Complicated Compensation Systems Don’t Work

We have experimented with a variety of compensation systems for our attorneys over the years.

We designed each system with the objective of (1) keeping the lawyers happy and (2) increasing profits.

We've tried straight salary.

We've tried salary plus bonuses based on a variety of objective factors.

We've tried salary plus bonuses based on a subjective decision by management.

We've tried formulas tied to revenues and origination credits.

We've tried salary plus commissions for originating cases and/or generating billable revenues.

We've tried all of the above with adjustments for uncollected billings.

We've tried a variety of other approaches based on all of the above.

What works?

Our experience is that simpler is always better. It's impossible to change behavior when people don't understand the compensation system. It's shockingly easy for a compensation system to get confusing when work and life get busy. You've got to make the system really, really simple if you want your people to respond to it.

Is your system overly complicated?

Apply my “one breath” test. If you can explain the system without taking a breath, then you're good to go. If not, then go back to the drawing board. Make it really, really simple.

Example: “You'll be paid $100,000 per year.” That's one breath.

Example: “You'll be paid $50,000 plus 10 percent of your collected revenues.” That's one breath.

Example: “You'll be paid 20 percent of your collected revenues plus 10 percent if you originated the case.” One breath, but it's getting close.

Keep it simple, and you'll see results. Make it complicated, and you'll get the same old behavior you were trying to change.

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