Michael Roch | How Partner Compensation Can Undermine Your Firm’s Strategy

Elise Holtzman: Hi everyone, it's Elise Holtzman here, a former practicing lawyer and the host of The Lawyer’s Edge podcast. Welcome back for another episode. Most law firm leaders think they're compensating people fairly and believe their compensation system reflects what they're trying to build. But what if it's doing the opposite? Quietly rewarding partners for hoarding clients, avoiding collaboration and dodging the harder conversations about who actually controls client relationships. Today's guest has spent more than two decades inside compensation committees around the world, helping firms see the gap between what they say they value and what they actually pay people for. He's just wrapped up new research tracking how partner reward is shifting across dozens of countries and he brings a rare cross-industry view of what actually works. By the end of this episode, you'll have a clearer way to test whether your own comp system is helping or hurting the goals you care most about.

Before we dive in, today's episode is brought to you by the coaching team at The Lawyer's Edge, a training and coaching firm which has been focused exclusively on lawyers and law firms since 2008. Each member of The Lawyer's Edge coaching team is a trained, certified and experienced professional coach and either a former practicing attorney or a former law firm marketing and business development professional. Whatever your professional objectives, our coaches can help you achieve your goals more quickly, more easily and with significantly less stress. To get connected with your coach, just email the team at hello@thelawyersedge.com.

I am delighted to welcome my guest today, Michael Roch, the founder of MHPR Advisors, a consultancy that advises managing partners, boards and remuneration committees on partner compensation and governance. He spent more than 25 years working with law firm leaders across Australia, Canada, the UK, Europe and the United States and his client base extends beyond law into accounting, consulting and other professional partnerships worldwide. He trained originally as both an accountant and a lawyer before moving into consulting, which gives him a sharp eye for where compensation, governance and tax questions collide. He's the co-author of “The Partner Remuneration Handbook”, the first comprehensive book of its kind on how professional service firms should think about pay and governance and he co-leads one of the longest running global surveys tracking how partners are actually paid, now in its fourth edition, giving him a cross-market view into what's changing in partner reward right now. Outside the advisory world, he splits his time between Zurich and London. Michael, welcome to The Lawyer’s Edge.

Michael Roch: Hello, Elise. Pleasure to be here with you.

Elise Holtzman: I'm really glad to have you. And you and I were talking even before we turned on the recorder about this issue of compensation. It's so complicated inside of law firms. And you know and I know that if somebody had figured out the right system, every law firm would be doing the same thing. And yet we see that from law firm to law firm, philosophies about compensation and how people are rewarded financially can be so, so different. There seems to be this longstanding tension in these professional partnerships, law firms in particular, between rewarding individual performance, right? You've got a great lawyer, a great rainmaker and fostering real collaboration, even inside practice areas, but certainly across practice areas. And most law firms are struggling to do that well. So from where you sit, right, you're kind of at the intersection of how you run your firm and how you incentivize people and pay them. What do you think firms can do about resolving that kind of tension from a structural perspective?

Michael Roch: Sure, thank you. That's a great, great lead-in question. And the answer depends a lot on the type of firm you are and the type of things you want to try strategically. So when we look at a partner compensation system, we first look at three elements and we look at that in the context of where does the firm want to go, its organizational complexity, right? Is it a single office partnership or does it operate across the globe? And the cultural norms, so the values that the firm either says it holds or actually holds, because those three things will impact on how you do partner compensation. And then we look at partner compensation as a system, we essentially always look at three things. One, we look at the financial setup and that has to do with how profits are shared, how the firm talks about the financial side of compensation. The second side is what counts in the sense of partner performance, partner contribution. And then third is the decision making, the governance between a partner's input to the firm, a partner's contribution to the financial result that the partner has achieved. How does that tie into the overall structure for how partners are paid? So that's how those three inputs, strategy, culture, organizational context, infuse what the right answer is for the financial setup, the performance management, contribution management in our language and the governance, the decision making around that. That's the lens through which we look at everything in partner compensation. Now, having said that, let me answer your question, which I haven't answered. And that is, when we get into a US firm, most of the difficulty arises in that the firm has developed its partner compensation system, when it was much smaller than when we get to it. And a very small firm has to look at compensation in a very individualistic way, most of the time, because every single partner, what they do counts for the result of the firm. As the firm then grows in size, that need changes. So I need to look at feeding several practices. I need to look at, I'm looking at my client relationships more broadly than just the bits that I serve. And most firms miss updating what they're doing on compensation, or are stuck in old paradigms about how they do compensation. And that's then what causes the tensions that we then get hauled into to help the firm resolve.

