JK Notes
Compensation as a strategic issue
 what you reward
Issues of culture, networks
Different subfields have different expectations and ways of working (corp law works
more in teams)
Building new business – building a health practice, but it’s not turning anything yet
Brainard, Bennis, and Farrell Case
Issues in the case:
Use congruence model framework: identify problems and locate causes in each area of
organizational architecture. Find solution by intervening in cause-effect relationship.
Bring other pieces of architecture into congruence/alignment with solution.
What should a compensation system do? How to design one that recognizes multiple
ways to add value to firm and does not demotivate through feelings of inequity, etc.
In this case, know that solutions have to center on compensation. How to allocate
compensation points to partners while evaluating performance on multiple dimensions.
1. What problems?
1st stage:
--Difficulty agreeing on how to split the partnership pie while preserving
consensus and recognizing multiple ways to add value to the firm
--Breakdown in procedural justice
--Need to motivate people to bill more and bring in new business while
preserving the reputation and culture of the firm.
--Managing short- and long-term contributions. Seniority = long term
reward
--Getting consensus; acceptance of outcomes without anger/resentment.
--Politicization of process; election of Compensation Committee members
--Best business getters and billable hours people are individualistic; not
team players.
Keeping compensation system aligned with culture and strategy
2nd stage:
--Declining income (more pressure)
*More competition
*Rising costs (Associates salaries)
3rd stage: Factors making it harder to reach consensus
--Growing diversity (age, class)
--Growing size (hard to mange information; communication)
--Growing departmental segmentation
*More departments
*Divergent department business models & cultures
+Corporate
--Politicization of governance
*Retirement of founding partners
*Election of Compensation Committee members
2. Strategy
Product differentiation—occupy product niche
Reputation: growth through referrals
Compete on culture—
Important in a law firm
--Dilemma: strong shift to Wall St. business model could destroy their
distinctive core competence and niche strategy.
Shun big-city, business-oriented Wall St. model
--High quality law; craftsmanship; “over-lawyer”; top grads; elitist
--Not obsessed with business and billing hours
--Professionalism
3. Tasks: what tasks contribute to the goals/success of the organization?
Similar to Allentown case: where is profit center?
Short-term: bill hours, bring in clients
Long-term: maintain culture of firm; serve clients well (may mean write-offs)
Individualistic? Some of it.
More teamwork than meets the eye.
Providing expertise to others within the firm (Jason as tax lawyer)
Developing a new business
Loss leades
Writedown and business origination issues: appear on the surface to be
one person’s doing, but team interdependencies exist.
4. Formal organization
Growing segmentation
--More departments (began as corporate, expanded into others)
--cultural/organizational differences among departments
*Corporate—more team-oriented-rely on other departments
*litigation-more individualistic, short-term oriented
*Reputation of firm has brought in clients; not individuals
*Some departments bring in bills; others not
+Trusts not
Culture and leadership declining as sources of integration
3. People issues;
Leadership succession
--Retirement of founder partners who Management Committee. (No one
could step into their shoes). Shift to election.
Growing numbers – hard to know everyone.
Growing diversity—age and class.
Less loyalty and commitment; more mobile
Recruitment issues: have they been hiring the wrong people?
Expectations of people; Motivation—retention; recruitment; turnover
3. Informal organization
a. Social networks
--Decline in cohesion
--Everyone used to know each other
--Easier to assimilate all info
--Teamwork in some areas: corporate law
b. Culture
--Conscious of building culture: atmosphere, spirit
--Egalitarian, value autonomy, not a sweatshop
--Serve clients (long-term relationships; reliance on referrals)
Solutions at two levels:
1. How to solve the compensation problem: assigning weights to criteria,
gathering information on performance, allocating points in a procedurally
justice way, motivating more business getting and billing without sacrificing
values of firm.
2. How to manage the culture and strategy of the firm. More fundamental
problems. Rising politics; lack of consensus.
General solutions?
Stick with electing people to Compensation Committee?
How to manage all the data? Importance of continuity.
Reward people for the contributions they make to the success of the firm.
What is success?
What weight should be attached to getting business as opposed to innovation,
long-term.
What weight attached to developing new business, such as Piccoli’s health
practice/
What weight attached to being a specialized resource person such as Jason?
Are all the right dimensions included?
Should the criteria for compensation vary among departments?
Did they make a mistake in paying such a premium for Paula?
Have they made selection errors?—hiring people who didn’t fit the firm?
Should they have tried to hire people who fit the culture—sought intrinsic rewards
Is Paula o’Brien OVErcompensated?
Paul Piccoli—new health practice?
How to reward Jason
Thornton Gray
Billable hours
Origination credits
Teamwork; cooperation
Collections
Write-downs