Compensation Matters: Incentives for Multitasking in a Law Firm
Due to the limited availability of firm-level compensation data, there is little empirical evidence on the impact of compensation plans on personal productivity. We study an international law firm that moves from high-powered individual incentives towards incentives for "leadership" activities that contribute to the firm's long run profitability. 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. Although the motivation for the change in the compensation plan was the multitasking problem, this change also impacted the way tasks were allocated within each team, resulting in greater teamwork.
The authors acknowledge helpful comments from participants at the Columbia Business School Microeconomics Faculty Lunch, the Trans-Pacific Labor Seminar and the Association for Private Enterprise Education Annual Conference. All remaining errors are their own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
“Incentives for Lawyers: Moving Away from "Eat-What-You-Kill,” (with Ann Bartel and Brianna Cardiff-Hicks), Industrial and Labor Relations Review, forthcoming.