Elise Holtzman: There are so many challenges that we see inside of law firms, particularly those that you just mentioned, where they're kind of making a shift from being the partner-founded firm and the guy's still there who started the place, to something more sophisticated, broader. Maybe they're opening more offices, they're bringing in more practice areas. What is getting in the way, do you think, when we talk about those sorts of firms, what is getting in the way for them, in terms of changing the compensation system to meet the moment?

Michael Roch: Usually two things at least. One is the daring to be strategically clear. What is it that we're looking to achieve now and how is that different from the past? Most firms fudge that, because they don't want to let go of their past entirely, or they're afraid that some partners no longer like that place so they try to fudge the outcome. If the purpose is clear, if we need to have many, many more offices and many more practices, this is why, this is how it benefits all the partners as a whole, then that discussion becomes a lot easier. And then the second part is being stuck in old paradigms. So, when I'm looking at a classic law firm, where everything is about a partner's own originations, right? My fees and me, or my matters and me, or my clients and me, that by definition puts you at odds with a firm that is looking to grow across different areas of practice, across different offices. And it's the failure to let go of some of those old paradigms that will then get you in the situation where eventually, what you have either is a hodgepodge of band-aids and no longer works, or you've got unhappy partners who are no longer, either they're unhappy and they go, which might be a good thing, might be a bad thing, don't know, depends, or worse, the firm does not move as fast as it otherwise could. So it's… and here's a difficulty, right? I mean, there's quite a few things that one can do to screw up a partner compensation system, but to affect a change, you have to show to the partners the opportunity. Hey, look, if you affect this change, then we could perhaps achieve X, Y and Z, but partners have to believe that, you know, my future is going to be fundamentally different if I affect this change in my outlook, my strategy and my purpose. And that then means co-commitmentally, here are the changes that we need to put in place in order to share our profits, share our gains in a good sort of way.

Elise Holtzman: Right, and what I see happening is that there are going to be some partners who feel and they're often the ones in power, they're often the ones that have influence in the firm, because some of them have been the most highly compensated, that they look at this system and they say, well, that sounds really great, but I'm going to be losing some money here. And so they're pushing back against it. There is a cultural aspect to this as well, I suspect and you know better than I do, because you see it across countries. But certainly the American culture is more of an individualist culture. And so do you think that that's part of it? Do you think that that individualist culture is a big part of it?

Michael Roch: Yeah, it is. When we work with a new client in a country, where we haven't worked before, we try to really understand the country culture, how that infuses, what is the self-understanding of what it means to be in partnership. And that is fundamentally different in the US, compared to the UK, compared to Germany, for example. And then we look at how does that shape the partnership culture and the firm's culture. So yeah, that is a big impact, but I don't want to make too much of it either. A lot of it has to do with values that we've lived for a very long time and what are we happy to keep and what are we happy to let go of, because it's no longer helpful.

Elise Holtzman: I know you mentioned that in your book and the speaking that you've done and you mentioned it a few minutes ago. You've said that a firm's compensation system really is a mirror of what it actually values, not necessarily what it says it values. If you could give me a couple of examples of situations that you've seen, where that's become evident to you, I think that would be helpful. And I'm curious, you know, when you walk into a firm for the first time, what are you looking for in that regard? And what are some of the things that you're seeing?

