As a long time student of sales I am especially interested in developing compensation plans to motivate and inspire salespeople to become high producers. That being said, I was delighted to receive my weekly Business Insights newsletter from the Stanford Graduate School of Business that summarized a new study, coauthored by Kathryn Shaw of Stanford Graduate School of Business, and Ann Bartel of Columbia Business School and Brianna Cardiff-Hicks of Cornerstone Research that sheds light on encouraging high producers to become good leaders.
This particular study looked at a high-powered law firm founded in the 1990s, and grew rapidly for over fifteen years relying almost entirely on an eat-what-you-kill system.
In its purest from, eat-what-you-kill means basing the size of a person’s paycheck almost entirely on how much business that person brings in. Shaw and her colleagues wanted to see what happened when this law firm switched from an almost pure eat-what-you-kill approach to one that rewards work that benefits the firm as a whole.
My partner Matt Plociak is a firm believer that money, and that being on full commission should motivate salespeople or in this case, even lawyers should be compensated an eat-what-you-kill basis.
So the question in this study of the law firm is whether the shift from eat-what-you-kill improved the long-run strength of the firm by having the senior attorneys invest more effort on the organization as a whole. The belief by some of our colleagues is that at some point, even fast-growing companies need more than big producers. They need leaders who will invest time and effort on the big picture. They need people who can bring out the best in employees, communicate a vision, or build the firm’s public reputation. And this necessarily, begs the question as to how to structure incentives that focus on the big picture, and still generate increasing revenues.
The data collected in this study may not be totally conclusive enough to offer a definitive judgment, but it does indicate that the law firm did make better use of their junior associates who had been underutilized under the old system, which ultimately resulted in a win-win for all the attorneys in the firm.
To be sure, Shaw says, companies of all types still want ambitious go-getters who dream of big paychecks, but encouraging people to work for the good of the whole organization can be a winning strategy for everyone. I’m curious as to what you think. I look forward to your comments.