There’s a simple approach you can follow to be sure your compensation levels and systems are current.
If you’re still paying now the same as you were paying before, then you’re doing it wrong.
Things change. The world moves forward.
Nothing stays the same. Court rules change, laws change, and technology changes, so why would you expect to pay now the same way you were paying before?
Lots of successful lawyers I know hire a team member, set a salary, and pay it month after month with small annual reviews and increases. They’ve been doing it that way forever, so they assume it’s what everyone else is doing and they keep doing it. That’s the way it’s done, right? Wrong.
Compensation systems change, just like everything else. The level of compensation changes too.
Compensation lives in a highly dynamic market. You can’t set it and forget it. You’ve got to pay attention.
Back in the day—way back—lots of employees received a salary, a defined benefit retirement plan, plus a full load of benefits including all kinds of insurance, paid vacation, sick days, etc.
There are law firms continuing to do some variation of that plan even today. It’s like they’re stuck in time.
Modern Thinking on Law Firm Compensation
What’s expected today?
Today, many employees consider themselves lucky if their employer contributes to their 401(k). They don’t even remember defined contribution plans, and they’re used to paying a big chunk of the monthly bill for their insurance and benefits.
Today, many employees work under some form of variable compensation. Lots of lawyers are used to covering some portion of overhead before they receive any compensation. Many assume they will be compensated with some mix of salary and commission and bonus. The plans are as numerous as companies and firms.
It’s understandable that small firms have trouble keeping up with the latest trends in compensation. We usually lack human resources people who stay current. We’re paying our team using whatever “seat of the pants” system we learned from another lawyer at Starbucks (or whatever preceded Starbucks).
Unfortunately, most bar associations aren’t much help to us. They rarely provide compensation and salary information. What they do provide is often based on small surveys that prove useless.
We’re in the dark. We have no idea what to pay and how to pay it.
How to Determine What to Pay
What’s the solution?
It’s simple.
Ask prospective employees. Yes, ask them.
Hiring is a supply and demand business. You’ve got to pay the going rate (meaning paying the amount and using the compensation system that “keeps them from going away”). Your approach to compensation isn’t one sided. It’s a meeting of the minds between you and the employee.
The only way for us to stay current on compensation is to keep in touch with the market. Those conversations typically take place in job interviews.
Of course, most small firms don’t need new employees each month. That’s why we lose touch with the market. We have no need to go shopping.
You Need to Keep Tabs on the Market
How can you stay in touch?
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You can keep interviewing, even when you don’t have an opening. You can window shop.
I’d suggest you interview all the time. You ought to talk to a minimum of one prospective employee each month. Be sure to ask about expected compensation. Stay connected to the market.
Interviewing does more than keep you informed of the latest trends in compensation. It also serves as the first line of defense in the event of an unexpected resignation.
Interviewing helps you keep a steady supply of replacement employees at the ready. If someone leaves, you’ve already got an idea of who can take the position. The best defense is a good offense, right?
If you’re always interviewing, you know the following:
- What kind of compensation employees expect,
- What you need to do to keep existing employees in an ever-changing market, and
- Who you can hire when someone leaves and you need a quick replacement.
What I love most about continually interviewing is that it helps me avoid that sinking feeling I get when someone asks, “Can we talk?” No one ever says that except to resign.
Of course, your first thought is, “How can I interview when I don’t have an open position?” This is probably followed by another question: “Won’t my employees freak out if they know I’m interviewing?”
Let’s attack these questions in reverse order.
Be honest with your existing employees. Explain that you’re doing the interviewing so you’ll stay in touch with the market. Explain that you want to be ready when growth opportunities occur. Explain that you want to be ready to address unexpected contingencies (illness, pregnancy, spousal moves, etc.). They’ll understand if you’re up front about it.
What about interviewing when you don’t have a position open? Again, be honest. Explain to prospective employees that your practice is to interview regularly so you’ll be ready when an opening occurs. Also explain that you’re always open to adding someone when the right person comes along, regardless of whether you have an opening right now (as you should be). Tell the prospects to keep in touch, and let them know you’ll be keeping their information ready for any opportunities that arise.
If you’re not interviewing regularly, go ahead and start. Run an ad on Craigslist and get some resumes. Put your finger up and test the wind. See what’s happening in your market.
Soon, you’ll know whether you’re paying the right amount in the right way. You’ll also have that sense of relief you get from knowing that you can replace a key employee if she quits tomorrow. An hour or two of interviewing each month is well worth the time investment.