Michael Roch: When we work with a new client, the first order of business is to understand deeply what the client is all about, what they're looking to achieve, what the compensation system is and isn't. And a lot of time, you know, we have a briefing during a proposal process, or as we get to know this potential client, where the client tells us, hey, X, Y and Z, this is how our partner construct works, et cetera. I believe 50% of it, until we really get into it and see how it operates in fact, in practice, until we see how the partners perceive, how the partners perceive the compensation system, then we've got a complete picture of what, you know, how it actually operates. And the best example I have, some years ago, we were working with a firm outside of the US that said, you know, look, we're a managed lockstep firm, so 10 year accounts for a lot and you move up by a year, depending on how you do and then you might be able to come down, et cetera. Complete rubbish. They were operating a hardcore American-style meritocracy dressed up in a different way. So, like I said, we believe half of it, as we start working with a client. So, if you're asking what do we look for, in a compensation system, we look for everything. How do the economics work? If there are incentives, how are they structured? We look at what counts to receive a profit share. Is it just billings, or numbers, or supervised revenue, or originations, or whichever, or is it other things that count? And we also look at how, in our language, how does the contribution dialogue happen? Meaning, how does the partner get feedback about their performance? Is it just in the compensation memo? Hey, you know, you've had a great year, you've had these billings and, you know, good job, do the same thing next year. Or is it a bit more sophisticated? Look, you know, as an equity partner, here's the five things we need you to do in this business, based on your strengths. You know, we think you ought to do X, Y and Z. Can we, you know, ask you for some commitments that you can make, in order to, you know, help this office grow some revenue, or help this practice group develop, you know, these five clients or some such. So, we look at how actively is the partnership, quote-unquote, managed, which is a nasty word in law firms. I get that, but we look at that entire system and process. And then we also look at the compensation committee itself, how it operates, how it takes decisions, what processes, what standards, what inputs, data, metrics, measures it uses. Because I've been in a lot of firms where the managing partner says one thing, hey, we're looking to do this, this is what our system is and then actually you observe a partner compensation route. It's super educating, because then you see actually how people talk about a partner's performance, how that translates into compensation. And that, you know, so we take all those inputs and then we shape our picture and then we prioritize and say, look, this, given what you want to achieve, this bit is not working at all. We have to talk about that or these bits, you know, we can tweak it, but that's not your priority. So we prioritize and then we work it through.

Elise Holtzman: What do you think about the way in which compensation committees do their work? Some people in the US, at least and in Canada will talk about the black box, your compensation memo, or as I like to call it, the defending your life memo. There used to be a movie called Defending Your Life and it's, you know, you defend your life. I've done this for the last year. Here's why I think you should pay me a lot of compensation. The memo goes into the compensation committee and a number gets spit out back at you. And I almost laughed when you said, does the compensation committee say, hey, you've done a great job and this is what you should do going forward, or is there a more detailed view of it? And many times what I've seen is there's not even the first part, right? They just give you a number of what you're making next year. And that's it. And you're supposed to glean the information yourself from whether you went up a few dollars, or went down a few dollars. And so it's a black box for decision making. And then some law firms, everybody knows what all the partners are making. And in some law firms, you're supposed to guess what your partners are making and you have no idea where you stand. What do you think about the different ways in which law firms run those sorts of systems?

