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56 | EDGE INTERNATIONAL REVIEW
EDGE INTERNATIONAL REVIEW | 57
By Ger y Riskin
the problem lies with the ways in which the compensation process plays out, including expecta- tions of partner behavior and the communication of the process by which a figure is reached.
e result is that if you ask any individual partner to describe the compensation system, you will get a unique interpretation that will differ in some way from that of any other part-ner in the firm.is diversity of perception creates the fodder for unresolvable circuitous dis-cussions (debates, really) about the compensation system.
Lawfirmsfrequentlycallmetosaytheyneedhelpwiththeir compensation system. Sometimes, they’ll indicate that it’s HOW ARE COMPENSATION DECISIONS COMMUNICATED?
simply part of the strategic review. After peeling back the Typically,thecompensationcommitteewillspendcountlesshoursporingthrough
layers and determining what they really want, however, it is mountains of data and then engage in debate and discussion about what is fair, what often apparent that the compensation system is just fine “as behaviors the firm is trying to encourage or discourage, and how everyone else affected is.” It is the deployment of the compensation process that would feel about any particular decision.
After the committee completes this onerous (and typically thankless) task, the numbers are In this article, I will explore why so many partners may be griping about communicated to those affected without any detailed explanation. As a result, a partner re- a compensation system that, in fact, is just fine.
ceiving his or her “number” is left to speculate how the number was determined, usually at-tributing more to billable hours and receipts than the compensation committee did. is in WHAT THE HECK IS THE COMPENSATION SYSTEM?
turn leads to the conclusion that nothing really matters except numbers — or worse, even the Unlessthesystemisentirelyformulaicandquantitative,requiringnohuman
numbers are not assessed uniformly or equitably, but rather are covered in a cloak of bias.
intervention (a rarity, to say the least), all too often there is a sense of mys- All this could have been avoided if the number had come with an explanation of the tery about what the compensation system is and how it is applied. Subjective factors that affected that partner’s compensation and how. The explanation need not be factors are often listed somewhere, and in fairness, are usually properly consid- extremely specific, but it must at least touch on the factors that were considered most rel- ered. However, this is a well-kept secret from those affected by the system.
evant in assessing that partner’s number.
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EDGE INTERNATIONAL REVIEW | 59
THE HIDDEN PROBLEM: WHAT’S THE PLOT?
WHAT IF THE COMPENSATION SYSTEM IS FLAWED?
Givinghigh-qualityfeedbacktoapartnerregardingcompensationre-
Therearecaseswherethefirm’scompensationsystemisnotconsistentwith
quires that the partner know what the firm expects of her or him and behaviors that the firm expects from its lawyers. ere are many firms in the firm’s assessment of how performance relates to those expectations. In which the lawyers will nevertheless tend toward the desired behaviors out of most firms, those expectations are not clear in the first place, but that does loyalty and respect for good leadership.
not stop the compensation committee from considering what they ought to If, however, the dissonance between the compensation system and the de- sired behaviors is great enough, then it will be necessary to at least fine-tune If a partner is unaware of what the firm expects, communicating the the system, and significant changes might well be necessary. It is my hope dissonance between the expectations of the firm and the performance of that this article will discourage many firms from prematurely reaching the the partner will fall on deaf ears. Perhaps instinctively knowing that, most conclusion that the compensation system must be changed.
compensation committees are reluctant to have the dissonance discus- One last thought: Some of the finest firms in the world have secret sys- tems in which no partner knows what any other partner earns. is process So if we find the plot — that is, ensure the partners know what is expected all but eliminates the jealousy and aggravation that comparisons can cause.
of them, not just at compensation time but throughout the year — then the I appreciate the challenge of getting the horses back in the barn; neverthe- compensation committee can apply subjective factors with more confidence less, I think that senior management ought to consider the possibility of and communicate better to those affected. Communicating the outcome re- going to such a process if at all practical. • 1. Preparation
At least two individuals from the compensation committee must agree upon
the precise message that is to be delivered to each partner and create a bul-
let-point outline. e points must connect the deliberations of the compen-
sation committee to the individual partner’s plan and performance. is
requires at least a consultation with the partner’s practice group leader (if
this is not already integrated into the compensation process).
2. The Meeting
Those two individuals and the partner should block off at least 30 minutes,
Your preferred future
even if the meeting takes only 10. The objective of this meeting is to de-liver a clear message that contains encouragement and appreciation for thecontributions of that partner and, if applicable, precise areas for improve-ment with a process to help the partner achieve it. That process might in- Whetheritisstrategy,leadership,managementstructure,or
volve an internal or external coach, a course or program, or some other competing for clients, Gerry Riskin's years as a managing
customized solution. The options should be discussed with the partner, partner of an international firm and his 28 years of consulting since who should participate in selecting what he or she believes to be the most co-founding Edge qualify him to participate with you in an initial dis- cussion about the future you desire for your firm and some options for breathing life into those aspirations. 3. Fol ow-Up
Email: riskin@edge-international.com
e compensation process is endless. e process whereby partners receive 202.957.6717
feedback on their performance in the normal course of events must be inte-grated with the compensation committee’s future deliberations.

Source: http://www.edge.ai/files/donttouchcompprogram.pdf