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Law firm partners face the dilemma of reconciling the three R’s of law practice management � recruitment, retention, and remuneration. The structure of a firm’s compensation system for partners has a significant impact on the interaction between partners and associates. The system can affect whether partners and associates work together as a team or pull apart with an “us against them” mentality; whether the partners are dedicated to and play an active role in achieving associate development and satisfaction; whether the firm can attract and keep highly qualified associates; and whether the firm can maximize its potential to be productive and profitable. Adjusting the way the firm compensates its partners can go a long way toward improving its performance on these issues. Given the reality that a firm can absorb only so many associates into its partnership each year, and that attrition is necessary and desirable, what is the incentive for partners to do anything about associate satisfaction, especially at the risk of losing some of their share of the partnership pie? It is another “R” that is at stake here: the firm’s reputation. If the firm is known for being uncaring or hostile to its associates’ needs and, as a result, unable to retain them, then the firm’s ability to recruit its first choice associates will suffer. Eventually, this will have a negative impact on the partners’ remuneration. WHAT DO ASSOCIATES WANT? Associates are particularly concerned about receiving training and mentoring and obtaining career-building assignments. When these essentials are in short supply or altogether lacking, associates become dissatisfied. The firm becomes a steppingstone to a better opportunity. Often, disaffected associates stick with a firm for only two years, the point when they are becoming most marketable to another firm and most profitable to their current firm. Then it is too late to win them back. Securing loyalty from associates must start from the moment they walk through the door on their first day at the firm. Many firms welcome their associates with orientation programs and then do not go far beyond those programs, plus CLE and perhaps an annual review, to provide one-to-one training or mentoring. When firms assign a mentor to each associate, work often intrudes, and associates meet with their mentors once, twice, or not at all. Training and mentoring associates is a time-consuming activity. Law firm Web sites often describe, in glowing terms, a firm’s commitment to its associates. In many instances, this is simply lip service, while the firm adopts a “sink or swim” approach. Whether it happens intentionally or through neglect, the associates are left to intuit what is expected of them. The partners rest on the theory that “the best and brightest” will be the survivors. The problem with relying on this theory is that all associates, including “the best and brightest,” take longer to reach their full potential. Effective training and mentoring requires detailed feedback as to why, for example, a partner made particular changes to a draft prepared by an associate. Similarly, upon returning from a client meeting or court, partners should explain what they did, and why. An aspect of associate training that is frequently ignored is business development. Firms rarely provide seminars on how to network. Associates, under pressure to fulfill their billable hours requirements, have little time or opportunity to engage in nonbillable networking activities that enable them to meet individuals who could eventually become clients. Another issue that leads to associate dissatisfaction is the way that assignments are given out. In one scenario, some associates are given plum assignments and others are usually stuck with grunt work. In another, some associates are burdened with too much work, while others scramble just to keep busy. In a third, all associates are required to hunt for work. Each case shows a lack of management and control over associate development. To be efficient and productive, a firm must have a fair way of distributing assignments. Disgruntled associates spread the word. When a firm alienates the associates it already has on board, it will have difficulty in recruiting its first choices down the road. CONNECTING PROBLEM TO CAUSE These problems can often be traced to the firm’s compensation system. In general, partner income tends to correlate reasonably well with partner billing. The more hours of their own time, and the more hours of other attorneys’ time, that partners bill to their clients, the higher the partners’ income. The compensation system of many law firms generates conflicts between the collective interest in devoting quality partner time to associate career development and the interests of individual partners in maximizing their billable hours and, hence, their individual incomes. Training associates is long-term, with diffuse and unmeasurable benefits for the individual partner. This gives rise to what economists call the “free rider” problem. The “free rider” says: If other partners in the firm train associates and I do not, I still receive the full benefits of their training, and I also get the benefit of making more money by spending all my time pursuing my own self-interests. Similarly, if I can have associates who are trained by other partners working as many hours as possible on my clients’ matters, I will earn more than if I encourage them to spend time educating themselves or to lead more balanced lives. Let them think about quality of life on some other partner’s time and dime. Thus, I have every incentive