Michael Roch: On this defending your life as you called it, or the phone book of what I did this year. Reality is, it's a nice piece of work and it gets looked at occasionally, but it isn't going to create a big impact. Its impact is a lot less than what most partners, I think, it has. To me, it's a proxy for an absent performance dialogue that happens before I get to compensation. If I have a continuous conversation with my leadership team about what it is that I'm to do as an equity partner and here I do distinguish a bit between equity partners and non-equity partners and salary partners. But as a co-entrepreneur, as an equity person, I need to have a somewhat ongoing dialogue, not daily, but a triodic dialogue with my leadership team about where the business is, what do I need to do to help move this along. If that's robust and strong, then I have a lot less of a need for my once-a-year phone book that I have to write about all the great things that I've done. And, you know, if it's just self-directed, you know, I can go out and acquire 15 gas station franchisees. But if the firm wants to, you know, acquire private equity houses, like, you know, no connection between what the firm needs and what the department does. And I see a lot of that. So that's one aspect. So this phone book, I'm not a big fan of it. I'm a much bigger fan of periodic dialogue where there's a true discussion with my practice group leader or my group head or whatever the organizational structure is, to say, look, Michael or Elise, over the next 18 months and preferably beyond just my financial year-end, over the next 18 months, we need to achieve X, Y and Z. Here's how you fit in, so please help us do that. What commitments can you make? And then I get measured against that. Much better input for me, as a partner, much more motivating and a much better input to the compensation committee. Because if they just get my, you know, some revenue numbers usually and then my phone book of what I did this year, I have no way to really make a decision. And that, by definition, translates into more transparency as well, right, of what's expected, which a lot of partners, a lot of partners complain about, especially less senior partners, more junior equity partners. It's like, what do you expect me to do? Just do more work, build more clients, find my own clients, what do you want me to do? And they ask that because that performance dialogue is usually missing, or not effective, or underdeveloped, or whatever. And the second question that you have is around the transparency, which is, there's many, many, many, many aspects to this. So one is what's expected of me and what's expected of partners in my rough similar position. And that's a reasonable expectation to have, to have transparency about that. There's transparency about the outputs that I'm achieving, right? I'm entitled to understand how have I done in relation to all of this. And then the other side of the cycle stand the compensation transparency. So am I entitled to understand what my other partner's profit share is? There's many advantages to an open system and many disadvantages to an open system, or a closed system. Also many advantages, disadvantages, that depends a lot on, in part on culture, in part what I'm looking to achieve, in part on leadership philosophy and what it means to be a partner in the firm. Among equity partners, to keep it completely closed, as you know, you're supposed to guess what my other partners are making and there's a nice theory that partners don't talk about it. The reality is, you can't muscle them, right? You can't, you know, put the tape in front of their mouth. A different story is the transparency about the inputs that the compensation committee considers, when it makes its decisions. I'm not entitled to see all of the input that my compensation committee considers in detail, because that's why I've heard a compensation committee before. That's their job, to take that information and to do something with it. And a lot of firms, the way the partners say, I need to know, how did they get to that decision for that partner? Usually my best friend and my worst enemy, right? The partner got promoted with need to equity is like, I want to know, you know, why is it that there's this differential, right? But that's, you know, for the inputs, I'm not sure that I'm entitled to that as an equity partner. There, the additional input is how big the gaps are that I'm creating in the equity. So, small compensation gaps. So, if I've got an average profit per equity partner of, let's say, a million and I'm grading the compensation of my equity partners in $10,000 increments, I'm asking for problems. Completely material differences. But if I have gaps that are, you know, 150 grand at a time, it's going to be much more clear to understand, hey, yeah, you know, compared to what Elise is doing, I think I am worth 150 grand more, versus what she's doing, what I'm doing. But if the differential is always like around the thousands, it's like you can't articulate the difference as a committee. And that's when you have partners who are struggling. As we said at the outset of this discussion, there's many moving pieces and we need to understand all of them and be very careful what we tweak.

Elise Holtzman: One of the specific questions I have for you, is about origination credit. That can be one of the most sensitive parts of partner compensation, because it's driven by this additional work. It's not just, I'm doing really good legal work. There's something else that's driving it, additional effort, relationships. Firms obviously want to reward the people that bring in the work. But, and I know you've done a lot of work with Heidi Gardner, who's been a guest on the show and I've mentioned many times, on collaboration. What drives true collaboration and why do we care about collaborating? So, you know, quickly, we care about collaborating, because Heidi's research shows that the more people inside partners, inside professional services firms collaborate with one another, the more sticky those client relationships become, the more money the firm makes, the more money individual partners make. So if you want to drive collaboration and at the same time you want to reward the individuals who bring in the work, things start to get complicated. And you and I have seen, I have seen law firms that say you're not allowed to give, share origination credit. I've seen law firms that say you must share origination credit. I've seen law firms that leave it to the partners themselves to kind of duke it out and fight over origination credit. So how do you help compensation committees, design systems that reward the right instincts, without letting a very small group, let's say, of senior partners who have had these relationships for 40 years, hoard all the control over the firm's client relationships.

