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20 de Junio de 2008El rincón de Hildebrandt
Compensation, by William G. Johnston and Joseph B. Altonji
We suggest setting performance (and compensation) guidelines for various phases of associate development that consider objective and subjective criteria. In the examples that follow, we use a three-tiered approach with progress based on merit, not on years of service.
En muchas empresas en todo el país, las principales funciones de los asociados de primer año son bastante simples: generar un número importante de horas facturables y aprender a ser un buen abogado. Sin embargo, estos dos objetivos se colocan a menudo en conflicto directo y los jóvenes abogados tienden a centrarse en el objetivo de la facturación horas. Sería mucho más beneficioso para los despachos de abogados adoptar el enfoque de la promoción, que hacer hincapié en horas facturables y no facturables.
Target Rates
It is not uncommon for a firm to set an associate billable-hour target of 1,800 hours or higher per year. In the major-city firms, 1,800 is almost a minimum acceptable threshold; 2,000-plus hours is the norm. With respect to first-year associates, it’s troubling that firms expect more than 1,800 billable hours from individuals who are, for lack of a better word, unskilled. This is not to advocate a reduction in a lawyer’s overall commitment to the firm. Focusing solely on billable hours, however, is not the best approach and results in financial and non-financial losses for many. The clients lose because they bear some of the cost of training the associate, may fall victim to an associate who uses a heavy pen when recording time (in part because of the billable target) and may end up with a subpar work product. The young associates lose because they feel pressure to record hours to stay in their firm’s goodgraces, even though they may know they are not qualified to handle the task at hand. Finally, the firm loses when associates get burned out or work inefficiently to hit the billable-hours bogey.
Unfortunately, even after the first year the associate’s role does not change that much. From the second-year associates to the more senior level, the billable-hours treadmill never stops. In fact, it gets reset every year as a new quota comes into play Jan. 1. In the repetitive process, an associate will continue to record hours and may pick up some mentoring and training. All too often, though, the associate throws in the towel and moves to another firm, to an existing client or even to another industry altogether.
It is time to rethink associate compensation. Over the past few years, a number of firms have eliminated their lock-step compensation systems and replaced them with structures that are merit-based. By taking a more corporate approach to compensation, these firms are way ahead of those that continue to cling to the lock-step structure.
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William G. Johnston Mr. Johnston is a Vice President with Hildebrandt International and focuses on improving the strategic positioning, financial performance and operational effectiveness of law firms. Mr. Johnston is a frequent author and speaker on topics related to law firm finance, merger and partner compensation. He also has experience in expert witness matters and has represented clients in preference actions and partnership disputes. Prior to joining Hildebrandt International in 1996, Mr. Johnston was an analyst with a major insurance company where his duties included management of treasury operations and investment portfolio performance, development of accounting policies, and capital budgeting. Mr. Johnston is a certified public accountant and is based in Connecticut.
E-mail:wgjohnston@hildebrandt.com |
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Joseph B. Altonji Mr. Altonji is a Director in the Chicago office of Hildebrandt International and co-leader of Hildebrandt’s Strategy practice. With over 20 years of experience, he has consulted with hundreds of law firms on improving their strategic focus and business management on both a firm and practice level. Mr. Altonji concentrates his practice on helping firms clearly define and subsequently achieve their strategic objectives, including alignment of firm governance, management and compensation systems with firm strategy, mergers and other areas. In addition, Mr. Altonji advises firms in crisis situations, helping them reestablish economic and practice stability. He is a frequent author and speaker to various groups including law firm networks on topics related to law firm strategy, governance, compensation and economic performance, and has provided deposition and courtroom testimony as an economic expert in a variety of cases. Prior to joining Hildebrandt International in 1989, Mr. Altonji was a consultant with a national litigation support consulting firm. In that position, he worked with litigators and in-house counsel to analyze the economic and financial issues involved in business disputes.
E-mail:jbaltonji@hildebrandt.com |
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