Punished By Rewards

By Sue Manch –

It’s law firm associate bonus season once again and the Above the Law blog’s http://abovethelaw.com/bonuses/) reporting of results from firm to firm is alternatively stirring anger and schadenfruede among associates – depending on whether their firm awarded so-called, “DPW”, “half – DPW”, or lesser amounts. With the NY-centric firms having banner 2014 financial results, the huge bonus numbers were probably in order. No doubt these lawyers gave up significant time with family and friends and likely sacrificed personal well-being in return for epic bonuses. And then there are all the other firms – firms with more modest 2014 results, firms that did well but do not operate at NY profitability levels, firms that did badly, and so forth – these firms reap online insults regardless of the millions they may pay out in bonuses.

So what’s a firm to do? Instead of reaping rewards for blessing your hardest working lawyer tier with extra money, many firms – even some of those paying the highest dollars – are scorned by associates who know or believe others were paid more.

Let’s think about how this works:

• If you don’t give out any bonuses, you anger all your associates and quite a few of your partners who believe their best associates will jump ship for firms that DO pay.
• If your firm did really well and you give out top-dollar bonuses, you only really win if you are the first to do so and remain the highest among your peer firms. Woe to those who come out early and have to backtrack to make it up to the higher levels.
• If your firm did really well and you don’t give out top-dollar bonuses, you look cheap regardless of whether your firm economics compare in any realistic way with the NY-centric firms that started all this. After all, I worked 2700 hours and so did the NY associate – same thing, right?
• If your firm didn’t do so well and you give out top-dollar bonuses, you may gain somewhat with associates but lose big-time with your partners. Where is that money coming from anyway?
• If you give bonuses to some and not others or offer variable amounts, you alienate many associates you may need next year and turn them against one another in the battle for hours. M&A is strong right now, but what happens when you need those litigators to be engaged again?

Maybe it’s time to consider a different approach.

Most of the bad results during bonus season are due to 1) a lack of transparency of firm financials and bonus criteria and 2) poor communication. But we also know money is not a great motivator (see Daniel Pink’s great video – http://www.n2growth.com/blog/leadership-motivation/). So how do we address the two implementation issues as well as the psychological issues involved in bonus season?

Offer information that allows them to act autonomously, understand their level of mastery, and see the purpose of and connection of their performance to their bonus potential:

Enhance Knowledge: Do your associates understand law firm economics and have you taken the time to teach them the cash to revenue cycle and discussed realization and profitability results for your firm as compared to peers? Do you brief associates on firm performance year over year in at least a broad way?

Clarify Top Performance Criteria: Are your bonus criteria clearly outlined, effectively measured, and consistently applied (remember it’s more about what you do than what you say)? And are you supporting the specific behaviors you want to see repeated (e.g., if it’s all about hours, you will get hours but maybe not quality work, efficiency, or ownership).

Be Transparent at Every Step: Do you have a communication plan for distributing bonus information, for example . . .

1. Communicating specific bonus criteria (not payment amounts)at the beginning of the year in which their performance will be measured;
2. Providing regular updates/feedback on where they stand throughout the year;
3. Offering transparent reporting on year-end performance of the firm at large and what it means for the bonus pool; and
4. Sharing clear information on how bonus amounts are being awarded before they appear in an associate’s paycheck.

Make it About More Than Money: Do you share information on each associate’s unique strengths, developmental gains made in the past year, and priorities for next year in addition to offering a bonus number? While I’m not a fan of mixing review meeting with bonus announcements, the two can remain separate and yet be effectively linked by having substantive performance review meetings occur one or two weeks prior to bonus communications.

Bonus season has become an annual exercise in frustration for everyone involved.   Bonuses should provide a “thank you” to top performers proportionate to their full range of contributions, motivation to stay engaged or do better in the coming year, and a real sense of participation in the firm’s economy (good or bad). If your bonuses are punishing your firm more than creating positive impact, a new approach may be in order.

Blog Author

Sue Manch collaborates with firm leaders to devise strategies to align business strategy with talent strategy. Her goal is to assist firms in preparing their lawyers to provide the highest quality service to clients and build successful and satisfying careers. With 30 years of experience consulting and coaching, Sue is an established thought leader in legal talent strategy and lawyer development. She has a particular expertise in leadership development and has designed innovative succession strategies for law firms. Sue has deep experience in the design and implementation of leading-edge programs such as emerging leader development, alternative career track models and workforce planning, competency-based performance management models, and diversity initiatives.

Sue was a founding Principal of Shannon & Manch, LLP – now SJL Shannon. She has been an advisor to the majority of the Am Law 100 and Global 100 law firms, as well as top law schools and in-house legal departments. She is the author of four books, including the ABA publication “Learning from Law Firm Leaders” and countless articles and held positions at Bingham McCutchen, Georgetown University, The Catholic University of America Columbus School of Law, and Trinity College, among others. She has a MEd in Clinical Counseling from the University of Virginia and a BA in Psychology from Ohio University. Sue is also a Master Coach, certified by the Behavioral Coaching Institute and experienced in leadership, business development and team management coaching for lawyers.

Susan.manch@sjlshannon.com