Michael Roch: Let me answer a couple of different subparts of what you're asking. One thing that you've said is interesting about originations is about not just being a good lawyer. And I will say that originations has nothing to do with the quality of lawyer that you are. It has to do with your sales success, we are using sales instead of business development intentionally just to make the point. It's how good of a salesperson are you. That is what originations is supposed to reward. The struggle is that in a small, okay, look, in a small firm, it's relatively straightforward. Because there I can say, okay, you know, this relationship came from this partner and, you know, this partner is doing the work, no problem, right? This person is doing billings, this person is doing originations, end of story. And when firms were small, when I started practicing law in 1996, God forbid, when firms were still quite a bit small, it was relatively easy and straightforward. And as IT systems developed, it was relatively simple to say, okay, you've got originating credit, you've got supervised credit, you've got work credit and that's how firms sort of ran through their systems. Firms are in a different space today. Most firms are a bit larger than that and are a bit more sophisticated than that. So that model is not working for most firms anymore. But that's where we came from. It's like simply it was there to look at relationships. Today, originations, many firms, many US firms, are not very clear about what they mean by originations. Is it ownership of the client? Is it new client generation? Is it matter-by-matter acquisition for a client? Is it all three, a combination? What is it? And as a result, you know, everybody's unhappy, because everybody thinks that origination credit is unfair and doesn't get allocated in the right sort of way. So first order of business for a managing partner is to be very clear and for the partnership as a whole to be very clear. What are the different types of sales behavior, sales results? Again, that language just to make a difference. Am I looking to measure and encourage? If I can't answer that question, I don't pass go, I don't collect $200. I have to go back and work that through. Because if it's a combination, or if it's a hodgepodge or sometimes this, sometimes that, then my origination credit is trying to do a lot of different things and it's not going to work. So that's one. Two, if I have origination credits, then I've got to put some rules around that, including how do I resolve proper differences about who should have allocated what credit. If I did that just to the client relationship partner, it tends to make for a very unhappy situation, right? So the best firms who have well-working systems have both a compensation committee and some small group of partners whose job it is to resolve these kinds of differences between partners along the policy. If I don't have that second aspect of the governance, it's really, really hard to make a credit system work around originations. I can give that to the compensation committee, that job, but then please, you should not resolve credits at the time it comes to allocating partner compensation. At that stage, it's too late. If you've got a very active compensation committee that looks at credit differences throughout the year, that's fine. It can be the same group of partners. But you've got to have somebody other than the people in the field, looking to resolve these differences, especially on complicated relationships, weird matters, cross-practice, cross-office stuff. That to me is table stakes. If we don't have clarity about what origination is and I don't have a decent governance around making sure that origination credits inputs are fair, I don't get to the collaboration discussion, because it won't work. So assuming I've got those things in place, then I can talk about collaboration. And you've mentioned our collaboration with Dr. Heidi Gardner, who is also a fantastic collaborator, I must say. Here we have developed a diagnostic called Smart Reward, which helps firms understand how their compensation system either undermines or encourages, empowers collaboration. And that has, there's an index for that, there's some benchmarking for that and that's been a super interesting diagnostic, for both, the clients and for us as well. And once I'm then looking at collaboration, then it's very much about, do we have a clear… Back to our earlier conversation, do I have clarity about what the firm is looking to achieve? Why collaboration is important? Why is it additive and not just to be a vocation of money? If I'm looking at collaborating partners versus those who don't collaborate, it's like, is there a financial benefit for collaborating? Is it a benefit? If I can prove that, then I go to the next step of trying to understand what does collaboration mean? Is it just cross-selling, which is a term that I abhor, or is it about developing relationships jointly, or is it about innovation in the age of AI? Is it about that? Can we put some numbers around that? And then it's about, you know, how does that get manifested in the financial setup, how our incentives are structured, how the profit sharing is structured and the decision-making process that the compensation committee uses. Because if we just, you know, if we talk about collaboration all day long and I've got my credits right, etc., if the compensation committee makes it easy on themselves and say, you know, it's all too complicated. I'm just, you know, it's just one, let's go to the laser spillings, because that's convenient, then you don't have an effective system.

Elise Holtzman: And in fairness, it is complicated, right? There's so many different, I mean, you know, you and I could talk about this for, this is your entire role here is helping people figure this out. And there are so many moving parts to it and there are cultural pieces of it. And you know, who's running the place and who gets to make these decisions. And even once you figure out all of the things you just mentioned, you mentioned this idea of incentives. Once you figure out all the different buckets and how you decide what goes into what bucket, then it becomes a question of which buckets are you valuing more? Are you valuing the collaboration bucket more than the individual origination credit bucket? Is that for compensation? Is it also for, let's say, making equity partner? Because I see a lot of non-equity partners who want to move into equity, getting worried about whether they're the relationship partner, or the originating partner, or just, you know, the matter partner, or whatever it may be. So it is very complicated. Another question I wanted to ask you about is managing partner compensation, or practice group leader compensation. And the reason that comes up for me is that, you know, one of my frustrations with our profession is the way in which we allocate work, in these law firms. If you look at any other company on earth, they are designed so that somebody is, let's say, designing the widgets, somebody's manufacturing the widgets, somebody's marketing the widgets, somebody's selling the widgets. You don't have one person trying to do everything. And certainly in early stage law firms, you've got lawyers running around trying to do everything. So there are some managing partners that we might call professional managing partners, but for most law firms, managing partners and practice group leaders are doing that simply as an add-on to the legal work that they're still being expected to do. And there are so many different ways to be compensating people who run the place. So I'm curious about your philosophy on that. Do you think that law firms should be having professional managing partners? Do you think that most managing partners are being adequately compensated for what they do? What do you think?

