“However, lockstep has a further issue to deal with. How do you reward young high fliers? People who go all out, and succeed. They are unlikely to be satisfied with being told that in a few years time, when they are at the top of the lockstep, they will reap the financial benefits of their hard work.”

The point you raise is an important one.  One answer is to implement an innovative bonus system, that responds promptly to the success of the high flier, with a gift - say a trip for two for the associate and his/her spouse/partner to some lovely resort destination, and the time off to go there! This kind of bonus, which can be delivered by the firm immediately following the success is relatively inexpensive but has a high-impact for the lawyer and his/her significant other.  Triggers for such a bonus could include bringing in a big new client, having a significant win for a client, cross-selling an existing client, or doing an outstanding job of leading a practice group.

This idea originated with Fraser Milner Casgrain’s Adam Pekarsky - via a talk he gave for the Legal Marketing Association Vancouver in 2006, and was recently implemented by a local Vancouver firm.

The firm, as an entity, has a revenue target, a profit target and a client satisfaction target for the forthcoming financial year. The firm-wide revenue target contains 2 figures; a relatively low one which amounts to breakeven plus partners’ “salary”, and a high one which reflects what the firm should do if each practice groups performs in the way expected.

The “global” high revenue, profit and satisfaction targets are broken down into targets for each practice groups. Partners’ compensation was arranged as follows:

Each partner receives a set “salary” (in fact, monthly drawings) to pay mortgage, school fees etc. This amounts to approx 40% of their expected annual income, and is based on the firm always achieving, as a minimum, the breakeven target.

Compensation above the set “salary” is based on the performance of each practice group. This is not merely a revenue target, but also includes profitability and client satisfaction. To earn a quarterly bonus, the practice group must achieve its targets in all three areas. If the firm has a spectacular year, so that the firm wide stretch target is exceeded, the excess revenue is split between those practice groups which over achieved, by the proportion they overachieved.

The basis of this scheme is to bring partners’ compensation into alignment with the firm’s strategic objectives. It is all very well to talk about being collegiate and teamwork, but if the compensation system does not reward this type of behaviour, then the concept will remain just fine words.

The compensation system needs to be simple, transparent, and applied evenly across the board. No special pleading for exceptional circumstances. I should add that the above scheme is lifted from the scheme used in a major UK law firm, which moved to it from strict lockstep.

You mention one benefit of lockstep is that peer pressure forces the managing partner to deal with under-performing partners. This is absolutely true. However, lockstep has a further issue to deal with. How do you reward young high fliers? People who go all out, and succeed. They are unlikely to be satisfied with being told that in a few years time, when they are at the top of the lockstep, they will reap the financial benefits of their hard work.

The problems with the above system are twofold (assuming, of course, the partners agree to amend in this way).

1. Do the Practice Group Leaders know how to manage professionals? Many are excellent at managing their own files, and at managing money, but managing people is a different animal. Some form of coaching is usually advisable at Group Leader level.

2. Once a Practice Group earns its bonus, how is that applied to all group members? In my experience, this tends to be the most contentious of the problems. Should there be uniformity across the firm, or is it better for one group to reward in one way, and another in a different way? Who exactly shares in the bonus pool; just the partners, all fee earners, or every one including support staff? There is no obviously correct answer to this, and each firm needs to feel its own way. For myself, I would always suggest that the bulk of the bonus should go to the partners, as they carry all the risk, and it is they also who have the ability to drive the scheme forward, or let it lie.