I just talked about giving your people the opportunity and tools in order to succeed. Now let’s talk about how you reward them for their efforts. Depending on your billing model, I offer up two compensation models which are already proven to light the flame in staff and lawyers.

Contingency Model

Working with a personal injury firm and understanding the flow of work and the time it takes to reap the rewards and the work is not billed by the hour, The Managing Partner and I came up with this.

  1. For every successful case that goes to completion, whoever brought in the file, referral or direct contact will receive a percentage of the settlement. I will leave what percent up to you to determine.
  2. Due to the nature of personal injury work and how it often takes 2-3 years to get to a settlement, the Managing Partner thought it would be good to give them an immediate reward. So for every client that they took on, there would be a one-time lump sum bonus given to the staff member who generated the client.
  3. And in order to support cohesiveness and a team approach, this firm will regularly reward all staff when the firm reaches and exceeds its growth targets with a profit sharing program.

Billable Hour Model

When your firm bills by the hour and you set targets for your people to reach, there is an opportunity to create a three-pronged compensation model. The first is for hitting targets. The second is for business development. And the third prong, is to support the team approach.

  1. The first part of this model is rewarding your people when they get close to hitting their billable targets, when they reach them and when they exceed them. This should be customized for each person. You certainly can’t expect a junior law clerk to bill the same amount of hours as a more senior associate. So set up aggressive yet attainable targets for each of your people. Come up with a % when they get close, another % when they reach their targets, and a final (generous) % when they exceed their targets by a certain amount.
  2. Based on the average revenue of each of your clients or files, your business development bonus structure could look something like this. Up to 50k in collections, they receive a 5% bonus. From 51-149k, an additional 10% bonus on that amount. And for anything over 150k, a 15% bonus on the entire collection. This is a very powerful incentive.
  3. Thirdly, you want to support a cohesive and team approach. Figure out what benchmarks you want your firm to achieve. Build in additional bonuses for when this happens. This doesn’t have to be strictly monetary. It could be a team outing or a spa day. But be sure to reward your team as a team.

Don’t feel you have to pick one or the other. I have another client who opted for a hybrid of several different models. The important thing here is to know your people and what will motivate them and reward them best. 

Compensate for growth

I have always been a strong advocate for developing your talent. As a coach I’ve seen first-hand the incredible return on investing in your people can bring, not only in revenues, but also in higher employee engagement and loyalty. The next thing to think about is how to compensate your people and stimulate even more growth for your firm.

Working with a small firm owner, together we created a firm-wide compensation package. It includes individual billing targets (yes this firm uses the billable hour). But when the lawyer or law clerk gets close to the target, the first bonus kicks in. Upon reaching the target, a second bonus is added. And finally, when they exceed the billing targets, one last bonus. That is a real incentive to meet and exceed the targets.

But now it gets interesting. The real money is in the business development each law clerk and associate engages in. Now the average file at this firm generates about 50-60k. So we set up the bonus structure as follows. From 0-50k each person brings in collected billings, they get a 5% bonus. From 50-100k, they get a 10% bonus. And 100k + they get a 15% bonus. This Managing Partner wanted to really incentivize, so if they bring in over 150k in revenue, they get 15% on the entire amount. That is going to generate growth.

We did discuss one potential outcome. That is if the law clerk, who was already bringing in business before this compensation model was put in place just focused on business development and dropped her billing targets but generated 1m in revenue, what then? Be careful what you wish for. You change her role. She becomes a rainmaker and you compensate her generously and go out and find another law clerk to fill her place. Pretty cool if that happens.