Best Practice: Law Firm Associate Compensation - Incentives for Improving Production
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner for a 18-attorney insurance defense firm in Atlanta. We have 6 partners and 12 associates. Most of our associates have 10 years plus experience. They receive a salary plus discretionary bonus. We are having problems with six of the associates not reaching performance goals. (1,800 minimum billable hours per year.) While we have some attorneys billing 2,400+ hours per year - these six are not - some are billing 1,400 hours. What sort of incentive should we be thinking about to improve their performance?
A. The incentive is to get to continue their employment, maintain a full work schedule, progress to partnership, and to receive future pay raises and bonuses.
I know of some insurance defense firms that pay a billable hour bonus above a certain level. However, this approach often causes other problems such as milking hours in client files and overbilling often resulting in client dissatisfaction and potential loss of key clients. In addition, other factors are also important - quality of work, results obtained, teamwork, client relationships (minding) etc. that are often not considered and left out of the equation.
I would first see if you can determine the reasons behind the low hours of the six associates. Do they have enough work? Do they put in enough hours? Are they good time managers and good time keepers? If they have enough work - then meet with each of them - lay out the expectation of 1,800 hours and consequences for non-achievement. If they have issues with time management or time keeping impress upon them the importance of improving these skills - in the meantime they may have to simply put in the extra time to get in the hours.
Suggested consequences:
1. For those not meeting expectations. Manage and coach them in real time- but be firm about your expectations. You are paying them a salary for a certain level of expectations. If there is not enough work reduce their working hours and compensation. Consider production in future salary reviews and bonuses. Don't pay them an incentive bonus to perform the work you are already paying them to do.
2. For those exceeding expectations. Reward them with a discretionary bonus. But when advising them of the bonus advise them specifically what it is for and that is it a variable bonus and award for specific performance exceeding expectation.
Often motivation is more about getting the right people on the bus than incentive programs. See article on the topic below.
Click here for article on compensation and motivation
Click here for our blog on compensation
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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.