“It’s the most wonderful time of the year.” A beautiful song written by Edward Pola and George Wyle, and recorded and released by pop singer Andy Williams for his first Christmas album. I used to think the most wonderful time of the year was when school started each fall. That was, of course, when I had school-age children and we had just spent a long, hot summer together. But for many people in the legal field, the most wonderful time is when year-end bonuses are delivered. And just like Clark Griswold in “National Lampoon’s Christmas Vacation,” some employees receive a terrible blow when opening the bonus envelope.

Year-end bonuses (also referred to as employee recognition programs) are generally intended to provide incentives for good work throughout the year and reward employees that the firm would like to retain. If that’s the case, then why are so many people surprised or disappointed at bonus time? If we factor out cheap management – as portrayed by Brian Doyle-Murray in “Christmas Vacation” – and inept employees – like Chevy Chase as Clark – then the culprit must be the usual suspect: the good old “lack of communication.”

If attorneys and other employees don’t know how to produce at the level of the bonus they’d like to receive, they are destined for disappointment – and firm morale will suffer.

Year-End Bonus Trend Facts

According to a 2014 survey from the outplacement consulting firm Challenger, Gray & Christmas, 78 percent of businesses planned to offer a year-end gift or bonus in 2014, up from 53 percent the previous year. The numbers are trending similarly this year.

Given this information, we can discern that the year-end bonus is a tactic used by most companies to motivate and retain good employees. That’s why my recommendation is to use this costly tactic to motivate and encourage the optimum behaviors from attorneys and other professionals at the firm. To achieve that goal, the firm must communicate clearly the activities that they are encouraging with their employee incentive programs.

How to Assess Law Firm Bonuses

Law firms can establish bonus amounts in various ways. Some firms determine the number of billable hours attorneys, at each level, must reach and pay them a percentage of their billable hours over the set quota. This is a an old-school method that is being phased out, as successful law firms demand more from their attorneys than billing hours.

Another popular way firms determine the bonus is more subjective. Management sets billable hour goals, and each attorney sets other goals, which build and strengthen the firm each year. Those non-billable “work” goals include marketing, business development, client service, pro-bono activities, recruiting, firm management and mentoring, among others. Both the billable hours and other contributions are then considered in determining the bonus.

The more subjective methods of determining bonuses to motivate behavior take more consideration and, thus, more time. However, over the long term, they do lead to a stronger, more profitable firm.

How to Improve Your Law Firm Bonus Program

Employee recognition programs are a high-dollar investment for any law firm. Here are 10 tips for making your firm’s bonus program show long-term results.

  1. Determine the factors that you want to encourage. Think about what affects the firm’s bottom line and include factors that contribute to success.
  2. Consider the firm’s expectations of attorneys at each level of their careers and set billable and non-billable goals accordingly.
  3. Establish the oversight/evaluation process and the individuals charged with the task  (i.e., practice group leaders, mentors, management and marketing committee members, evaluation committee, etc.).
  4. Plan for quarterly reminders for checking on progress toward billable and non-billable goals.
  5. Monitor progress throughout the year, and offer one-on-one assistance as needed.
  6. Communicate the bonus determination process clearly and often.
  7. Communicate the bonus determination process clearly and often.
  8. Communicate the bonus determination process clearly and often.
  9. Communicate the bonus determination process clearly and often.
  10. Communicate the bonus determination process clearly and often.

The more you work to strategically motivate your attorneys, the more they will contribute..If you would like to discuss employee recognition ideas or other law firm management issues further, please contact Terry M. Inser at tisner@jaffepr.com