Partner Compensation Models;Behind the Numbers; DEI Thesaurus
ALM Pacesetter Research released its "Innovation in Law Firm Partner Compensation Models" Report on June 5th ("Report"). Compensation is critical to both retaining current partners and attracting lateral partners. 63% of partners surveyed by ALM noted that compensation is the most impactful factor influencing their decision to explore partnership at a different firm (Report, citing ALM's 2025 New Partners Survey Results Study).
Partners tend to be more satisfied in transparent comp systems, with the Report noting "a significant overlap between respondents who indicated that partner salaries are 'completely transparent' and those who reported being 'very satisfied' or 'satisfied with their compensation.'" The Report noted that "equally important is ensuring that partners clearly understand the behaviors needed to advance their individual success to produce those behaviors."
According to the Report, innovative firms are increasing the bonus pool to reward high performing equity partners; implementing claw backs and deferred compensation to retain partners; and utilizing forgivable loans, which are not reported on a partner's compensation schedule, providing law firm leadership with a mechanism to attract or retain particular partners without causing friction among the partnership at large.
The Report recommends utilizing both year-over-year data and multi-year data to effectively track key performance measures and capture both short-term and long-term goals.
Behind the Numbers
In conjunction with the Report's release, ALM hosted a panel webinar. The most interesting insights came from legal services consultant Tim Corcoran, who offered several critiques of the traditional law firm management model, leading with the observation that "No one in a law firm is paid to think about tomorrow."
· Reward underlying actions: Corcoran noted that firms often reward results, but not the underlying actions. As an example, he compared two partners, one who is gifted a large book and another with a more modest book developed through his/her own business generation efforts. The partner with the larger book would likely be paid more, despite the fact that the partner with the more modest book has taken more actions toward and show more acumen in growing the overall pie, by introducing new business to the firm.
· Look behind the numbers: Corcoran noted that high-rate practices are viewed favorably, but that firms should look behind the numbers to assess profitability; in other words, a higher-rate practice that utilizes substantially more resources or commands out-sized compensation may be less profitable compared to a relatively lower-rate practice. Relatedly, a partner with a lower-rate practice may be in the highest quartile for billing rates for his/her practice in the market, while a partner with a higher-rate practice may be in the lowest quartile and accordingly should be subject to rate-hike discussions, despite having a high rate within the firm.
· Establish credit sharing guidelines: Corcoran notes that law firms need well-defined but succinct credit sharing guidelines "somewhere between 0 and 75 pages in length."
Corcoran recognizes that all of the above takes resources, the chief of which is time. And that time is a very scarce resource for law firm management, which brings us back to his statement that no one in a law firm (or perhaps not enough someones) is paid to think about tomorrow.
DEI Happenings
Law firms generally appear to be changing the language of their DEI initiatives but largely leaving the initiatives in place; their clients are taking a similar approach, i.e., "diversity" becomes "talent acquisition," "equity" becomes "fairness", and "inclusion" becomes "belonging" (War on DEI Spurring Companies to Pull Out a Thesaurus, Not a White Flag, Chris O'Malley, 5/5/25, Corporate Counsel).
Goodwin attracted media scrutiny late last month, after terminating its fee agreement with a recruiter who criticized the firm's decision to withdraw from Mansfield, as well as SEO (Sponsors for Educational Opportunity) and the Leadership Council on Legal Diversity (Goodwin Locked in Public Feud with Recruiter Over Diversity Program Decisions, Patrick Smith, 5/29/25, American Lawyer). According to Diversity Lab Founder Caryn Stacy, Mansfield is alive and well and "the vast majority of law firms remain dedicated to these equal opportunity efforts" (After Goodwin Makes Mass Disclosure to EEOC, Observers Scrutinize Firm Approach, Abigail Adcox, 6/10/25, National Law Journal). Stacy noted in a recent podcast that more firms had re-upped for the 2025-26 cycle than at the same point in 2024.
