Partners compensation and the Institution Management
Law Firms are generally formed by some lawyers that have certain features in common such as technical quality in specific areas of Law, entrepreneurial spirit and good relationship, and that decide to get together (early in their careers or by “split” ), on account of the mutual use of each one of their skills.
This technical complementation creates a more comprehensive entrepreneurship and the personal affinity (character, ethics, companionship and trust) creates the most important aspect of all, that is its continuity.
The same “glue” that approximates and binds these lawyers is the responsible for all the entrepreneurial philosophy that the experts call “vision, mission and values” and that will (or should) guide all the decisions and attitudes to be taken as long as the office exists.
As I have always stated, the management of a Law Firm occurs on a metaphorical chessboard, where there is an intricate interdependence among all the engaged elements. The remuneration for the partners is one of the most important pieces of this chessboard and its definition or change (position or movement on the chessboard) practically defines the strategy of all the other elements.
In an office there are two entities that should walk side by side, mutually feeding themselves in a virtuous symbiosis, which are: the institution and the partners. The decisions of those latter ones directly and intensively interfere in the institution but, as for every action there is a reaction of the same intensity and in an opposite direction, the institution reacts at its discretion, in a positive or negative manner to those attitudes. The virtue or merit lies in the correct choice of the decisions in a way as to transform this process into a virtuous cycle of relationship between those two entities.
Once the entrepreneurial philosophy is defined, the cycle in the “institution” entity goes through the strategic planning, which, in turn, defines objectives and targets. The mid and the long-term objectives define the career plan of the attorneys and partners and the short-term ones define the evaluation criteria of the professionals. Those two elements should feedback the strategic planning for eventful course correction.
As for the “partners” entity, the cycle goes through their behavior in compliance with the philosophy and the consequent definition of the talent attraction and retention criteria. Those criteria make up the career plan of the professionals and define the evaluation criteria of the attorneys and partners (that is it! the partners must also have evaluation criteria). Finally, the definition of the remuneration method for the partners must be fully integrated with the entrepreneurial philosophy and all this together will then make up a single cycle of virtuous feedback, which will be vital for the long lasting of the institution and the financial happiness and professional achievement of the partners!
The support by an outsourced and experienced consultancy firm which is also exempt from internal political interactions may help a lot to find the solution of this challenge, as well as to define the management model and future strategy.
José Paulo Graciotti, is consultant and founding Partner of GRACIOTTI ASSESSORIA EMPRESARIAL, engeneer by Escola Politécnica Universidade de São Paulo, with Financial MBA at FGV and specialized in Knowledge Mnagement by FGV. ILTA Member since 1998 (International Legal Technology Association) and ALA (Association of Legal Administrators), with more than 27 years managing Law Firms in Brazil – www.graciotti.com.br
