system.
The compensation committee or the managing partner must make it clear that members of the firm must involve other members in all matters involving a certain amount of dollars, exposure, or certain types of cases. Base compensation must, in some fashion, be tied to the lawyer's ability to involve other firm lawyers in an effort to deliver legal services to clients.
At the end of each year, firms distribute bonuses. The bonus or profit pool that will be distributed should be based, in part, on the perceived success of the lawyer in working as part of a team, not just being a "rainmaker" or "spreading the work." The size of the pot for bonus payments for team lawyering will be based on the importance of teamwork to the firm. When the bonus system includes payment for teamwork, the system will reinforce the new firm culture of cooperation.
Sunsetting the Source
Being perceived as a rainmaker for the firm--the source of the client relationship--is usually accompanied by a larger percentage of the firm's compensation. But if that compensation scheme continues indefinitely, the culture of the firm remains entrepreneurial and isolated, not cooperative. The "source credit" must be terminated at some point. If there is no "sunset" provision, the firm will never "own" the client and the work generated from that client. Ultimately, the work must become a "house" account. The firm will keep the client because the firm did good work. The lawyer bringing in the business should be compensated for the source, but only for the first few years. The size of this compensation, usually determined as a percentage of the revenue collected, differs for small firms and large firms.
But whatever the percentage, the firm needs to have a "sunset formula" providing for a decrease over a period of several years, perhaps three to five at the most. The lawyer can get a bonus for teaming--bringing in other lawyers to deal with the matter and the client. Using a similar formula, as the sunset bonus decreases the teaming bonus can increase. Thus, although the lawyer will still receive a bonus, the reason for the bonus compensation is different. This will impact the lawyer's perception of what is important and will affect the firm culture. Client services will improve as lawyers' perceptions change.
Measurement of Teaming
The compensation committee needs standards by which to judge whether partnering has actually occurred. There are several tests that the committee might employ. First, objectively review whether tasks were delegated and to what extent, and how many other lawyers were involved in the matter or litigation. Second, subjectively examine the lawyer's attitude toward partnering and mentoring. While no set of standards is arithmetically precise, these standards provide a good starting point for evaluating the "partnering performance" of lawyers within the firm.
A healthy organization that survives for many years (beyond just the current generation of lawyers in the firm) needs a cooperative environment. Law firms must change their focus from that of "eating what you kill" to "together, we can make it happen." One significant part of the effort to alter the firm's culture is to change the elements for which lawyers will be compensated.
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