The ABCs of Attorney Compensation: An Inside Peek
Is your attorney compensation model outdated?
If it rewards individual behavior, encourages silo practices and discourages collaboration, it probably is.
“Outdated compensation models put the lawyer at direct odds with their clients’ interests,” writes Brenda Barnes, CPA, MBA and co-author of RESPECT: An Insight to Attorney Compensation Plans. “Creating a new compensation plan for the modern law firm will better align lawyer and firm interests and lawyer and client interests. Modern compensation plans are especially important in recruiting and retaining the next generation of lawyers.”
Order a copy of RESPECT: An Insight to Attorney Compensation Plans.
Below is a sneak preview of how the book defines the basic attorney compensation plan terms.
Everyone makes mistakes. When it happens to you, Lawyers Mutual has your back. For nearly half a century, Lawyers Mutual has been the smart choice for professional liability coverage for North Carolina attorneys. We cover the state from Murphy to Manteo. We insure large firms, solo practitioners and everyone in between. We help new lawyers enter the profession with confidence, and we help keep seasoned veterans safe and successful. The numbers speak for themselves. Lawyers Mutual has been in business since 1977, making us the only insurance carrier to provide continuous protection over that period. Today we insure more than 8000 lawyers in North Carolina. Most of them will stick with us until they retire. Why? Because they know we are here for them today and will be here tomorrow, bringing protection and peace of mind in turbulent times. Visit our website, give us a call, or ask a colleague why Lawyers Mutual is the smart choice for liability coverage.
Sneak Preview of RESPECT: An Insight into Attorney Compensation Plans
Below are some key definitions from RESPECT: An Insight to Attorney Compensation Plans, by Brenda Barnes and Camille Stell (reprinted with permission of the authors):
Equity partners. Equity partners are law firm owners, and their pay is from their share of the firm’s profits in a given year. Some law firm formation includes shareholders rather than partners.
Non-equity partners. Non-equity partners are not owners, and they are not paid a salary. This is a distinction that is usually not visible outside the law firm.
Equal partnerships. This system is typically used by small law firms. The partners agree to share in the profits equally or equally within defined groups.
Incentive-based systems. In the 1940s, the Boston law firm Hale and Dorr is said to have created the first incentive-based compensation plan, The firm identified lawyers in three categories. Finder – The lawyer as rainmaker who brings in the client. Minder – The lawyer who is responsible for managing the client relationship. Grinder – The lawyer, often the associate, who is responsible for doing the client work.
Eat-What-You-Kill. This system is common in small law firms. These firms sometimes operate as a collective of solo lawyers who share common space and employees with each lawyer paying their share of the overhead cost.
Lockstep Systems. The Cravath System relied on recruiting the best law school graduates, training those associates by the best lawyers, and compensating them well. This was at a time when most law firm associates were only paid for work they brought to the law firm. Cravath’s idea resulted in law school graduates who became excellent lawyers and as they rose through the ranks, they would remain loyal to the firm that had invested in them. This system was adopted by most Biglaw firms.
Modified Lockstep Systems. Salaries are not capped by seniority, but merit contributions allow firms to offer top salaries.
SOURCE: RESPECT – An Insight to Attorney Compensation Plans by Brenda Barnes and Camille Stell - Lawyers Mutual Insurance Company (lawyersmutualnc.com)
Why choose Lawyers Mutual for your financial protection? One reason is experience. Lawyers Mutual has been in business since 1977 and insures more than 8000 lawyers in North Carolina. We’ve been providing continuous protection from professional liability to NC lawyers longer than any other insurance company. Another reason is stability. The company’s financial strength is absolute. Since 1999, Lawyers Mutual has paid dividends fourteen times, with more than $8 million dollars returned to policyholders since 2011. Want even more reasons? Visit our website, give us a call, or ask a colleague why Lawyers Mutual is the smart choice for liability coverage.