What To Do When the Fighting Over Comp Starts
When financial pressures build, firm management should give care to values and partner emotions.
November 01, 2017 at 01:54 PM
6 minute read
We know it's coming. While Big Law on average may eke out growth in profitability this year, about half of firms will see a decline. For many, this will be the second down year in a row. For even more firms, momentum in profitability growth has been lost and increases in profit per equity partner (PPP) are not keeping pace with inflation.
When we close the books for 2017, we know what to expect: partners will start to complain bitterly about inequities they perceive in the compensation system. Senior partners may not complain directly about their compensation, but they will argue forcefully that younger partners in their practice areas are being treated unfairly relative to others. They'll share these views with their younger colleagues thereby fomenting discontent. Partners will threaten, overtly and by innuendo, to leave. Partners will lose perspective, seeing others' behaviors as evidence of intrinsic malice rather then as reactions to circumstances. Divisions will emerge, factions form, and dysfunction abound.
What should leaders do? Many will take substantive steps to improve financial performance—trimming back on unproven growth initiatives, outplacing underperformers, cutting costs. While this is necessary, it's just a first step. Not only do these actions raise anxiety, thereby fanning the flames started by lowered profitability, but these substantive changes address only one side of a two-sided challenge.
For a partner to succeed at an elite law firm they need to do just two things: make money and get along. The 'make money' side is well understood—firms can't afford to carry free riders. The 'get along' side is less well appreciated. Partners work as hard as they do, and stay at firms the way they do, because of the mutual respect and affection they enjoy with their colleagues. Just as it is for individual partners, so is it for partnerships as a whole: to function, a partnership must both make money and get along.
The two aspects of partnership performance reinforce each other in a virtuous loop. While it's easy to see that making money helps people get along (rising comp can salve a host of ills), the reverse is also true: getting along helps partnerships make money. When partners get along not only is less time lost to internal bickering but they also coach and mentor each other, enabling each to become the best possible version of themselves. They collaborate better, integrating their specialties in offerings that are a win-win: clients get more-efficient delivery of higher-value solutions; firms develop more loyal and lucrative clients. Getting along is a prerequisite to this truly 'smart' collaboration, i.e. partners working together in ways that extend beyond collegiality to deliver the financial and strategic benefits that have been proven to result.
So how does a firm leader promote getting along? Interventions with individual partners can help and certainly sitting down with disruptive senior partners individually is critical—it's vital they have an opportunity to vent their frustrations to leadership directly and openly, and to feel they've been heard, so that that they don't resort to the unproductive carping and fomenting of discontent.
But a broader, partnership-wide, structured conversation may help too. This allows partners to talk directly together about behaviors under stress, which is more productive than their hearing exhortations from leadership. The conversation can act as a timely reminder of what partners enjoy about their work and their colleagues, and of their common values and shared culture.
Here's a strawman of how such a partnership-wide conversation might be structured, (obviously, it has to be customized to each firm's particular circumstances). As a preparatory step, firm leaders would constitute a steering committee of mostly younger, high-potential, partners. Their charter is to foster a discussion of how partners can support each other productively as the firm weathers difficult market conditions, and of what things partners can do to stave off the centrifugal forces that can become unleashed when firms go through difficult financial times.
The approach would be to have two rounds of group discussions in each of the firm's offices, (with each discussion followed by a group dinner). The first round would center on partners responding to the open-ended questions of the steering committee's charter. While it is critical that the effort be led by partners, it may help to have the discussions facilitated by in-house support staff personnel—firms increasingly have very able strategy, planning, and practice support personnel well-versed in facilitating such group discussions. A scribe should record each group's emergent (without attribution), and these summaries should be made available on-line for any partner interested in reading them.
The second round of discussions would play back what was learned from the first round, structured into an accessible format—for example: principles, encouraged behaviors, and specifics for partners to start doing, do more of, and to stop doing. The discussions would serve to establish some common language around the issues, to communicate with partners the actions that are being asked of them by their fellow partners, to implicitly solicit group buy-in to the suggestions (effectively a set of ground rules), and to thereby pave their way for certain positive behaviors to become accepted norms (and others to be prohibited). The discussions likely will identify further information that partners feel they would benefit from, e.g. understanding better the expertise of certain practices or offices, identifying other partners with overlapping business development interests, accessing business development, pricing or project management support. These could be addressed through subsequent follow-on discussions and initiatives across the offices, practices, and client teams.
The vast majority of partners practicing at elite firms today are essentially decent people with a strong, albeit unstated, desire to affiliate with their peers. Wise leaders do well to address this warmer side of their partners' personas. If nothing else, you remind people of why they're together, you allow the emotions to vent, you remind partners of their obligations to each other and of the paramount necessity of good behavior at bad times. More fundamentally, you demonstrate that you're capable of listening and that you know there's more to it than money.
Hugh A. Simons, Ph.D., is an ALM Intelligence Fellow. He is a former senior partner, executive committee member and chief financial officer at The Boston Consulting Group and the former chief operating officer at Ropes & Gray. The ALM Intelligence Fellows Program is a collaboration between ALM and leading thought leaders in the legal industry. The program aims to foster the development of data-driven research on key topics related to the business of law.
Heidi K. Gardner, Ph.D., is a distinguished fellow at Harvard Law School's Center on the Legal Profession and teaches in the school's executive education programs for law firm partners. Her book, “Smart Collaboration: How Professionals and Their Firms Succeed by Breaking Down Silos,” was published earlier this year.
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