Ball, of DLB Consultants Inc. in
was part of a panel on compensation issues for law firm leaders held during a
recent Canadian Bar Association conference in
"Management and leadership are of significant value because they can have an impact on the firm overall," Ball said, adding that the managing partner's ability to generate new business for the firm is of high value "because it is incremental revenue which continues and provides for the sustenance of the firm."
While the managing partners in attendance agreed with Ball, a survey Sirkin conducted prior to the panel showed that most felt their opinions are not shared within their own firms. For example, when asked how a managing partner's performance is currently judged versus how it should be judged, most respondents said more emphasis should be placed on firm growth and reputation than is currently the case.
According to Sirkin's survey, most managing partners do not have separate compensation plans from the other partners in the firm. They have no financial guarantees during their tenure as managing partner, do not receive an increase in their equity share of the firm nor do they have any employment guarantees after their term as managing partner is finished. Half those surveyed said they would return to active practice at the same level as they did before becoming managing partner.
Stock would remedy that situation by providing one year of income protection to the managing partner following his term in office.
Sirkin's survey, which had 34 respondents representing small law firms with fewer than 10 lawyers to large firms with more than 100, showed that managing partners increasingly want to be seen as the chief executive officer of the firm rather than a practising lawyer who happens to have some extra responsibilities.
Stock said in order to compensate managing partners for their work, the work itself needs to be more specifically defined, measurable, and achievable given the time, talent, and resources available.
He said managing partners should clear their agendas of tasks that should be delegated to others within the firm or outsourced. The manager can then focus on a maximum of seven or eight objectives that carry specific price tags and deadlines with them. Stock said law firms should look to their corporate clients for models of how to compensate leadership.
"Corporate people are paid incentives to accomplish financial goals," he said adding there is no reason law firms cannot behave the same way.
However, Stock cautioned against tying a manager's compensation too closely to the firm's bottom line. He said only 50 per cent of a managing partner's compensation should be tied to how well the firm is doing financially and the rest should be tied to client satisfaction and partner morale.
According to Stock, it remains the job of the compensation committee to evaluate the success of the chairman or managing partner of the firm. However, he said it is up to the chairman and managing partner to evaluate the various group leaders.
Once the managing partner has a specific set of goals in place, that model can also be used to determine how other members of the firm are compensated, said Ball. Instead of having people progress through several levels in lock step, as is currently the case at most firms, each partner should have his or her own individual business plan (IBP).
Ball said all IBPs should:
· align with the firm's overall strategy;
· be part of the planning and budgeting process;
· communicate the performance criteria to individuals;
· logically lead to fair allocation; and
· be administratively easy to use.
Ball added that business plans should cover and set goals for six key categories: commercial (fees), time management, client relationship (maintaining relationships and identifying new clients), marketing including publishing and public speaking, professional development and management (committees).
Once the IBP is in place, Ball said, movement of lawyers from one level in a firm to a higher level should be based on how well they meet the goals set out in the plan.
The discussion ended with each panelist giving his top two tips for managing partners. Ball and Sirkin listed selection as their first priority. Both said managing partners should be selected based on their capabilities and willingness to do the job. In addition, Sirkin said partners should recognize that they are choosing an individual who has little leadership training, so it should be provided. Ball added that partners should realize that managing a firm is a full-time job.
"It takes all your resources, all your working hours to do the job well. It can't be done part-time."
Stock advised, "Don't do it all yourself. Build a team who will work with you. Communicate effectively."
Finally, Sirkin said current law firm culture doesn't value leadership and strategic planning. He said this attitude "must be changed from the top down and from the bottom up."