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Legal Talent & Inclusion

Reimagining lawyer compensation models: Lessons from the Law Firm COO & CFO Forum

Gregg Wirth  Content Manager / Thomson Reuters Institute / Thomson Reuters

· 5 minute read

Gregg Wirth  Content Manager / Thomson Reuters Institute / Thomson Reuters

· 5 minute read

In the post-pandemic era, how law firms manage their talent has become an area of intense focus and a determining factor in how firms can define and differentiate themselves going forward

NEW YORK — Hybrid working models, recalculated office strategy, increased associate attrition, and worries among reimagining lawyers over career trajectory, professional purpose, and work-life balance all play a part in keeping talent management top of mind for many law firm leaders.

Yet arguably one of the most long-lived of these conversations — over lawyer compensation — has itself become a knotty problem that has veered from the pragmatic question of what each firm can afford to pay, to what compensation model makes sense for a law firm given its commitments on culture and value.

At the recent 21st Annual Law Firm COO & CFO Forum hosted by the Thomson Reuters Institute, a key panel, The New Romantics: Reimagining Purpose & Compensation in Modern Legal Services, discussed the question of compensation in depth, touching on issues of compensation structure, non-compensation benefits, lateral integration, and investment in staff.

Offering a bit of history, panelist Janet Stanton, a Partner at Adam Smith, Esq., noted that law firms generally got good marks on how they handled the pandemic and its disruption on their business. “Of course, there were issues, and the pandemic seem to have exacerbated some trends that were already in the market,” Stanton said, adding that it was particularly apparent in surveys that asked why lawyers might leave their current firms. Surprisingly, she said, compensation was a distant fourth among the reasons, behind such issues as work/life balance and flexibility.

Structuring compensation

Panel moderator Jeffrey Connor, Chief Financial Officer of McGuireWoods, suggested that how law firms structured their compensation models may be changing as firms try to transition to new ways of retaining and promoting key talent.

Dwight Floyd, panelist and Chief Operating Officer at Eversheds Sutherland (US), said there’s a lot that goes into figuring out what goes into a compensation review, and it’s constantly being re-evaluated as the market evolves. “It’s always under review,” Floyd said. “We’re always trying to figure out better ways to do that and always listening to partners in terms of what they think is important. So we can take different things into account in different ways.”

Panelist William M. Washington III, Chief Financial Officer at Baker McKenzie, agreed, adding that models and priorities can differ greatly depending on where firms are in the market. “For example, our primary goal is to be competitive in every market in which we compete,” Washington said. “And I actually find the US market to be one of the easier markets where we’re able to make sure that we just stay at top in everything that we do.”

It is also important for firms to develop and communicate their non-compensation advantages to potential new hires or laterals, the panel offered, because surveys show those factors can be strong lures and retention mechanisms for top talent. Panelist Shonette Gaston, Chief Operating Officer at Blank Rome, for example, explained that how law firms handle important non-compensation issues like diversity, career advancement, work flexibility, and other advantages has come to matter more than strictly how much money a firm’s lawyers make.

Gaston said she had just returned from a three-day diversity summit the firm hosted for lawyers, staff, and clients that included talk around the firm’s key diversity initiatives, such as going to underrepresented schools and building a program to offer students a chance at becoming a summer associate at the firm. “We have affinity groups, we have training, and we try to make connections when we can,” Gaston added, stressing that this type of integration was critical for new associates and lateral hires, especially those working in hybrid work situations. “We make sure that we’re meeting and spending time with them, and opening the doors for the programs that we have at the firm for them.”

Integration and investment questions

Gaston and other panelists pointed out that hybrid work environment is very different, especially in terms of how new lawyers are integrated. “We still try to make sure that they’re always included in committees, we ask them to participate by Zoom or Teams, and we do ask that they come to their office,” she said. “In fact, we assign everybody to an office, and then each lateral has mentors that are assigned to them through that office.”

Floyd, of Eversheds Sutherland, agreed that remote working has changed the way firms are handling new lawyer integration. “There’s a tremendous number of people who’ve joined our firm over the last two-and-a-half years who have not had the same kind of introduction and integration that most everybody else has had,” Floyd said. “And the jury’s going to be out for a while on what kind of effect that has had.”

Adding another wrinkle to the compensation debate, McGuireWoods’ Connor noted that with non-lawyer professionals being in such high demand, law firms are beginning to change the way they are staffed — perhaps not in the overall ratio of lawyers-to-staff, but in the specific areas in which firms are investing.

Laura E. Long, Chief Operating Officer & Chief Financial Officer at Hanson Bridgett, concurred, noting that her firm, for example, has made a conscious investment in professionals to fill newer roles like business development leaders and pricing experts. “We’re also doing a lot more around project management, and I’ve gotten them to support me in the work that I do, both on the financial side and in operations for a number of years,” Long said, adding that now the firm is starting to transition those duties to its paralegals to allow them to better support the attorneys and the client teams.

“And that’s been really successful,” Long said. “Paralegals are seeing the opportunities for them, and the attorneys are really seeing the value of that support.”

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