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Partner compensation isn’t taught in law schools, so it’s not surprising that law firms struggle with the issue. Nor is it surprising that law firm leaders constantly invent new analytics, adopt models they have heard are successful in other firms, or even occasionally just throw up their hands and declare that “there is no perfect system!”
Compensation mechanics are often assumed to be self-evident — supposedly, people will do what you pay them to do — and so many leaders assume that developing a successful compensation plan is easy. But the truth is that human motivation (and lawyer motivation) is much more complicated, and many common assumptions about how to motivate and incentivize behavior are actually wrong.
The following are six important lessons about compensation approaches that create the greatest ongoing problems for law firms.