What does your firm value in a partner? According to the results of consultant Edge International’s 2015 Global Partner Compensation System Survey, the average law firm in the United States considers “client origination” first and “firm work” last when determining partner compensation.

It is easy to see why managing partners can end up with smaller slices of the pie. If your managing partner has reduced his or her rainmaking activities and billable hours to assume administrative duties, you might consider using an alternative compensation model of objective and subjective criteria to determine the partner’s fair share.

Objective Criteria

To establish a basis for objective measures, work with your managing partner to set goals and allocate percentages to billable work and non-billable management responsibilities. How such allocations break down will likely depend on your firm’s values and strategic objectives, but they might include financial performance, as measured by per-partner performance or revenue growth and completion of specific projects, such as moving the firm to new office facilities or hiring a lateral partner.

Your managing partner may, for example, decide to devote 75% of his or her time to firm management and 25% to client work. In this case, the 25% would be evaluated the same as the client work of other partners and the remaining 75% would be subject to various — mostly subjective — measurements.

Subjective Measures

To ensure that your managing partner and compensation committee know which duties are considered part of the job and which ones might constitute superior performance, be sure to document the position’s basic responsibilities. (Note that these duties are likely to evolve over time, even over the course of a single performance period.)

Responsibilities might include:

• Overseeing business, marketing and public relations initiatives;
• Managing internal operations, including such functions as accounting and HR;
• Ensuring client satisfaction and resolving disputes;
• Enforcing fraud controls and ethics policies; and
• Promoting good firm morale and productive relationships between attorneys and staff.

To help evaluate your managing partner’s performance of regular duties and to identify extraordinary performance, ask the partner to perform a self-evaluation. Also, solicit feedback from those who collaborate with or have been affected by the partner’s work, such as attorneys, support staff, clients, vendors and outside advisors.

The Best Formula

As with all attorney compensation systems, rewarding managing partners is an imperfect art. If your managing partner or other partners are dissatisfied with your current formula and you are not sure how to implement one that addresses their concerns, talk with your financial advisor.

For best practices on partner compensation models, contact Kal Shiner at 312.670.7444. Visit ORBA.com to learn more about our Law Firms and Lawyers Group.