Law Practice Management Asked and Answered Blog

Category: First

Sep 20, 2017

Compensating Your First Associate Attorney in a Law Firm

Question:

I am the owner of a law practice in Belleville, Illinois. My practice focuses on real estate, estate planning and administration, and bankruptcy. I have three legal assistants. While I have been in practice for ten years, I have never hired an associate. I have a busy practice and now is the time. I have identified a candidate with six years experience that I want to hire. He has business that he can bring with him. He has been working with a larger firm as an associate and has been paid a straight salary. My next step is to make him an offer but I am struggling with how to pay him. I would like to hear your thoughts.

Response:

Some small firms put associates on an eat-what-you kill system based upon fee revenue collected from clients they bring in and fee collections from other matters they are assigned. They are they paid a percentage – ranging for thirty to forty percent when the fees are paid. However, in most firms associates are paid a salary and possibly a bonus based upon performance. Bonuses may be discretionary or formulaic based upon performance factors such as billable hours, working attorney collected fees, client origination collected fees, goal attainment, signed engagements, etc. Personally, I think a salary plus and discretionary bonus is the best approach for new associates.

However, in your case with an associate that is more seasoned and that has a book of business I think you should consider a salary with a formulaic bonus based upon his working attorney fee collections and client originations. Here are the mechanics:

Pay a set salary.
Establish a bonus threshold using a multiple of three times salary.
Establish a weighted performance measure and weight working attorney fee collections .60 and client origination fee collections .40. For example, if the associate brings in a client and does all the work he/she would receive 100% fee credit. If the associate works on a matter but does not bring in the fee he/she would receive a .60 fee credit.
The associate would be paid a bonus of 20% for weighted performance measure in excess of the threshold. For example, if the associate is paid a $80,000 salary the threshold would be $240,000. If the weighted performance measure is $300,000 the amount in excess of the threshold would be $60,000. Thus the associate would be paid a bonus of 20% times $60,000 or $12,000.

I would also set a minimum performance expectation of $240,000 for the salary that is being paid.

You could also include non-billable goal attainment bonus as well but you can always add that later.

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John W. Olmstead, MBA, Ph.D, CMC

Dec 15, 2015

Law Firm Retreat – Suggestion for a Firm Having Their First Retreat

Question:

I am a senior partner in a fourteen attorney intellectual property firm in Memphis. We are planning on having a firm retreat in January 2016. We have never had a retreat before. Our plan is to have a one day retreat facilitated by a consultant with specific focus on competitive strategy and marketing. We have just decided this week that we would like to do this and are just beginning the planning process. I would like to hear your thoughts and suggestions.

Response:

Here are my thoughts:

First of all it is now December and January is just around the corner and I believe that you need to have at least 60 days to properly prepare and plan for the retreat. Most management consultants that facilitate retreats, including myself, will want to get to know the firm and will want to conduct attorney interviews, (face to face or via telephone depending upon whether they are local), review financial reports and other documents, and prepare the retreat program. Participants (your people) may need time to prepare as well. Off-site facilities will need to be booked as well.
Decide in advance the outcomes that you would like to achieve. Is it to entertain, inform, educate, or to develop specific solutions or action plans.
Keep the retreat's focus narrow and concentrate on just a couple of topics – it sounds like you are doing this.
Establish ground rules upfront – example – off agenda items, day to day operations issues, etc. are off limits.
Building follow-up action plans into the program and identify who will be responsible for following up after the retreat is over.

Law firms frequently have what at the time seems to be a successful retreat but after the retreat is over and time passes it becomes apparent that no change has taken place, action items were not completed, and partners believe there was little return on the retreat investment.