Managing Professional Firms: How Partner Compensation Supports Strategic Choices

Abstract

This article presents a study about professional firms’ partner compensation system based on the ‘pie-splitting’ research conducted by David Maister among American law firms. Greater internal demands from professionals and higher quality of services required by clients induce professional firm leaders to reflect about their managerial structure, internal processes and human capital development (DeLong, Gabarro & Lees, 2007). A key topic to be addressed in order to better understand strategic dilemmas of professional firms is partner compensation. In the literature, it is widely discussed how to equitably reward partners, considering external and internal criteria, but a lack of research and structured models can be found. This study intends to help professional firms’ managers in defining the criteria for partners’ compensation in order to support internal and external strategy of their firm. The goal of the research is to expand and verify the results of Maister’s study. The research will be the first carried in Italy including in the sample the top 100 Italian professional law firms. Authors intend to identify the skills and behaviours mostly rewarded in professional firms and to test whether there are differences in the criteria that firms consider in splitting the partnership pie. Moreover, future steps of the research will investigate whether the compensation system applied by a professional firm is designed in a way that it supports the firm’s strategic decisions.