Lawyer Compensation and Business Development: Traditions, Trends and Insights for Legal Marketers

Your firm’s compensation system can be a prime motivator for lawyers’ marketing and business development (BD) efforts. For both micro-level activities, such as individual lawyer coaching, and macro-level activities like practice group planning or cross-selling initiatives, it’s paramount for legal marketers to understand their firms’ compensation structures — and what exactly they reward.

Common Marketing Metrics

Most partner compensation systems heavily reward origination of work, which encourages marketing and BD activity. While origination-based systems can encourage personal marketing BD, they don’t always incentivize firm-oriented activities or “hunting in packs.” Many firms today are encouraging collaboration in both business development and cross-servicing existing work, requiring firms to rethink their compensation metrics.

Firms are increasingly focused on metrics measuring collaboration and recognizing the various roles partners play in developing and expanding work. These can include proliferation credit, client management and matter management, among others.

Additionally, firms that encourage partners and associates to make investments of time in the firm and their career in addition to billable work can create an atmosphere where marketing and BD activities are expected at all levels of the firm. Establishing targets for investment time, planning for how that time will be used and accountability at the end of the year maintains focus on the full range of activities lawyers contribute to the firm.

Internal Tensions

There is tension in firms between rewarding development of and doing the work. Firms with large institutional client relationships may put more of a premium on doing the work. Over time, this may de-emphasize the importance of BD activities, particularly if the activities are not paired with the investment time concept.

On the other end of the spectrum, systems that focus on rewarding only the first-touch originator and don’t recognize the contributions of others to developing and maintaining the work can cause frustration for those partners and may disincentivize them from making investments in building clients where others get the credit.

New Ways to Motivate Marketing

To drive more marketing and BD activity, some firms are trying new things, including:

• Tying bonuses explicitly to marketing and BD contributions and successes.
• Asking partners, in either pre-compensation interviews or self-assessment memos, to describe where others helped them with BD and where they helped others.
• Not distributing origination statistics during the year to decrease internal competitiveness and encourage collaboration.
• Holding quarterly or semiannual check-in meetings with lawyers to discuss progress against BD targets.
• Including feedback from the marketing team as part of the performance evaluation process.

What’s Next for Partner Compensation

As we look ahead, we expect to see more firms tweaking their compensation approaches with a focus on encouraging collaboration, including:

• Continued movement away from “first touch” origination, so origination/revenue credits recognize the reason a client is with the firm today.
• More clarity and supporting guidelines about how origination/revenue credits should be allocated among partners, with active oversight by leadership to ensure credits are being allocated fairly and consistently.
• More clarity on how both quantitative and qualitative factors are factored into the compensation decision. Some firms are creating a matrix that looks at contributions across key performance areas, including client development, and what contributions are required at different levels of the compensation ladder.

Actions for Legal Marketers

Given the premium most firms place on originations, legal marketers can be a great asset to lawyers who want to increase or maximize their compensation. This, in turn, helps the firm as a whole: a rising tide generally lifts all boats.

The key is to show how you can proactively contribute to increasing business for both lawyers and the firm. This might include:

• Providing proactive insights on specific clients or the industry in which the client operates that could result in an opportunity to help the client see around corners and expand the work.
• Using client interviews to establish a plan to build the relationship.
• Proactively identifying areas where different practices in the firm might be able to provide insight to a partner’s client and make those connections.
• Working with associates to develop “path to partner” marketing plans.

 

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