It's Bonus Time!
REWARDING TOP PERFORMERS WITH
INNOVATIVE INCENTIVE PROGRAMS
BY STEVEN T. TAYLOR. Go ahead. Just try to talk to law firm leaders about
money these days, especially associate compensation. You may not
get very far as they tend to be a bit reticent, to say the least. But really,
can you blame them? After all, huge headlines in the legal press
and blogosphere shout out the bad news that law firms are lowering
associates' base pay and freezing bonus packages. Often critics de-
pict these moves as being not just lean but downright mean. So some
firm leaders don't want to be associated with anything surrounding
this issue for fear of having their partnerships' reputations tarnished.
"Collectively, bonuses and compensa- that have occurred this year, many
tion is tinder waiting for gasoline to be partners feel that associates should
poured on it and a match to strike it, be happy simply to be employed.
and I don't want to be either the gas or "The bonus that many firm lead-
the match;' says a chair of a major na- ers give their people these days seems
tionallaw firm, who asked for anonym- to be that their associates still have
ity. "Law firms are businesses and we're jobs: 'Congratulations, you've been
doing what we have to do. And yet firms awarded another week of employ-
and their leaders are vilified and im- ment;" says Jonathan Lindsey, a
proper motives are imputed to them. I principal at Major, Lindsey & Africa,
just don't want to be heard on it. When the world's largest legal search firm.
you Google [his name J, I don't want to "They used to be called boom-year
see my name attached to this subject:' bonuses, and I don't think this has
His response is typical of other been a boom year, to put it mildly."
chairs and managing partners, if Still, even in-or especially in-
they respond at all. (In fact, several these tight economic times, there
C-suite leaders failed to return phone are firm leaders who remain positive
calls when they learned that bonuses about bonuses because they know well
were the subject of inquiry.) And the benefits that bonuses continue
with the thousands of lawyer layoffs to bring to their firm's bottom line.
WNW,LAWPRACTICE,ORG July/August 2009 Law Practice 43
IT'S BONUS TIME
It's About Merits, when they enhance productivity." does so in the form of Starbucks in the
Productivity and Creativity "Merit" seems to be the operative morning, but then-going one step
Increasingly over the past decade, more criterion for law firms today. Early this further-it also serves double scotch
firms have turned to bonus structures year, as just one example, Philadelphia's on the house (and presumably on the
to reward their top performers-a megafirm Morgan Lewis & Bockius rocks) at the end of the workday.
trend that started in the mid-1990s replaced its 2,000-billable-hour re- But cash still talks, particularly in
but really gained speed in the past two quirement for associate bonuses with tight economic times, so monetary
years. Now many of those that have a merit-based system. It's now one that rewards remain the centerpiece of the
bonus systems in place are realizing takes many different contributions most successful bonus programs. Here
the advantages when it comes to mo- into consideration, such as efficient are snapshots of two successful, in-
tivating performance and retaining service to clients and participation in novative monetary bonus programs-
top talent, things that are especially the firm's programs and management. one from a 400-lawyer partnership
important during the current reces- E
on,..Ji.be ast Coast and another from a
sionary cycle. Those firms that instead --'
:; fite-attorney firm on the West Coast-
rely primarily on salary to compensate
their lawyers, on the other hand, may tK~t'swhat's driving
neither of which, it's worth noting, has
taken a serious hit in the recession.
wish they had bonus structures, too. some of the associate
"When you get into a time like this, "Real Money": A Trailblazer
if you're overpaying people on the sal-
salary cuts-the need in the Bonus Round
ary side, you don't have bonus money to create enough profit Dickstein Shapiro, which has offices
left to take care of the big producers;' in Washington, D.C., and New York,
says Ward Bower, a principal of Altman
to enable bonuses to has been a pioneer in many law firm
Weil, who consults on strategy and go to the people who management areas. In 2000, for ex-
compensation issues and is a strong ample, it became one of the first major
are really driving the
proponent of bonuses. "A number of firms to toss its lockstep formula for
firms are in this position. And that's economic engineJ!J compensation, replacing it with a
what's driving some of the associate
;a value-based system while also launch-
- WARD BOWER, ALTMAN WElL ~
salary cuts-the need to create enough ing a merit-centered bonus program.
