the partnership

3 times it works well … and 2 times it doesn’t.

by marc rosenberg
partner comp: art & science

the harvard business review published an intriguing article on compensation titled “rethinking rewards” written by alfi kohn, who describes himself as a leading critic of competition.

more on partner compensation: why compensation and buyout plans must be synchronized | how business entity type affects partner income | paying for current vs. historical performance | partner pay in retirement transition period | how to pay non-equity partners | 5 types of partner evaluations | how large and small firms allocate income | partner pay: recapping the compensation systems | partner pay: the declining importance of book of business | 3 non-performance-based comp systems | 3 subjective compensation systems | partner compensation 101 | how partners view compensation: it’s not all about the money
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says kohn: “it is difficult to overstate the extent to which most managers of people believe in the redemptive power of rewards. certainly, the vast majority  of  companies  try  to  motivate  employees by tying compensation to performance. but research suggests that, by and large, rewards succeed at securing one thing only: temporary compliance. they do not create an enduring commitment to any value or actions. a kick in the pants may produce movement but never motivation. rewards do not alter the attitudes that underlie our behaviors.”
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transitions can be affected, too, if you don’t handle this.

by marc rosenberg
partner comp: art & science

coordinating how the partner compensation and partner retirement/buyout plans are structured is critical.

more on partner compensation: how business entity type affects partner income | when a firm tanks while a partner soars | how profitability affects income allocation | paying new partners and lateral hires | 3 rules for promotion to partner | should the mp be the highest paid partner? | integrating partner comp with strategic planning
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one of the biggest complications for firms changing their partner compensation system is addressing the effect it will have on their partner retirement/buyout plan.
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not as much as you might think.

by marc rosenberg
partner comp: art & science

here’s the challenge: firms are rarely able to complete their internal accounting in time to finalize their income and make final partner distributions prior to the end of their fiscal year, which for 90 percent of all firms is dec. 31.

more on partner compensation: when a firm tanks while a partner soars | when partner vacation becomes excessive | management stipends: who, how and why | paying part-time partners | the 8 basics for data-based partner performance evaluations | crash course: operating a compensation committee | why firms use partner comp formulas

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on dec. 31 of each year, firms still have a sizeable bonus pool to allocate. by the time the entire compensation process is completed, it could be february or march.
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adjustments during the year may be in order.

by marc rosenberg
partner comp: art & science

assume this: an eight-partner, $7 million firm had income per partner (ipp) the prior year of  $350,000.

more on partner compensation: paying for current vs. historical performance | partner pay in retirement transition period | how to pay non-equity partners | 5 types of partner evaluations | how large and small firms allocate income | partner pay: recapping the compensation systems | 5 other systems for paying partners | why firms use partner comp formulas
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in the current year, for whatever reasons, the firm’s revenues decreased to $6.5 million and ipp sank to $300,000.
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it’s not usually the time off that’s the problem, it’s the pay.

by marc rosenberg
partner comp: art & science

if there is a practice management abuse that makes me want to wring a partner’s neck, this one is a great candidate: partners who take a “clearly excessive” amount of vacation every year, maintain that they are working full time and expect their compensation to be unaffected.

more on partner compensation: paying for current vs. historical performance | how profitability affects income allocation | paying new partners and lateral hires | 3 rules for promotion to partner | should the mp be the highest paid partner? | integrating partner comp with strategic planning | partner pay: the declining importance of book of business | 3 subjective compensation systems | how partners view compensation: it’s not all about the money
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the partners committing this abuse are almost always founding partners, rainmakers or a former mp. in all of my experiences with this problem, the firms were under $10 million.
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do you value originated and inherited book the same?

by marc rosenberg
partner comp: art & science

this nuance is recognized more effectively at larger firms where, to preserve one’s income or merit an increase, partners must demonstrate proactive contributions to the firm year after year. at smaller firms, partners are often able to maintain their income largely based on past performance.

more on partner compensation: how profitability affects income allocation | management stipends: who, how and why | paying part-time partners | how to set the managing partner’s compensation | partner pay: open vs. closed compensation systems | 11 points in designing a partner comp system | what partners earn and how they earn it
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partners who perform well every year:
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