How Mid-Sized Law Firms Stay Competitive and Attract the Best Attorneys

 

Some say mid-sized firms will eventually become extinct. With a shrinking market and growing competitors, the squeeze is definitely on, but they can still compete with the right tools.

Included in the small firm's tool chest should be a solid compensation formula that attracts and retains rainmakers and a marketing system that helps everyone to grow.

A primary concern with most compensation systems is how to pay everyone without offending anyone. No matter how you slice it, some lawyers will be paid more than others in most firms.

Whether the hierarchy in a firm is implied or real, there will be rainmakers and there will be grinders. The trick is to get a system that distributes money based on relative value without being complicated or controversial.

See the following articles for more information:

• Pay to Win—How to Make Your Law Firm's Compensation System an Asset
• Guide to Law Firm Associate Hiring, Training, and Promotion

The structure and culture within a firm can often be predicted by looking at its compensation system. While each has its own nuances, most systems fall into one of four types — and some are better than others when it comes to recruiting and retaining attorneys who perform. This article identifies four types of compensation systems, and some pros and cons of each.

1. Equality or Parity System

The most rudimentary compensation type is based on equality or "parity," which means "we all split the profits evenly."

This system usually grows from a partnership where two (or more) attorneys go into practice together, contribute to running the firm and bringing in clients, then divide up all profits evenly.

While such a system is attractive to an attorney desiring a small shop and an even piece of the pie, it will not attract multiple rainmakers.

Maintaining and recruiting attorneys at varying career levels becomes difficult with parity systems in place because, while they are straightforward on paper, they do not take into account how much each attorney is really contributing to the firm. When a firm divides profits evenly but each attorney is no longer contributing equally or needs time to "ramp up" the practice, a new system is necessary.

2. The 'Lock Step' System

The next type of compensation, the lock step system, often develops when parity systems are no longer working. This system brings into play the concept of seniority and enables the more seasoned lawyers (presumably) with a greater number of clients to be paid more than junior lawyers with fewer clients.

The term "lock step" comes from the idea that an attorney starts at one level and, as seniority grows, so does the compensation level and paycheck. It's based on preset formulas without specifically tracking individual performance.

Thus, if an attorney's contribution failed to increase — or even lessened — the firm is still locked into a high pay level for an unproductive attorney. More importantly, younger producers may feel under-compensated and may migrate elsewhere.

• See The Argument for Eliminating Lock-Step Partner Compensation for more information.

Lock step systems usually attract lawyers who appreciate a guaranteed progression in pay and seniority, but can also enable them to underperform over time. For these reasons, lock step systems are difficult to use as a recruiting tool and are becoming rare.

3. Subjective Compensation

A third category, subjective compensation, factors in the opinions and authority of a managing partner or committee when determining an attorney's pay.

There are many approaches within the subjective arena and many factors to consider when setting up these systems. Most subjective systems do have a hard data element involved. However, data is only part of the big picture and ultimately, the attorney's pay is determined by decision makers within the firm. This may be a tough pill for established rainmakers to swallow if they are not part of the decision-making process.

When it comes to recruiting, subjective systems may attract attorneys who respect or tolerate a "management structure." These systems are particularly useful to large firms that require a certain hierarchy to manage a massive group of "employees." Management is able to pick and choose who they'll hire and how they'll pay because they have plenty of work for talented grinding attorneys.

However, for rainmakers who like autonomy and who value pay based strictly on performance, subjective systems may not be attractive.

4. Objective Compensation

If a mid-sized firm has attorneys at varying levels of seniority and productivity, what kind of compensation works? It depends on the goals of the firm.

For most firms, the goal is to recruit and retain rainmakers as well as productive grinding attorneys. Keeping these people happy often means not messing with their paychecks. In this situation, the answer may be a purely objective system that relies strictly on a mathematical formula.

With objective compensation, attorneys know where they stand. A formula is established to track the amount of work brought in and performed by every attorney in the firm. Regardless of how the calculations are set up, they all rely on determining a mathematical value for each attorney and splitting the money based on those values.

Many productive attorneys gravitate to firms for their objective compensation systems. Such attorneys don't want to get caught up in the politics and management issues of firms with subjective systems. Instead, they want to originate/grind out the work and get paid accordingly.

It's easy to see where a mid-sized firm with an objective system is attractive for this type of attorney. The attorney would have the backing of a reasonably-sized firm and the autonomy to make what he is worth. Objective systems are common in plaintiffs' contingent fee firms, but relatively rare in mid-sized business firms. There is an advantage in the competition for rainmakers for those few firms that have objective systems.