profit to enable bonuses to go to the According to Michael Nannes,
people who are really driving the eco- Morgan Lewis's conversion seems to the firm's chair, associates who per-
nomic engine. The smart firms realize mirror an approach that others have form at levels above and beyond the
that bonuses can be very effective." taken as well, in which creativity, rather call of duty receive an extra $10,000
So what constitutes effective than conformity, comes into play to $50,000 (in a good year). And
bonuses? Well, first of all, it's not when handing out non-salary rewards. on rare occasions, when an associ-
making them automatic. Just as a For example, New York's Cadwalader ate brings in a major client or has
growing number of firms have elimi- Wickersham & Taft provides free pro- worked on an important case that
nated the lockstep salary system, so fessional counseling services; other demanded many a weekend of service,
too have the strategically sagacious partnerships have instituted vacation she has earned a six-figure bonus.
ones cut lockstep bonus packages. and travel bonuses; and some firms are "We pay real money;' Nannes says.
"The important thing about bo- showing lawyers their appreciation by "I'm always glad to pay the best."
nuses is that they should not be tickling their taste buds. Pittsburgh's While the firm's associate evalu-
simply expected every single year; Reed Smith serves up healthy snacks, ation committee (AEC) obviously
they shouldn't be considered an for example, while Philadelphia-based looks at the number of hours younger
entitlement," says law firm manage- Dechert offers its associates all the fruit lawyers bill, committee members
ment consultant Robert W. Den- they can eat. And several firms dole also consider other kinds of factors.
ney. "They must be earned based on out free caffeine, including the inter- "We look at many different things at
merit, on stellar performance. That's national giant Clifford Chance, which the end of the year;' Nannes says. ''A
44 Law Practice July/August 2009 www.LAWPRACTICE.ORG
person at level one could have gotten
shoveled with a level of responsibil-
ity that was particularly high relative
to his or her placement. Or perhaps
an associate was in a practice area
that was heavily in demand that year,
one that demanded higher rates. This
year, we had an associate argue a case
before the-Supreme Court. That's
pretty cool. That's a good year."
Nannes says he's partial to what
the firm calls its "firm-building bo-
nuses:' which are awarded to those
who work diligently on several
committees or perform a lot of cli-
ent development work or conduct
many hours of pro bono service.
"These are all things that make the
firm a better place:' he points out.
Associates get to state their case,
too-they submit self-evaluations
toward the end of the year, articulat-
ing the contributions they believe
they've made to the firm. The AEC
members also solicit input from as-
sociates' supervisors as part of the
extensive assessment process. And
Nannes has been known to make a
recommendation or two when he
thinks a lawyer is worthy of some extra
cash. "If a client wrote a letter prais-
ing an attorney, I'll forward it along
to the committee:' he says. "Currently,
we have a person who has taken the
initiative to get associates to contrib-
ute money to the District's Legal Aid
Society. I'm going to make sure that
the committee knows about this firm-
and community-building effort."
The firm's younger lawyers aren't
the only ones who receive bonuses,
of course. Like most firms, Dickstein
has a system to reward partners, too.
