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Originally published in Texas Lawyer A Q&A Session with Mark Masson February 3, 2022 |
Ultimately, higher pay will come with higher, and possibly different types, of expectations. Firm leaders should be considering the new value talent can bring to the table–innovative legal approaches, use of technology for delivery and business generation, even recruiting more heavily from personal networks are all expectations that attorneys at every level should expect to come their way.
Since the COVID-19 pandemic began around two years ago, partner and leadership compensation at law firms has become more challenging than ever. To get it right, many firms need a mindset change around old, stuck partnership structures, says Mark Masson, lead partner in the professional services practice of Axiom Consulting Partners.
Masson asks: In the current environment, how can professional services firms make the most of who they have and compensate them appropriately, while always giving priority to delivering value to their clients,?
To address this question, Texas Lawyer spoke recently with Masson, an expert in partner performance and compensation, as well as growth strategy for law firms.
How has the COVID-19 pandemic affected or changed compensation at law firms?
The pandemic has resulted in significant turbulence in the pay markets—at the beginning, there was a deep downcycle with complete uncertainty and proactive pay cuts. This was followed by a rapid restoration of pre-COVID pay norms in 2020. In early 2021, as they quickly recovered, most firms retroactively made staff and partners alike whole, and then some. Given the dearth of [available] talent, 2021 has witnessed the rise and complete dominance of talent.
What does this mean for attorneys?
For the moment, this means qualified attorneys at any level will command a premium almost regardless of specialty or location. That said, the market will likely correct itself in the medium term for several reasons:
- The “Great Resignation” is likely more of a reconsideration of the environment, team, and conditions under which professionals want to practice—yes, some have pulled out of the legal industry altogether, but the likelihood is that between graduates and those who come back into the market on their own terms, talent availability and supply will increase.
- Client needs and demand will moderate over the medium term as well—uncertainty has driven unprecedented demand for legal advisory in a down macro-economy. This uncertainty will dissipate eventually, lowering the demand somewhat
- Expenses will come back as well—travel, entertainment, office operations all will curtail the free cash firms have to entice talent to join or stay.
Ultimately, higher pay will come with higher, and possibly different types, of expectations. Firm leaders should be considering the new value talent can bring to the table—innovative legal approaches, use of technology for delivery and business generation, even recruiting more heavily from personal networks are all expectations that attorneys at every level should expect to come their way.
What questions should law firm management be asking if the way they determine compensation hasn’t changed since before the pandemic?
Firms have relied for a very long time on simple and largely individual-based metrics: origination, working attorney fees, utilization. While it is difficult to argue with the effectiveness at times of abundance, leaning too heavily on these measures drives parochial behaviors that eventually lead to client churn, talent attrition, and costly lateral hiring.
We have seen companies struggle with the rising cost of talent and feel cornered and unable to focus on the behaviors and contributions that sustain and build firms over time. That’s why we’re heavily focused on helping companies embed collaboration to bring more of the firm’s capabilities together, developing a healthy partner pipeline, broadening and strengthening their own client relationships.
To bring about these effects, firm management should be combining “how” and “quality” measures along with “what” measures.
If origination, working fees, and utilization are “what” measures, leaders should also be closely focusing on:
- Quality of overall client relationship: number of services, breadth of network in firm, number of partners serving
- Collaboration: Credit sharing, passing off of relationships to newer partners, development of new service areas
- Partner pipeline: number promoted to partner who have led engagements for a given current partner, staff promotions on a partner’s team, and feedback as to how influential a partner has been to next level development.
Often these measures are pushed aside as too soft or too difficult to quantify. That is not the case—they do have impact and are certainly possible to incorporate as measures.
Collecting new data provides an additional option, and the use of analytics adds a level of sophistication in the extracting of insights from the data already resident in a firm’s current billing and finance system.
Focusing on these measures alongside traditional economic contribution expectations is a good way for leaders to ensure fair value for reward as the stakes in pay and competition for attorneys continue to rise.
Conversely, what should partners and associates be doing if the above is true?
Per Masson:
- It would seem so many are pulling out of their current firm at least to pause and reflect on the environment in which they want to practice.
- Focusing on the “how” and “quality” of their contributions, encouraging others to do so, and lobbying firm leadership to focus on it as well can quickly and dramatically change the culture.
- Regardless, a focus on collaboration, innovation, high-quality client relationships, and building up the next generation are the most critical of activities for effectively growing a firm over time.