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Best Practice: Law Firm Associate Compensation - How to Deal With Overpaid Associates

Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC

Q. I am the managing partner of a twelve attorney defense litigation firm in Santa Monica, California. We have four partners and eight associates. Associates are paid a salary. We have several associates that are being overpaid - they are being paid $150,000 - $180,000 and just barely generating $300,000 in working attorney fee receipts. I would appreciate your thoughts.

A. Do they have enough work? Do they put in enough hours? Are they good time managers and good timekeepers? If they have enough work - then meet with each of them - lay out the expectation of 1800 hours and consequences for non-achievement. If they have issues with time management or time keeping impress upon them the importance of improving these skills - in the meantime they may have to simply put in the extra time to get in the hours.

Suggested consequences:

  1. For those not meeting expectations. Manage and coach them in real time- but be firm about your expectations. You are paying them a salary for a certain level of expectations and performance. If there is not enough work reduce their working hours and compensation. Consider production in future salary reviews and bonuses. Don't pay them an incentive bonus to perform the work you are already paying them to do. In worse case situation you may have to reduce salaries.
  2. For those exceeding expectations. Reward them with a performance-based discretionary bonus. But when advising them of the bonus advise them specifically what it is for and that is it a variable bonus and award for specific performance exceeding expectation. 

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John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics and author of The Lawyers Guide to Succession Planning published by the ABA. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.

Posted on Nov 02, 2016 by Morgan Yingst | Comments (0)
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