EWYK and other comp issues

For both partners and associates at law firms, it’s all about the money. And I don’t mean that in a derogatory way. The way lawyers get paid and earn revenue is at the heart of most law firms. Every law firm — no matter what type of law you practise, where you are located, or how many people there are in your firm — needs to make money in order to stay afloat. But you may be surprised at how “shy” Canadian lawyers are to talk about money.
However, we have managed to get some discussions going on both the associate and partner levels in this annual money issue of Canadian Lawyer. Our cover story, “Crunching the numbers,” examines associate profitability, an issue that until recently hasn’t really captured the attention of law firm managers in Canada. Perhaps that’s because the partner-to-associate ratio, or its trendy name “law firm leverage,” has not been as much of a concern in Canada as it has in the United States where there are plenty of highly paid, fixed-salary associates who don’t add to the bottom line. Works well when firms are raking in the dough, not so much when the money is not rolling in. Over the last couple of years, over-leveraging has led to tremendous associate layoffs in the U.S. It hasn’t been quite as overt in the Canadian market, but that’s not to say it isn’t time to look at how to make associates more profitable. Our story lays it out, and, perhaps not surprisingly, puts the onus on partners to be the drivers in making their associates more efficient and effective.

And on the partnership front, compensation models are also coming under more scrutiny. The profits-per-partner numbers for Canada’s big firms are not widely available in the same way as those of Americans (AmLaw 200) and U.K. (U.K. 200) lawyers, and — so I’ve been told — are not as high. Lockstep, everyone earning the same piece of the pie, and the eat-what-you-kill model remain the two most popular methods for compensating partners, with the latter in Canada being the most predominant. At least that’s the way it appears in our Law Office Management column this month which talked to law firm managers about how they’re divvying up law firm profits (without revealing any actual numbers).

As always with our money issue, readers will find the money theme running throughout the magazine from our always popular legal fees survey, “The going rate,” which looks at what lawyers are charging across the country for some of the most common legal work, to our legal reports on M&A and insolvency law. So be sure to let me know if anything hits home or gives rise to ideas for other articles.

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