Incentives for Lawyers: Moving Away from “Eat What You Kill”

The authors study an international law firm that changed its compensation plan for team leaders to address a multitasking problem: Team leaders were focusing their effort on billable hours and not spending sufficient time on leadership activities to build the firm. Compensation was changed to provide greater incentives for the leadership activities and weaker incentives for billable hours. The effect of this change on the task allocation of the firm’s team leaders was large and robust; team leaders increased their non-billable hours and shifted billable hours to team members. The firm’s new compensation plan (combining an objective formula with subjective evaluations) is the fastest-growing compensation system among law firms today.