You Get What You Pay For

There’s an interesting discussion at the The Legal Watercooler: Well. There’s a solution. (part 1) on the issue of pay for performance at law firms, specifically, how that method might ameliorate the wage inflation that seems to infect each years’ incoming class of law firm associates. Some very good researchers have articles in the Harvard Business Review that say you can’t rely on pay-for-performance to achieve the revenue and productivity goals you expect, that the long term costs outweigh the short term benefits.

Reading the HBR articles closely, it’s clear that firm culture has a powerful influence on how these pay-for-performance systems operate and whether they succeed. For the moment, let’s set aside the law firm culture issue, as the variety of compensation systems seems as unique as the law firms that implement them. However, I do want to briefly consider what might be part of a functional pay-for-performance system for law firms, especially among the lowly early associates.

The marketing problem here is that law firm clients want to receive services, even those perceived as a commodity, at the highest possible level of quality (quality is a “given” in most satisfaction surveys of inside counsel, such as those by BTI Consulting). Clients are of the same opinion cited by Heather Milligan in her original post, in that they see the early associates as genuinely unable to perform at that desired quality level. Therefore, there is a value gap between rates and performance, even though you can argue that the gap is perceived, not real.

I believe that client satisfaction is an important metric that could drive pay-for-performance. However, it requires more than ever that firms understand what clients’ objectives are, what their service expectations are and that all members of the service delivery team have this knowledge, too. Moreover, it should be a non-avoidable requirement that early associates get client relationship training and have an actual opportunity, at no cost to the client, to meet the people to whom their work will go. Intake programs for law school graduates should include this component within the first six months, and firms should thereafter refuse to make work assignments without first introducing the associate face-to-face to the client.

The faceless-to-faceless management model for associate work enables clients’ to dismiss the skills of those new attorneys because clients have no emotional investment in who the associates are as people. If firms would make as much of an effort in showing who they are to a client as they do in showing what they cost, even, a huge and positive advance (IMHO) in client relationship managment would be the result, paving the way for less rate gripe.

All but the most lockstep and inflexible production compensation systems could then introduce a pay-for-performance component that takes the client’s view into the compensation equation. And when the client has a say in compensation, then firms really will be able to both get the attention of the Millenials focused on client relationships and defend the rate structure that supports quality service delivery.