TRP 268: [Legal] Why Compensation Matters with Camille Stell

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high stakes headhunter, author, and professional speaker, Scott Love. You're listening to The Rainmaking Podcast, and my name is Scott Love, your host. Thank you for joining me on the show. Now, as I've mentioned several months ago, we started a separate series of our show on Sometimes Tuesdays. Every Thursday is still general business development discussions and interviews.

[00:00:40] But on Sometimes Tuesdays, we have legal specific topics that we're covering. Things that are very niche-y just for people in the legal profession. So if you're not in the legal profession on Tuesdays, I don't think those are going to help you as much. But if you are, then definitely listen to these on our Sometimes Tuesdays series. And by the way, you can also go into the show site, therainmakingpodcast.com, and look for the color code of a teal color to quickly find those that are legal specific.

[00:01:08] I'm excited about our guest today. Her name is Camille Stell. I first saw her speak at a managing partner roundtable where we shared the stage, and I was impressed with both her delivery and also her content. And she's just a really nice person that knows a lot about law firm partner compensation. In fact, she wrote the book called Respect and Insight to Attorney Compensation Plans. We're going to talk about that and how that impacts your organization.

[00:01:35] So if you work in the legal industry, especially if you're in a leadership role, this is definitely a show you want to pay attention to. You can connect with Camille on the show notes. All of her contact information is there as well as the link to order her book, and I'd highly recommend doing that. I've read it. I'd highly recommend that. As always, this show is sponsored by Leopard Solutions, legal intelligence suite of products. Firmscape and Leopard BI. Push ahead of the pack with the power of leopard.

[00:02:04] And now here's my conversation with Camille Stell. Thanks for listening. Hey, this is Scott Love with the Rainmaking Podcast. Our guest today is Camille Stell, and our topic title is Why Compensation Matters. Camille, thank you for joining me on the Rainmaking Podcast today. I'm so excited to be here, Scott. Thanks for having me. Me too. And it was nice to share the stage with you at David Ackert's Managing Partners Roundtable.

[00:02:31] I really enjoyed your presentation, and that's why I wanted to invite you here, because the topic of compensation is something that is important for partners. And let me get right to it. Let me ask this question, why does compensation matter, Camille? I think when we give people a number, like a salary, when we give people a number, they see it as assigning a value to them.

[00:02:58] And I think if law firm owners or any other professional services business owner can keep that in mind, it really can change the game on compensation conversations. Because the people often assigning those numbers don't really mean it as a value, right? This is a market conversation. This is what's going on in the economy. You know, this is just a part of our budget.

[00:03:28] Yet the individual receiving the offer or getting that salary really sees it as this is the value I bring. And this is what you have to say about me. So compensation conversations, I think, can get emotionally charged. And sometimes business owners struggle with that. They don't quite understand where's all the emotion coming from.

[00:03:56] But it's about the respect factor. That's interesting. So let's kind of break this apart. It looks like we have two sides and two perspectives we need to keep in mind. We have the partner that's looking to join that firm. And then we have the firm itself. And within the firm itself, as you know, it's not just one person that says, yes, this is the offer. That's what's unique about professional services firm is that there is a lot of cooks in the kitchen right there.

[00:04:22] And with what you've seen kind of looking at the law firm side, who are the people that get involved in making these decisions about partner compensation? It's interesting, right, from the recruiting perspective that you have. I'm sure you have a variety of conversations. Often there's a recruiting partner. There's a managing partner. There's a partner in charge of a geographic location. There's a recruiting committee.

[00:04:50] There's a compensation committee. There's a lateral hire committee. So to your point, there are many cooks in the kitchen. And I think, again, the process can often get in the way of there being some take stock of the emotional component of making a move, you know, valuing what the lateral brings to the table.

[00:05:19] And then I hope we'll have time to talk about this in a little bit. But the whole world of new attorneys, new associates and the feelings that they have around compensation and value, which is slightly different with the main difference being compensation is often in a black box in a law firm.

[00:05:45] And lateral hires are getting a little more exposure to the black box because they're often going to come in at a partner level. But new hires, new lawyers are coming into these very opaque systems. And I can tell you for that new generation of lawyers, they believe in transparency. It's a value culture to them.