Michael Roch: Yeah, that's a great question. And we help a lot of firms figure out their compensation for their partners in management roles. To your question, how valuable is management? I'll give you one example. That is a client that we started working with in 2007. Client's revenue, firm revenue, firm revenue, 8 million. Today, it's now 2026, that same firm is turning about 110 million. And roughly in 2008, the firm at that time, 12 equity partners decided to appoint a full-time managing partner from their cohort. He gave his files away to his other partners and he became a full-time managing partner and literally ran it to 100 million. So done well, great value in management. Because if I, as a managing partner, can empower three partners to go after something that they otherwise wouldn't, everybody wins, right? But that's, you know, it could be that they had a very unique business model and a very unique vision. It could be, of course, it's a combination of things. But there is, if somebody says, well, you know, managing partner of a hundred million billion dollar law firm is just sort of an add-on, I don't understand that.

Elise Holtzman: Great, so the question is, are they typically being adequately compensated?

Michael Roch: If I've got a full-time managing partner, or a full-time group head, or practice leader, whatever your language is, that answer is somewhat different to if I have a double-hatting managing partner or group head. If it's a full-time role, then I have to figure out where in the equity does that role slot in in terms of value? Does the managing partner always get paid the most? Does the managing partner always get paid among the most? Or does the managing partner always get paid more than most, more than the highest? That's a partnership philosophy question that we've got to work through. And there is, you know, depending on the firm, they'll make all of that work, depending on what they want to do. So there's a philosophy of, no, we always need to have our rainmakers have the highest profit share. That's fine. Then you slot in the managing partner at the 90th percentile and maybe declare victory. If the philosophy is different, no, no, no. It always needs to be the top dog, then it's a different answer that could work well for that partnership. So, the full-time role is one aspect. The double-hatting roles, that's where it becomes difficult, right? Because we've got to understand, okay, how does this partner spread their time? Is it 50-50? Leadership, client-facing, is it... Actually, not time, it's the wrong measure. It's energy, right? What do I expect them to do? How do I expect them to devote their energy? Let's assume it's 50-50. What I have to do in that case, I have to look at the two roles as almost if they were separate persons. So I've got a client-facing result that this partner is achieving and the partner has a leadership-related result that this partner is achieving, mainly tied to the group that they're leading, or to the firm, if they're leading that firm. And then at back end, a subpart of my comp committee looks at how do we square that in with respect to the rest of the compensation philosophy. Well, it's easy for me to summarize it like this in a call like that. That's the approach that you take. That's best practice. That's what we follow. That's what you must do. But making that work in the partnership, of course, this is not an easy discussion if there is tension in the system. And then once I've got that figured out, then it's about how does a person coming into a leadership role, face into that sort of dual level of compensation and how does a partner face back out. If I'm asking my managing partner to give away half of their clients, because they've got to focus on the firm, I've got to give them an off-ramp, so they have a chance when they reintegrate full-time into the practice, if that's the ambition. Most of the time, they say, I'm so tired of this client, so I want to do leadership. But if I want to go back for full-time private, I've got to give them some kind of assurance that their compensation at least does not go down. Because what… at the levels of earnings that we're talking about in most of our respective clients, it's a lot more about what do I have at risk to lose than about what can I gain additionally. I'm making three million a year, I'm simply not interested in the additional $50,000 I might get, but I'm quite interested in the $100,000 that I might not get. So that's the balancing out of the incentives that we have to work through in that case.

Elise Holtzman: One of the last things I want to ask you about, actually, that's a lie. I'd like to ask you about a lot more, but we don't have all day. So we know that retention, both of partners and associates, is top of mind for many firms right now. There's so much movement in the marketplace, and that's one of the first things that I hear from law firm leaders. And so you've talked about this idea that compensation systems affect retention, but it's not just at the partner level, right? It's obviously at the associate level as well and counsel. Where do you see firms getting this right or getting this wrong?

