Incentives for Lawyers: Moving Away from "Eat What You Kill"

We study an international law firm that changed its compensation plan for team leaders to address a multitasking problem: team leaders were focusing their effort on billable hours and not spending sufficient time on "leadership" activities to build the firm. Compensation was changed to provide greater incentives for the leadership activities and weaker incentives for billable hours. The effect of this change on the task allocation of the firm's team leaders is large and robust; team leaders increase their non-billable hours and shift billable hours to team members. The firm's new compensation plan (combining an objective formula with subjective evaluations) is the fastest growing compensation system among law firms today.