[00:06:12] And so that's that's another dynamic that's that's fraught with difficulty in negotiations. Absolutely right. So from the law firm perspective, with all the things that you mentioned, what do you think are the biggest challenges they have in coming up with a number that will be new perspective, lateral partner and won't upset everybody else that's been there for 20 years? What do you think those main problems are that they have with that can be all?

[00:06:38] One of the challenges I see is bringing in when firms are looking to expand practice area and they may be bringing it in a practice area that is that generates revenue in such a different way. So let's say, for instance, you've got a really strong business law firm and they say, wow, there's this hot shot litigator out there that's interested and we want to bring them in.

[00:07:05] Litigation practices and business practices make money in such different ways and trying to make sure that everyone has adequate expectations, realistic expectations coming in and understanding that the results. Let's say this litigator is coming in fresh off of a huge win.

[00:07:32] That number can be blinding to everyone. The business lawyers may not understand is that big win was seven years in the making. And they look at that number and say, oh, wow, this is going to be a great hit to our bottom line for the next seven years.

[00:07:51] And so having a conversation that really aligns the difference in investment in practice, you know, litigation practices tend to be, you know, people heavy, cost heavy, you know, wild swings in revenue and expenses. And for that stable business practice, they are very unaccustomed to that.

[00:08:18] So making sure that they understand what that process looks like, that can be a real challenge. Yeah, right. Have you ever seen firms that have had to make changes to how they determine comp before? Yes. Tell me about that. I've definitely seen, quite frankly, you know how most consultants are called in after the fact, right? When there's a problem.

[00:08:42] But I think folks in your role, I think business professionals listening to this conversation, they can really help alleviate some of those problems by being willing to address compensation and how compensation is determined before a big challenge occurs. But often I see it after the challenge has occurred. Let's say the new litigator has now been at the firm for two years.

[00:09:10] You know, they are getting this really big salary, but the number of the amount of revenue just doesn't show that reward yet. And so there's some scuffed up feelings around the partners who've been here and been working hard and are now having to share that piece of the pie. And so that's when I see some firms say, hey, it might be time for us to consider a new compensation system.

[00:09:38] And so they come in after the fact, but after the fact is better than never addressing it at all or, you know, waiting five more years to address it. So, you know, I've definitely seen firms change their compensation system. One, to accommodate problems or mergers or acquisitions that didn't quite go as expected. And Scott, this really wouldn't be a peer firm merging with a peer firm.

[00:10:07] This would really be that superstar lateral coming in to the firm. But then I've also seen firms exploring new compensation systems with a new strategic mindset. Maybe they've got a new partner in charge. Maybe they've got a new managing partner. Maybe they're just not seeing the results in their retention and recruiting efforts that they want.

[00:10:33] And they begin to believe that a review of the compensation system could be a link that helps fix that problem. And I often see that it is a link that helps fix that problem. That's great. What do you think is the correct mindset that a firm should have if they're making adjustments to comp? Is it we want to encourage collaboration and sharing of information among colleagues? Is it we want to reward those people that are bringing in the work so they don't go somewhere else?

[00:11:02] Is it we want to really keep our tax partners happy and our RISA and executive comp people happy that aren't necessarily originating work, but we really need them? What have you seen are kind of the main mindsets or strategies that firms are looking to accomplish as they make changes and adjustments in comp? So I think some of the successful firms that I've seen are looking at a couple of things.

[00:11:29] One is a shift toward rewarding team contributions. So typically people perform the behaviors that are rewarded. You want me to make money. You set my goal as a billable hourly requirement. I'm going to knock that out of the park. But sometimes that is to the detriment of the firm and the firm contributions.

[00:11:55] So I see some firms moving away from just let's have extraordinarily high billable hours at the expense of everything else to let's reward some team contributions. And a quick example of that would be proper delegation within the team. Right. It's great if you've got that superstar bill in 2300 hours a year.

[00:12:20] But what about somebody at the top who instead of just they bill the 2300, they rain make, they bill, they delegate. And then associates, junior partners have the opportunity to take on more work. And with their rain making, they're just bringing in more work. So let's really reward team results.

[00:12:48] Another thing I see firms doing is they're looking at the challenge of equity partnership that has a lot of challenges built into the system. Right. And so in big law, it's not been surprising that there are non-equity paths. Often that's not by choice. That was maybe a sign.