Michael Roch: It's a great question. It really depends. I'm going to give you a very bad answer. It really depends. Where it becomes difficult is if firms play the game of just chasing the money. Eventually you run out of money. There's always a firm that has more money than you to throw at a partner in your firm. There always will be somebody who will pay more. So the question is, can you play that game? One, two, how far do you want to play that game? Often, you know, especially when we're sort of on retainer for the leadership team, it's like, oh, you know, ah, one of my top rainmakers got an offer of X and we need to keep them and they've, you know, they're blackmailing me for more money. What do we do? A partner who is seriously ready to go, they will stay for another year, another two, another three, if they get paid some more money. If we don't figure out why that partner is looking to go, or why that partner ought to be looking to stay, if we don't go that further step, I'm just buying time if I throw money at the problem. That we know. A partner who has got his head outside the firm, that additional spot bonus will keep them for a while, but it will not keep them forever, until I understand what is driving the result. If I got a competitor that's offering 10 times the quantum, we're in a different discussion. But if it's not that kind of differential, then it's about something that the partner is perceiving as something fundamentally unfair, with respect to internal relativities. And I've got to figure that out before we go on with other things.

Elise Holtzman: Yeah, I think that's such an important point, because there are things that are there that are not financial in nature. And there are a lot of smaller to midsize firms, especially in markets that didn't have this problem before, because now there's all the hybrid and remote work. Right. So a big firm can come into a small market and pluck one of your associates out, or senior counsel, or junior partners and pay them a fortune more. That might be something that is very hard to compete with, understandably so. And yet there are things that make firms different. You know, it might, be there might be a reason to stay at a smaller firm and build a practice there rather than just going to a large firm that's going to chew them up potentially and spit them out at some point. So that's I think that's a really important point is to understand what you have to offer and what it is that these folks are missing, right? Is it platform? Is it support? Is it culture? Is it appreciation? Whatever it may be.

Michael Roch: Influence.

Elise Holtzman: Influence, yeah, that's another good one, right? Are people able to help make decisions for the firm, or do they feel like they're just another cog in the wheel and they don't have any say, or they don't have any agency in their own lives?

Michael Roch: And that's the, I mean, with the equity partners, that's one aspect, right? As an equity partner, as a co-owner, I've got, you know, there we can talk about different, you know, creating different visibility and what it means to be, you know, to be recognized financially and otherwise for the things that I do. That equation is a bit harder for my associates, my counsels, etc. A law firm is not self-executing. I've got to lead the people that are working with me. And I've got to show them how what we're doing as a firm ties to their personal ambition. If I'm not prepared to do that, I should not be in the leadership job.

Elise Holtzman: That's such a great point. I love that. I'm going to highlight that, right? I think that that's very important, is that there is sometimes a failure of leadership, in part because that's not what we necessarily went into the law to do. For some people, it is. But for many, it was like, I'm going to go work hard and do a good job for my clients. And they think about the legal work and not necessarily the leadership potential. So they don't necessarily know how to do this. And I think that understanding what your role is as a leader, is absolutely essential.

Michael Roch: The sooner I start having somebody who's working for me, if I'm a mid-level associate and I've got a junior working for me, I am in a leadership role. It's an inherent part of the job. And I'm unhappy that in most law schools across the world, we still only teach the technical aspects of how to do law. That does not help.

Elise Holtzman: It's one of my soapbox issues for sure. Michael, as we wrap up our time here together, I wanted to ask you a question that I ask all of my guests at the end of the show. There's a phenomenon called the curse of knowledge, where experts sometimes forget that what is so obvious and natural to them is not at all obvious to others. When it comes to designing compensation systems that support a firm's real goals, what's a principle or piece of advice that may seem obvious to you, but you think is very important for lawyers and law firm leaders to hear?

Michael Roch: Reward is not just about the money. There is a misperception that the only thing that makes people move, speak, drive, deliver, whatever, is cash. Not true. We've talked about empowerment, we've talked about influence, we've talked about showcasing, we've talked about, you know, we haven't talked about, you know, non-financial recognition. I have a lot more tools at my disposal to reinforce behaviors I want or don't want and drive behaviors than many law firm leaders think they have. Many think that I just have compensation and I just have to figure out, you know, they will do this if I just give them more money. No, no, I've got many, many more tools at my disposal, that would be my single answer to you.

Elise Holtzman: It's great to remember. It's great advice. And I hope that law firm leaders are listening to that advice and doing something with it. So Michael, thank you so much for being here today. It's been a pleasure having you on the show.

Michael Roch: Thank you very much for having me.

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