Firms Recalculating Compensation Models

, The Legal Intelligencer

   |2 Comments

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The firm then looks at how the attorney spent his or her time, how much has been collected on billed time, where his or her works in progress stand and how much time has been written off.

Spirgel said holding every attorney who has a hand in a matter—from the finder to the minder to the grinder—accountable for time that gets written off has promoted efficiency at his firm.

"When we started tracking realization and having a direct consequence for realization on your compensation, our overall realization improved and our associate utilization improved," Spirgel said. "A higher percentage of associate time was being collected and it wasn't being viewed as a free resource ... there was a real cost to it and it definitely altered behavior."

Similarly, David M. Kleppinger of McNees Wallace & Nurick said that while his firm has not changed the metrics it has always looked at in determining compensation, the emphasis has shifted more toward realization over the years.

Kleppinger said the firm tracks what it calls "individual fees received," which it arrives at by multiplying an attorney's billable hours by his or her standard hourly rate and then multiplying that figure by a firmwide realization rate.

If an attorney's realization rate exceeds the firmwide budgeted realization rate, Kleppinger said, he or she has a good chance of receiving what the firm refers to as a "holdback"—a portion of an attorney's compensation that can only be unlocked by meeting certain criteria.

If an attorney doesn't meet that criteria, Kleppinger said, the holdback portion of his or her pay gets redistributed to other members of the firm who performed above expectations.

While McNees Wallace does not give an origination credit, Kleppinger said, the firm does subjectively factor it in to its compensation calculation.

Kleppinger said the firm also conducts a profitability analysis for each client to determine how much profit the firm is actually making on the work being done.

"If all the work is being done by a senior partner [with a high hourly rate], it may be generating revenue but it will not return a profit to the firm," Kleppinger said.

What's being said

  • Chuck Bernstein

    Good basic article that is food for thought.

  • Publicus

    Downplaying origination is long overdue if we are going to make any continued claim to being a "profession." Rainmakers have had their rings kissed for too long. Let them bolt if their greed can't be satiated - the firms and the profession will be the better for it.

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