[00:13:13] But what I'm really seeing is a lot more options around career paths and with non-equity not being frowned upon. Right. And it's not any sort of punishment. It is a place where people might come in and out of their career based on certain life decisions and seasons of life. And it's a little bit more of rather than just a ladder straight up.

[00:13:41] It's a lattice back and forth across. And, you know, firms can sometimes use that to their advantage to manage maintaining a good, strong workforce, rewarding appropriately at different times and letting people find the right place for them and not assuming that everyone is going to want the peg of equity partnership. That's interesting.

[00:14:09] I like the way you phrase that, that it shouldn't be something that's frowned upon. And some firms kind of build that into their culture where they don't make it a big thing internally. They don't describe people as equity or non-equity. And they all come to the retreat and everybody feels like they're on the same level. And I've seen some firms that have gotten rid of the two-tiered one term. I've seen some firms that go from a one-tier to a two-tier. It's almost like there's no best answer. You have to find the best answer that works for what your goals are strategically. So that's really interesting.

[00:14:39] Agreed. So let's kind of look at the partner that's thinking about moving to another firm. Why would compensation matter to that partner? And what would be the main variables that partner should keep top of mind when lateraling to another firm in regards to compensation, Camille? Compensation can really drive the culture of a law firm.

[00:14:59] And depending on what the lateral is looking for, the compensation plan may be the answer to some of the questions of what they're looking for. So why are they leaving their current firm? Maybe they don't feel respected. Maybe they don't like the direction the firm's going. Maybe they feel their growth is being inhibited because of the partners above them.

[00:15:28] And you ask all of these questions during the interview, right? But sometimes it's hard to wonder if what you're hearing is the great spiel or if it's really how the culture is at the new firm. And often when you dig into the compensation plan, it'll help you to understand, you know, oh, they're rewarding billable hours. That tells me a little bit about the firm. Or, oh, they reward mentorship.

[00:15:57] They reward this non-billable function, this leadership function. Oh, they have a scorecard, a compensation scorecard. I don't have to ask a ton of questions. I can look at the compensation scorecard and find out what some of their values are. Yeah, interesting. And then I know that there's a season, and we all have heard it. It's called comp season. And people kind of disappear for three weeks.

[00:16:24] And you've got the committee that people either love or don't love that's doing the comp. And it's like this real stressful time when partners say, well, call me in three weeks when I know what my pay is going to be for next year. And sometimes they have to fight to get paid what they think they're entitled to. What do you think about that whole comp season and how partners have to fight to get paid within their firm? What do you think about that, Camille?

[00:16:49] You know, Scott, the other conversations I have a lot with law firms is about succession planning and, you know, comp and succession and path to partnership. So much of that ties together. But I have talked to so many managing partners or partners who have said, if I never have to serve on another compensation committee or await the news of another compensation committee, it'll be too soon.

[00:17:17] So, Camille, help me work my way into a succession plan. I can't do this anymore. I think that people sitting on the committee hate it as much as the people waiting for the committee to do their work. And I think it would be great if firms could get away from that lack of transparency. Great, I know who's on the comp committee. And great, I know they're huddled up for three weeks.

[00:17:47] But what are they doing? What are they talking about? What are they measuring, Mia? Is it my last great win? Or is the time I fell on my face what's top of mind with them right now? How are they measuring me? What does the pie look like? What's the revenue been this year? What are our expenses? There's so much opaqueness around those things.

[00:18:13] And I think if law firms could find themselves in a position of trust and developing a system that they believe in and their partners and associates trust them and trust the system, some of that stress could go away. Yeah, right.

[00:18:37] And to your point that you made just a few minutes ago about a compensation plan needing to fit the firm, there is no one size solution. You know, I am not here to say, I've got the magic solution. Let me tell you about it. But each firm, there are some qualities of successful compensation plans.

[00:19:04] And many firms have not looked at their plan in quite a long time. And so, you know, looking at that plan under new eyes, I think, can do wonders for firms. So tell me a little bit more about that. Let's go down that path again about a law firm leader or a group of leaders are looking at making adjustments. What should they be looking for? So what lens should they be looking as they make adjustments of their comp plan, Camille? Right.

[00:19:32] So, again, I really like the thought of having a compensation plan that supports the firm's strategy. So work in connection with your strategic plan. If you don't have a strategic plan and you're examining your compensation plan, then you probably have been doing the same thing the same way for a very long time. So it might be time to take a fresh look at a lot of things.