But unlike most firms, the partner-
ship also launched a unique incentive
program that rewards efforts to grow
the firm's culture of inclusion. In every
WWWLAWPRACTICEORG July! August 2009 Law Practice 45
IT'S BONUS TIME
one of the past four years, manage- law firm Wyers Haskell Davies are structures. But Wyers is very open
ment has asked the firm's diversity well-known, and where his colorful about it and makes sure that all of
committee to identify a partner who personality and easy-going approach the employees are aware of it. It helps
they think has done the most to ad- to the practice of law fit right in. keep people enthusiastic to perform."
vance diversity within the firm, and "I've always felt strongly that if Although the incentive program
that partner receives a diversity bonus. I worked smarter, I'd be paid more has been in place since the 1990s,
Still, most bonuses go to associates, and work less than the lawyers who the shareholders reshaped it in 2003,
and at least one of them-a very cov- pay less attention to the manage- giving it greater complexity in its
eted one at that-isn't cash-based. "In ment of the firm;' Wyers says. "Ever methodology to fold a wide range
our bonus system, we have a recogni- since I graduated from law school, of determining factors into the sys-
tion component; it's not just money my goal has been to practice law to . tem while enhancing its equality for
all the time;' Nannes says in discussing live, not to live to practice law." all employees. And two of its other
the Justin D. Simon Core Values Award. Wyers is the principal shareholder at~al but related features center on
Simon was a partner at the firm of the firm, which his father founded what Wyers proudly calls its "predict-
who died in 2001 and was known for, more than 80 years ago. But he also ability" and its calculation timetable,
among other things, his commitment wants the firm's four other lawyers under which the measurements of
to Dickstein's core values. Since 2002, and three staff members to have a the bonuses are done quarterly.
a non-partner who has demonstrated solid sense of ownership and fully "It's predictable in terms that the
similar commitments receives the realize how integral they are to the entitlement to a bonus is measur-
. honorary award, which comes with firm's success. Consequently, as firm able," he explains, "so you don't
a book of remembrances about Si- leader, he relies heavily on a gener- have a boss who at Christmas time
mon, a gift certificate, an endowment ous bonus system that rewards hard, is deciding who's going to get a bo-
of $1,000 to the charity of his or her and smart, work-even for the staff. nus based on who showed the most
choice and the intangible but ever- And that's a rarity in the profession. cleavage and who was the most in-
important firmwide recognition. "I want job satisfaction for ev- gratiating and all those other horrible
"When we have given that award, eryone, staff included, and I want ways of measuring access to pay:'
a good percentage of the recipients everyone to feel they're being treated Happily reporting that the eco-
have their eyes water up as they ad- fairly;' he says. "That sounds kind of nomic downturn hasn't diminished
dress their colleagues," Nannes re- schmaltzy. But we really are all a team the firm's workload, Wyers continues
ports. "These are people who do here, and the bonuses help us maintain to see how the extra cash motivates
important things and are not look- that teamwork. If we all have a stake in the firm's team to perform to its best.
ing for recognition. When they re- what each other makes, then everyone's "I can go away for 10 days and come
ceive the award, they're heartened. quality of life and income is enhanced." back and there's nothing that needs
I've gotten notes [that say], 'Big law One important feature of the firm's cleaned up around here," he says. "This
does not have to be that bad. I feel bonus structure is its transparency, firm can run for a hell of a long time
very good about what I'm doing.' which helps enhance the collabora- without me here. That's a testament
It's a very special form of bonus." tion and cohesion. "The employees to our management structure and
have access to all the important the bonuses are a large part of that."
Transparent and Equal information that bears on their suc- It seems it's also a testament to us-
Access for the Entire Team cess in their jobs;' Wyers says. ing bonus money to increase produc-
The small town of Hood River, Or- "This is the first bonus struc- tion and reward performance while
egon, is known for its spectacular ture I've come across that has such also serving to share the wealth-and
location in the shadow of Mt. Hood transparency," says Sheila Blackford, that's a winning combination. LP
and on the dramatic Columbia River a practice management advisor for
Gorge, the sport of windsurfing and the Professional Liability Fund of the Steven T. Taylor (stevetaylor77@comcast
.net) is an award-winning freelance
its laid-back attitude. It's also a com- Oregon State Bar. "Usually law firms journalist living in Portland, OR, who writes
munity where Teunis I.A/yersand his are hush-hush about their bonus on various subjects in the legal media.
46 Law Practice July/August 2009 WWWLAWPRACTICE.DRG