to enjoy a free ride on the associate training efforts of my partners. If most partners in the firm think like this self-absorbed, but economically rational, partner does, there will be relatively little quality training provided by anyone. Unfortunately, unless the firm compensates partners in a tangible, discernible way for making significant efforts to train and mentor associates, most partners are unlikely to do so. The short-run individual compensation incentives will divert the partner from pursuing the firm’s long-run interest. INCORPORATING REAL INCENTIVES It is not easy for firms to create sufficiently strong incentives for partners to train associates. One problem is measuring the quality of training that each partner provides. Some firms have successfully tried “360° reviews,” in which associates assess the training that they receive from various partners. This technique has been slow to gain acceptance out of concern that associates’ evaluations may be unduly influenced by the fear of partners’ retribution for truthful, but uncomplimentary, assessments. On the other hand, with no way to evaluate the nature and value of the training that partners provide, merely regaling associates with war stories over lunch could be characterized as training. Incorporating tangible, effective incentives for training and mentoring means changing the firm’s compensation system. But a number of factors militate against such change. Sheer inertia is the most common deterrent. Partners are busy with other activities and disinterested in tinkering with a training system that works somewhat, even if it could work much better. Change can provoke controversy and pit partners against each other. In addition, no one wants to risk adversely affecting his or her income by taking time to overhaul the compensation system. If it is difficult to design a compensation system that clearly rewards, and thus encourages, greater billing effort, it is even more difficult to design one that inspires making contributions that are problematic to quantify, such as the training and mentoring of associates. There are two logical approaches that a firm can pursue: (1) benchmarking or target setting, or (2) linking specific rewards to particular results. There are variations in the way that each of these can be implemented. Regardless, the principle is the same: compensate partners for the long-term benefits that accrue to the firm when nonbillable time is devoted to one-to-one training and mentoring of associates. Under the first approach, the firm can establish targets for associate training and mentoring in the same way as it sets billable hour targets. For example, a firm could require a range of 50 to 100 hours per partner per year for associate training and mentoring. These activities must be substantive � simply inviting an associate to join social lunches or to tag along to courts should not count. The partner could also be expected to keep a record of which associates had been trained through which activities. On a spot check basis, the firm could ask the associates to confirm that such training had been provided, and to provide an informal evaluation of the value of this training. What can the firm do with partners who fall short of this minimum standard? One possible response is to withhold a percentage of the partner’s total compensation, or a flat dollar amount. It must be a significant amount that will cause partners to think twice about shirking their commitment to associates. As an alternative, the compensation committee can simply take into account the partner’s failure to comply on an ad hoc basis. The weakness of this method is that the partner will never know how much it cost. Worse, the partner may be inclined to assume that the reduction in compensation was trivial, and therefore, a small cost in return for the opportunity to earn considerably more through billable activity. The second approach, awarding specific bonus compensation to partners who provide better than average training to associates, can be used either alone or in concert with setting targets. To make this approach work, associates must have the opportunity to assess the quality and quantity of training that the partners provide to them. The compensation committee can reward partners who consistently achieve high ratings. A change in the reward mix of a firm’s compensation system should be introduced gradually, with the results monitored closely. Clearly, there are several creative ways to provide tangible compensation to partners for making the effort to train and mentor associates. The way to overcome the “free rider” problem is to end the free ride. Over time, the corporate culture will change to the greater benefit of the associates and, therefore, to the greater benefit of the firm. The three R’s � recruitment, retention, and remuneration � and the interests of partners and associates will be in alignment. Linda E. Laufer, a former practicing attorney in New York City and now a career consultant to attorneys individually or through outplacement services, writes the “Crossroads” column for NYLawyer.com, an affiliate of the New York Law Journal Magazine. Her e-mail address is [email protected]. Buff Levinson is president of the Law Office Consultant, a firm providing services including compensation system design and implementation, productivity enhancement, profitability improvement, and marketing. She can be reached at [email protected] or through her firm’s Web site at www.tloc.ca. This article previously appeared in the American Lawyer Media newspaper the New York Law Journal.

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