[00:20:01] But create, you know, a plan for growth, for retention, for retirements, for succession, and create a comp plan that rewards that. For instance, retiring lawyers often don't want to retire because they don't want to leave that good gig behind them, right? And it's kind of all or nothing. You know, you bill and you get rewarded. You originate and you bear that reward for a long time.

[00:20:31] Some of these plans are not forward thinking. And so think about things like sunsetting origination fees, allowing origination fees at some point to become firm wide. When you brought in that great client 20 years ago, you got your reward. But now that's an institutional client of the firm.

[00:20:59] And many people serve that client. And there should be a different reward system for that. And maybe you can create some trailing profits for that retiring partner. Having transparency for retention and recruiting is really important in your compensation plan, right? So that people who are in that magical, you know, seven to nine years where they're so valuable to you,

[00:21:27] but you're not quite ready to make them equity. Let them know where they stand because otherwise they're going to go down the road and find a better opportunity. And it's not because somebody's offering them a ton more money. They may be just offering them the next step that they are unsure of when they're going to get that with you. So transparency, build that into your new comp system. That's a great point.

[00:21:56] And I've even told partners that if your primary motive to move is just money, that's not a good enough motive. And most partners move for issues related to leadership and strategy. And pretty much everything fits in those two buckets. But I'll explain to them that when you're with the right firm that aligns and gives you opportunities and things that I call not just connection points, but even force multipliers, that can really move you significantly further ahead, not in making money,

[00:22:23] but in developing your practice and your value to your clients, expanding it, building trust, etc., scaling it. That's going to lead to more money down the road. But don't start with that. Look at the firm. Look at the opportunity. Look at all the components. And it's so interesting because I just want to move on. I want to make more money. And I'll even tell some people, I don't think you should move. I'm in the business of telling people that you should. And I don't think you should because I don't think there's enough of a motivation there for that.

[00:22:51] So this is a really interesting conversation. There's so much more we could dig into this. I'd love to have you back on the show. But if you could summarize, Camille, three action steps, maybe suggestions, that you would give to those partners that are running law firms in a leadership role about evaluating and looking at their comp. What would those three suggestions be, Camille? So number one, audit your compensation system.

[00:23:20] Take a good look at it. Gather data on how you make decisions. Put your process and procedure in writing. Because you may say to yourself, oh, we've got a great system. Well, if you can't define it, it might not be so great. So audit your system, gather your data, outline your values. All of that, I would say, is part of the audit.

[00:23:50] Number two, I would say align your compensation with the strategic behavior that you want. Create a firm that is holistic and healthy and a good place to work. So maybe equal focus on revenue as leadership, collaboration, and contribution.

[00:24:16] And then number three, I would say increase your transparency and your communication about your compensation system. Don't just go in a huddle for three weeks during comp season, but actually talk about it through the year. Dispel some of the myths of the compensation season.

[00:24:42] And I think you'll experience less surprises after compensation season ends. Danielle, that's great. This is fantastic. This is insightful. Thank you for sharing your wisdom with us today. And tell our listeners, what do you do? What do you have? What would you like them to know about you? So I co-authored a book on compensation with another legal professional, Brenda Barnes. She and I wrote a book about, it's titled Respect.

[00:25:12] You know, what we think is so important about compensation, respect and insight to law firm compensation plans. And you can find that book at lawofficemanagementbooks.com. I think, Scott, you're going to be kind enough to post that in the show notes. Absolutely. We'll put that link in the show notes. You can also buy it on Amazon. And there's a Kindle version of it as well. But I think it'll answer so many questions for your readers.

[00:25:41] And it'll help them create their own plans. And then I'd love for folks to connect with me on LinkedIn, LinkedIn backslash Camille Stale. I do enjoy having conversation with folks about their law firm plans and what they want to do with their compensation systems. So it's a great place to reach out to me. That's great, Camille. We'll make sure to put all of that information on the show notes.

[00:26:07] So for everybody listening, go to the show notes where you hear this podcast and you'll be able to connect with Camille directly. Camille, thank you again for being here today. Thank you so much for having me. I've really enjoyed our conversation. Thank you for listening to the Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com.

[00:26:35] To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit theraingmakingpodcast.com.