Linking Collaboration and Compensation: Insights for Law Firms

What’s the ideal compensation system for driving partner collaboration in a law firm?

Fueled by superb Viennese coffee, Michael Roch & I tackled this topic with a couple dozen European managing partners in the TerraLex legal network. We explored how aligning partner rewards with collaboration can unlock value – within and across firms.

With the soft launch of our new SmartRewards methodology (more on that soon), we shared three actionable insights:

1. Clarify collaboration expectations: Partners need a clear understanding of their role in delivering smarter collaboration – whether it’s cross-practice client service, sharing client opportunities, or mentoring. Without clarity, accountability is impossible. Without accountability, efforts will drift.

   
   

2. Align rewards with behaviors: If you want collaboration, you have to reward it. But that doesn’t necessarily mean financially. Firms that tie broader rewards to collaborative efforts and outcomes – like strategic business reviews with clients – see stronger results.

   
   

3. Use data strategically: Leverage analytics to identify where collaboration is thriving and where it’s falling short, then adjust incentives to reinforce the right behaviors.

One clear upshot of our conversation: every kind of reward system has its trade-offs. Leaders represented firms ranging from tenure-based locksteps to merit systems with wide spreads between partners’ remuneration. Aligning the 3-I’s (imperatives, incentives, and integrity) is what drives collaborative behavior across an institution – stay tuned for more on that framework soon.

For a deeper dive into how performance management systems can encourage collaboration, check out the article Ivan Matviak and I wrote for Harvard Business Review: "Performance Management Shouldn't Kill Collaboration."

How is your firm aligning collaboration and compensation to drive results?