One criticism of objective systems is that they don't measure or place value on other important skills such as cross-selling, training and firm management. One way to allow for management-related activities is to separate them from the standard origination and grinding numbers and pay attorneys a salary for performing such duties. When it comes to cross-selling and training, the firm's marketing function becomes important.

Marketing and Development

A relatively new trend for mid-sized and even small firms is the implementation of a formal marketing function. One of the marketing director's tasks is to cultivate valuable skills in attorneys, such as the ability to successfully interact with and sell their services to prospective clients. These intangible skills aren't measured under most compensation systems, but they are critical to the survival of the business.

Of greater importance though, is the marketing director's ability to offer strategic advice that's valuable to rainmakers who have been at the game for so long. A firm with the ability to continually look forward and offer direction to its attorneys is more attractive than a firm which relies on the rainmakers to have all the answers. Thus, the combination of an objective compensation system, attorney development, and strategic marketing can be just the right formula for some mid-sized firms.

Like most things in life, what works for one does not work for all. But every firm would agree that staying competitive depends upon attracting, developing and retaining quality attorneys.

About Harrison Barnes

Harrison Barnes is a prominent figure in the legal placement industry, known for his expertise in attorney placements and his extensive knowledge of the legal profession.

With over 25 years of experience, he has established himself as a leading voice in the field and has helped thousands of lawyers and law students find their ideal career paths.

Barnes is a former federal law clerk and associate at Quinn Emanuel and a graduate of the University of Chicago College and the University of Virginia Law School. He was a Rhodes Scholar Finalist at the University of Chicago and a member of the University of Virginia Law Review. Early in his legal career, he enrolled in Stanford Business School but dropped out because he missed legal recruiting too much.

Barnes' approach to the legal industry is rooted in his commitment to helping lawyers achieve their full potential. He believes that the key to success in the legal profession is to be proactive, persistent, and disciplined in one's approach to work and life. He encourages lawyers to take ownership of their careers and to focus on developing their skills and expertise in a way that aligns with their passions and interests.

One of how Barnes provides support to lawyers is through his writing. On his blog, HarrisonBarnes.com, and BCGSearch.com, he regularly shares his insights and advice on a range of topics related to the legal profession. Through his writing, he aims to empower lawyers to control their careers and make informed decisions about their professional development.

One of Barnes's fundamental philosophies in his writing is the importance of networking. He believes that networking is a critical component of career success and that it is essential for lawyers to establish relationships with others in their field. He encourages lawyers to attend events, join organizations, and connect with others in the legal community to build their professional networks.

Another central theme in Barnes' writing is the importance of personal and professional development. He believes that lawyers should continuously strive to improve themselves and develop their skills to succeed in their careers. He encourages lawyers to pursue ongoing education and training actively, read widely, and seek new opportunities for growth and development.

In addition to his work in the legal industry, Barnes is also a fitness and lifestyle enthusiast. He sees fitness and wellness as integral to his personal and professional development and encourages others to adopt a similar mindset. He starts his day at 4:00 am and dedicates several daily hours to running, weightlifting, and pursuing spiritual disciplines.

Finally, Barnes is a strong advocate for community service and giving back. He volunteers for the University of Chicago, where he is the former area chair of Los Angeles for the University of Chicago Admissions Office. He also serves as the President of the Young Presidents Organization's Century City Los Angeles Chapter, where he works to support and connect young business leaders.

In conclusion, Harrison Barnes is a visionary legal industry leader committed to helping lawyers achieve their full potential. Through his work at BCG Attorney Search, writing, and community involvement, he empowers lawyers to take control of their careers, develop their skills continuously, and lead fulfilling and successful lives. His philosophy of being proactive, persistent, and disciplined, combined with his focus on personal and professional development, makes him a valuable resource for anyone looking to succeed in the legal profession.

About BCG Attorney Search

BCG Attorney Search matches attorneys and law firms with unparalleled expertise and drive, while achieving results. Known globally for its success in locating and placing attorneys in law firms of all sizes, BCG Attorney Search has placed thousands of attorneys in law firms in thousands of different law firms around the country. Unlike other legal placement firms, BCG Attorney Search brings massive resources of over 150 employees to its placement efforts locating positions and opportunities its competitors simply cannot. Every legal recruiter at BCG Attorney Search is a former successful attorney who attended a top law school, worked in top law firms and brought massive drive and commitment to their work. BCG Attorney Search legal recruiters take your legal career seriously and understand attorneys. For more information, please visit www.BCGSearch.com.