All law firms have them—the partners who spend the bulk of their practice managing the firm. But, if the firm focuses on compensating only rainmakers and large revenue generating partners, they may lose those best qualified for the job. Properly compensating partners who perform the seemingly mundane, but critical, work will keep your firm running profitably.

Ways to pay

Many law firm managing partners perform the job full-time and do not do client work, making compensation fairly straightforward. But, what about part-time managing partners who have given up client work to perform nonbillable management tasks? Compensating these partners can be tricky. It does not make sense to compensate such individuals based solely on billable hours, revenue generated or other methods that are used to evaluate full-time practicing partners.

Instead, consider a flat fee plus percentage. Here, your firm pays a set amount for management duties, such as $90,000. Then, you can add a percentage of profits based on hours, revenues, client origination and other metrics.

Another way to compensate part-time managing partners involves a mix of objective and subjective criteria. This method considers the partner's management and client-related contributions. Compensation is based on a variety of factors, depending on what your firm values, the percentage of time spent managing versus working with clients and how successful the partner is at meeting personal and firm objectives. Everything from your firm's financial health to the managing partner's business origination could be a factor. This second option generally works best because it allows firms to reward their managing partner not only for doing the job, but for doing the job well.

Objective factors

To ensure everyone knows what to expect, your managing partner should work with your compensation committee to allocate percentages to nonbillable management and billable client work. For example, the partner may decide he or she needs to devote 75% to management and 25% to clients. In this case, the 25% would be evaluated the same as the client work of other practicing partners. The remaining 75%; however, would be assessed on a variety of factors.

Objective criteria might include your firm's financial performance (as measured by per partner performance or revenue growth)and achievement of goals, such as implementing an IT upgrade or recruiting a lateral partner to head up a new practice area. Ask the partner to set goals that align with your firm's strategic objectives to help make this assessment easier.

Subjective factors

However, most criteria are likely to be subjective. For example, effective leaders usually are credited with having vision and inspiring confidence — neither of which are easy to measure.

Depending on your firm's priorities, your managing partner may be responsible for business and marketing strategies, including growth via mergers and geographic expansion. Other responsibilities may include:

  • Client satisfaction;
  • Public relations, business and community outreach;
  • Internal operations, loss prevention, internal controls and ethics;
  • Manager and partner performance;
  • Human resources and employee benefits; and
  • Firm morale and productive relationships between attorneys and staff.

Put such responsibilities in writing, recognizing that they may change over time as the partner adjusts to the role. Everyone should be on the same page about which duties are considered part of the job and which reflect extraordinary performance (usually financial achievements). In the case of the latter, you may want to pay a performance bonus separate from regular compensation.

Strike a balance

Fairly compensating your managing partners does not mean you have to pay them more than your top rainmakers. You will need to find the right balance for your firm. By providing the right incentives, you will attract those who are able to successfully balance managerial duties with client representation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.