Our Objective Compensation Formula
As discussed above, shareholder compensation is determined by an objective formula. Our compensation formula tracks each shareholder's production (cash collected on a shareholder's time), client responsibility or "minding" (cash collected on files that the shareholder manages) and originations (cash collected on files originated by the shareholder).
Each year, the shareholders determine the total amount available for distribution. Thirty percent (30%) of this amount is then allocated proportionately to the shareholders based on origination, nineteen percent (19%) is allocated proportionately to the shareholders based on client responsibility and fifty-one percent (51%) is allocated to the shareholders proportionately based on production. Each shareholder is provided reports showing these figures for all attorneys. All financial information at the Firm is shared with every shareholder.
The administration of the compensation formula involves quite an extensive spreadsheet and the firm has modified the formula to address contingent fees, associate profit and certain firm service by shareholders; however, the formula is applied equally to each shareholder. The primary benefits of the compensation formula are:
- Shareholders receive the same production credit regardless of whether they work on a client file they originated or another attorney's file.
- The typical credit for origination is divided into two categories origination and client responsibility to allow for sharing between attorneys. Accordingly, an
attorney is rewarded for bringing in a client to the firm and where another shareholder manages the file; the minding attorney(s) is rewarded for servicing
and growing the client.
- All politics associated with compensation are removed from the firm.
- The delicate balance between rewarding originators and rewarding the working attorneys is maintained as evidenced by the fact that both the firm's high
originators and high billers have remained at the firm.
- Our compensation formula recognizes the varying contributions of all shareholders and the firm does not need to differentiate shareholders by de-equitizing all but the highest originators.