Law departments award cash bonuses, but based on what factors? A colleague of mine raised the issue of how determinants of bonuses should be weighted for the following areas of performance:
• Company (revenue, share price, EPS, profitability, goal achievement, comparison to peers)
• Business unit (for lawyers assigned to support a business unit)
• Law department (as a whole, such as headcount, budget, key goals)
• Individual lawyer (objectives obtained, quality of work)
The weightings should shift toward company performance as lawyers become more senior, since they have more influence than do junior lawyers.
One third to company, one third to department as a whole, and one third to the lawyer’s own performance seems to me to balance the considerations fairly. I am wary of giving bonuses to lawyers that derive from the business unit they support, because down that path lies tensions with objectivity, not to mention that some lawyers support staff units. (See my post of July 14, 2005 on disclosing bonus ranges.)