Five Difficult Questions About Associate Compensation

In our compensation practice, my colleagues in Walker Clark and I are seeing associate performance emerge as a central, far-reaching issue that links directly to profitability.

Two specific, but related, questions almost always float to the surface of the discussion:

• Do we need to include a performance component in the base compensation or salary that we pay associates in order to motivate them?
• How can we offer a separate performance bonus without it degrading over time into an expectation or assumed entitlement?

There are three other subtler, but more important questions that many law firms overlook:

• What specific performance should we reward and how can we measure it accurately and equitably among a group of associates with different practices?
• Even if we offer handsome financial incentives for performance, do our associates have the skills that they will need to earn the rewards?
• How can we introduce a strong performance element into associate compensation without producing an "eat what you kill" environment that could be destructive of our firm's professional culture?

To some extent, associate compensation has become even more complex than partner compensation. In addition to rewarding past performance, associate compensation should also have a forward-looking perspective, which incentivizes and rewards the development of business and professional skills and performance that associates will need to become fully productive partners. As suggested by the final "hard question," the cultural implications of how a law firm rewards associate performance could last for a long time, especially after the performance-driven associates become partners and inherit custody of the culture of the firm.

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