Unlike most law firms, shareholder compensation at Flaster Greenberg is not determined by a subset of shareholders; but rather, by an objective formula equally applied to all shareholders. The effect on the firm of having this form of compensation system is dramatic. The typical politics present at many firms is absent. New shareholders need not worry about alliances, voting blocks or existing loyalties among more senior attorneys.
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 minding 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, and most important, 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 financial credit for origination is divided into two categories - origination and minding, which allows attorneys to share credit for client acquisition and management. Accordingly, attorneys are rewarded for each step in a client relationship - bringing in clients, managing the file and performing the work. This means that minding attorneys are rewarded for servicing and growing the client.
- 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.
- The dynamics associated with compensation are removed; resulting in a work environment where attorneys get to practice law, not worry about internal politics.
Our belief is that when shareholders are treated as business owners, they act like owners and have a genuine concern for the long-term health and success of their business.
For more information, contact Karen Roberts, Director of Human Resources, by emailing email@example.com.