Pay to Win—How to Make Your Law Firm's Compensation System an Asset

Most firms use one of three types of compensation systems—and usually, none of them fits the bill. Traditional lockstep compensation works well under very limited circumstances and fails dramatically the rest of the time. To make such a system work as a strategic tool, firms need institutional clients and practices, a lucrative market, agreed-upon cultural expectations, and the departures of those who are unprepared to meet those expectations. The firm also should be relatively insulated from lateral comings and goings. As the legal market becomes more tumultuous, it will be the rare firm that will be able to meet these conditions.

See also: The second generic approach is a formula system. This uses statistics to set compensation and generally focuses on personal productivity, such as hours billed or dollars collected, and business origination. These systems are often considered to be fair, but they are never strategic. They reward a limited number of factors in a rigid fashion. There is no room for management-driven rewards, flexibility, or strategic investment.