"Optimal Partner Compensation" Revisited: Fundamental Fairness

A few days ago I received this email from a reader, with respect to my "Optimal Partner Compensation" post:

"I like your point of view, but with one question: how do you calculate/compare the 30 percent kicker [up or down] at the end of the comp cycle without a formula, particularly in a middle- to large-size firm?"—Dave [from an AmLaw 100 firm]

Here's my response:

The short answer to your question is, I think, two-fold:  First of all, a formula always makes life simpler—no question about it.  Particularly when everyone understands the formula going in ("transparency"), it's hard for anyone to argue they were surprised/disappointed at the end of the year. 

The biggest source of discontent with compensation is always the catch-all complaint that it was "unfair."  By definition, if there's a formula and one behaves all year long based on the metrics in the formula, it's  hard to complain that it was "unfair"--one can of course take issue with the metrics themselves, but that's a different topic.  You cannot argue that the rules were changed in the middle of the game or "interpreted" wrongly--because it's a formula, there's no "interpretation" involved. 

But the problem with formulas, IMHO, is like the old joke:  "For every problem, there's a solution which is obvious, simple--and wrong." 

Bringing me to the second point:  I just don't believe as a matter of conscience and my (limited!) understanding of human nature that a year's worth of complex professional behavior and activity can be reduced to a formula.   As they say, "stuff happens." 

Just hypothetically, imagine that an important part of The Formula is hours personally billed and collected by a partner (not unreasonable as a component, although I would argue overweighting personal-billables can lead to "hoarding," consciously neglecting associate development, and other anti-social behavior).   Now suppose a key practice group leader decamps early in the year to a competitor, and you or I suck it up and step into the breach left by the departure, for the good of the firm.    I will bet our billed-and-collected hours would not be what they would have been had we stayed "home" in our familiar practice area with our familiar clients. 

But should we really be penalized for doing what's best for the firm? 

You get my drift.

Moreover, there's still life to the notion that partnerships are, if not for life, at least for the long run.  The  implication of this, I believe, is that people can forgive and understand what they might perceive as "minor" deviations from perfection from year to year if there is an ongoing solid consensus that over the long run the firm rewards people fairly. 

As I said in the original post, the acid test is if over time and across all partners, people will agree that "yeah, it seems about right."  Never under-estimate the power of humans (and lawyers in particular!) to sniff out fundamental unfairness—and its virtuous opposite.