Compensation Factors and the Three-Point ShotDavid Cruickshank
The basketball rule that awards three points for a longer shot was a seen as a “circus shot” when first introduced in the NBA (1978). The shot did not become a significant game-changer for many years. Larry Bird would make about three attempts per game. Stephen Curry today makes ten or more attempts per game. But the use of the shot has not arisen from just the skill levels of individual players. Team tactics and data analysis have also been game changers. Teams now calculate the value of the three-pointer and deploy strategies to get more clean attempts.
What does this have to do with partner compensation in law firms? The three-pointer gives the shooter a 50% premium on a successful effort. What if we were to substitute “collaborative business development” (vs. individual) for “three-point shot”? We would reward partners who collaborate 50% greater weight for their efforts, compared to the solo business-development effort.
Could this be the game changer for firms who truly believe that “more collaboration” is essential to revenue growth?
First, a law firm’s compensation system would have to contain some weighting components, even if only for a bonus pool. Second, a firm would have to be willing to articulate specific business-development activities that can be weighed (not just a “bucket of hours”). Third, the firm would have to distinguish collaborative business-development activities from individual efforts. I reviewed this distinction in a previous Communiqué article.
We could apply the three-point shot rule to financial performance and business development. For example, a collaborative origination (where partners agree to a roughly-even split) could be given 50% greater weight in the compensation metrics. This does not mean that 50% more revenue comes in, but 50% more credit would be given.
In business development, firms constantly bemoan the lack of cross-selling. Consider these business-development performance factors that could receive a 50% greater weight:
- Partner engages in introductions, meetings and sales activities to obtain work for partners in other practices.
- Partners jointly develop and present quality pitches and responses to Requests for Proposals.
- Partners work together to manage cross-practice projects for fixed fees.
As in basketball, individual originations and business development efforts will still be rewarded. Since collaborative efforts seem to be a “stretch” for many law firms, the additional work to get the collaborative credit should get additional rewards.
Now imagine that your three-point collaboration rule has been in force at the firm for five years. As in the NBA, you may discover partner performance that is game-changing for the whole team.