Conversely, over-emphasis on seniority can dissuade new partners, who believe that their efforts simply fund less productive senior partners. Another significant disadvantage of the pure-productivity allocation method is that senior partners hesitate to turn over client matters and clients to younger partners, because it will affect current distributions and future retirement benefits. Often, firms calculate retirement payoffs based on recent earnings. Thus, a partner in the last several years of practice may seek to increase earnings rather than transition clients to other partners. The conflict between seniority and productivity is not easily resolved.
Some firms stratify annual allocations between seniority and pure production amounts.
Many large firms form compensation committees, who decide compensation allocation issues behind closed doors. Whatever method you choose, be forewarned. Disagreements will occur. It s best to formalize and codify the process so there are no surprises, and an agreed-upon protocol can be followed. Recently, I discovered a firm that makes allocations based on a two-year cycle.