I’ve been promising to write about this for ages and have let some world-class procrastination get in the way.  No more!  Here’s the first of a three-part series on incentives. The next two have already been written and should be out before the end of the month.

In case you missed it, here’s my last post on incentives, which included feedback from readers.

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Working in Legal KM can sometimes feel like swimming upstream.  First there’s the constant battle to justify project costs, and having delivered a project successfully, KM professionals then struggle to encourage lawyer participation.

One question I have considered, read about and discussed with colleagues is “how can you incentivise your KM programme to guarantee lawyers will participate?”. It never takes long for me to come back to the same conclusion that financial incentives do not work.

I don’t believe there’s a silver bullet and ultimately, basic, boring people management and feedback of the face-to-face variety is required.

 

To examine this premise in detail, I’ll take a brief look at the underlying reasons why incentives fail, consider some alternatives, and finally tackle the inevitable “yes but” which accompanies any idea involving lawyers.

Why incentives don’t work

The idea of incentives is very appealing, but their ineffectiveness in the long-term is well documented.

 

Some of the reasons which account for their failure:

• bonuses for KM contributions lose their effectiveness and are not sustainable in the long-term;
  
• incentives fail to address people’s underlying needs and wants; and
• incentives actually cause dysfunctional behaviour among staff.

 

Not sustainable?

KM incentives are constrained in effectiveness due to the Law of Diminishing Marginal Utility.

Without embarking on a long economics lesson, the “value” of the bonus decreases as the lawyer earns more. Lets look at an example:

 

Take a 3 PQE lawyer earning £75,000, yearly target of 1800 billable hours, where the firm has a 1k bonus for 20 hours contribution.

 

Over the course of the year they do the 20 hours and after income and sales tax, see a measly £500 into their bank account.

 

The next year, they see a pay rise of £5,000 and a bonus of £15,000. All of a sudden the lawyer makes £80k and can look forward to another £15k in bonuses, plus another £500 if they put in the extra KM hours. The problem? They don’t bother, it’s no longer enough. They already bought the iPhone they wanted, and plus they get paid more, so they can do without your bonus.

 

Too bad, so sad, your KM bonuses no longer work on that lawyer.

 

So, maybe the bonus is too low, and it needs to go up? You’ll run into the same problem the next year and the year after that. You’re buying the time of an already busy lawyer who makes quite a bit of money. They certainly aren’t going to forgo billable hours in favour of a teeny tiny bonus (which would kill their regular bonus anyways), and what little social-life they have is likely to be highly prized.

 

The inflationary nature of these bonuses on your KM budget is unlikely to be sustainable year on year. With firms facing pressure externally from clients to drive costs down, and internally from partners to drive profits up, I’m guessing you won’t get to try for very long anyways.

 

Replacing financial incentives with prizes or gifts is no different. Gifts may encourage positive behaviour initially, but will have a diminishing impact over time for exactly the same reason (contrary to what some might claim, lawyers are capable doing the math and will be unlikely to sacrifice much of their time for a free meal or bottle of champagne, at least not after they’ve received the prize once or twice).

 

Don’t believe me? Think back to when you were younger. Get paid to do chores around the neighbourhood? How much? Feel like getting paid that much (inflation adjusted) to do chores around the neighbourhood next weekend? Thought not.

 

Lawyers have needs too

At a more basic level, lawyers in medium to large firms are likely to have moved to another plane of existence beyond which money is no longer a primary motivator. Consider the causes of motivation according to Maslow’s hierarchy of needs.

 

 

Maslow argues that people move from physiological needs to self-actualization needs in sequence. Lawyers for the most part have their financial security taken care of very early in their career. Far more important for them is to address their social and esteem desires. Money can certainly help them purchase a nicer house or a bright red Ferrari, but for a KM bonus to help them achieve that is prohibitively expensive.

 

Should you disagree with Maslow’s theory, Max-Neef’s concepts of needs bear the same conclusion. A lawyer’s need for more money is likely to be less than their other needs, QED.

 

Breeding Dysfunctional Lawyers

Putting motivation to one side, let us consider the assertion that incentives cause dysfunctional behaviour. Both Robert D. Austin and Alfie Kohn argue this point in their respective books Measuring and Managing Performance in Organisations and Punished by Rewards. Law firms themselves have shown this dysfunction at work, where for the most part lawyers are incentivised by the billable hour.

 

The dysfunction? Bruce MacEwan argues the billable hour:

 

“creates an essentially undeniable conflict between efficiency and productivity (which clients are always in favour of) and revenue generation (which firms are always in favour of)”

 

This article however is not about the billable hour.

 

Specifically, incentives can cause the following types of poor behaviour:

 

• the leader abdicates their obligation to manage (and give face-to-face feedback to) their people because accountability has shifted from the leader to the worker;
• individuals compete against each other for additional bonuses, leading to hoarding of knowledge rather than open sharing;
• individuals inevitably learn how to game the system, lawyers being particularly adept in finding loopholes;
• motivation shifts from being intrinsic (activities alone provide a reward in and of itself) to extrinsic (satisfaction come from achieving the reward) which has been shown to reduce overall motivation in the long term.  Ultimately your lawyers will ignore any activity which is not explicitly rewarded.

 

De-motivating your lawyers and reducing their interest in the job they do is hardly the recipe for a successful firm. Given that it is difficult to get lawyers to work in ways that are known to be successful, it seems self-evident that lawyers should not be encouraged to participate in activities that are known to fail.

If you’re still not conviced, listen to David Maister’s podcast: You cannot manage through pay schemes.

This entry was posted on Wednesday, October 15th, 2008 at 5:38 pm and is filed under Law firms, incentives. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.