To Holiday Bonus or NOT to Holiday Bonus

Allison Williams: [00:00:11] Hi everybody, it’s Allison Williams here, your Law Firm Mentor. Law Firm Mentor is a business coaching service for solo and small law firm attorneys. We help you grow your revenues, crush chaos in business and make more money. 

 

Allison Williams: [00:00:25] Hi, everyone, it’s Allison Williams here, your Law Firm Mentor, and this week’s podcast is dedicated to the oh so timely topic of holiday bonuses. Now, I know a lot of business owners have been struck hard by the coronavirus circumstances that we are facing and a lot of people that were not doing as well this year as they were last year or even as well as they projected for this year, are asking themselves the question of whether or not they should pay bonuses, whether or not they can pay bonuses.

 

Allison Williams: [00:00:58] And there’s a lot of conversation online about how lawyers feel bad about not being able to pay bonuses. So this episode is dedicated to the topic of holiday bonuses in general. But it’s also about the mindset with which we approach compensation. Right. That’s that’s what a bonus is. It is a form of compensation.

 

Allison Williams: [00:01:21] It’s paid to your employees either as W-2 or ten ninety nine, depending on how you compensate them. It is compensation. So we’re really going to talk about the frame of compensation, but through the lens of holiday bonuses. And I want to give you guys some thoughts about how to look at this issue and how to avoid some of those negative feelings that come up periodically as we talk about these issues going forward. So the first thing that I want to frame in terms of this conversation is the the mindset that triggers one to ask the question, should I pay a holiday bonus? So the first thing that we have to understand is, as I said earlier, holiday bonuses, whether to pay, how to pay, etc. the amount to pay. All of that is a compensation decision which should never be based on your feelings. So in other words, you should be consulting the metrics of your business and you should be running your business by the metrics of financial well management, we’ll call it, rather than how you feel about an individual or how you feel about your team or how you feel about how you’ll be perceived if you give holiday bonuses. And that last one is the one that oftentimes causes us to feel bad about our circumstances, whereby if we’re not able to or if we perceive we’re not able to and we ultimately choose not to give a bonus or to give a smaller bonus than we did the year before, the question comes up, how will my employees look at me as an owner? How will they feel about me as a business person? And I think that in this particular day and age, a lot of people are more inclined to say, I can’t afford a bonus.

 

Allison Williams: [00:03:08] And given what has happened in our world. Twenty five percent of businesses have failed in 2020. Twenty five percent of small businesses. So it’s not exactly off the radar that someone could say, I’m really happy to have a job. I understand if I can’t get extra money at the holidays the way that you have given me before, boss. But what comes up for a lot of us, even if we accept that some people may feel that way, there’s still the fear underneath that says, what if my employees look at me negatively because I’m not able to give a bonus? And the feelings that are often triggered by that question is the feelings of guilt and shame.

 

Allison Williams: [00:03:50] So we know that guilt is a feeling that comes when we feel that we’ve done something wrong. And shame is a feeling that we have when we feel that we are wrong, when we’re bad as a person. And we know that feelings of guilt and shame are used to acculturate us in our society. Our parents used guilt and shame in varying different ways growing up. And you don’t have to have abusive parents for this to be true. I mean, I want you to think about the ways that you were led to change your behavior as a child. So if you did something, you might have been called a bad boy or a bad girl, or if you didn’t share with your sibling, you may have been told that’s not very nice of you. You’ve done something wrong. Mommy or daddy is not pleased with you. Right. And so what we start to do, what we start to learn is that our behavior should be driven when we’re younger by how other people perceive us. Right. Because our parents are the first people who perceive us, the first people that we’re interacting with that will have a perception of our behavior and will enact some form of punishment or some form of reward based on how they perceive our behavior. So we start to get that message very young, that doing what is pleasing to others, in particular, what is pleasing to our parents is what is going to get us that feeling of satisfaction with ourselves. That’s our first place of self-esteem. And when we start looking at how those messages go throughout life, if we don’t at some point develop our own internal sense of self-esteem, separate and apart from how other people perceive us, it becomes very easy for us to engage in behavior that is designed to elicit a certain response from a person, not from a place of wanting to get a win win. Right, mutual satisfaction, because all people have a desire when they engage in behavior or else they wouldn’t engage in it.

 

Allison Williams: [00:05:53] Whether that desire is even negative, i.e., you know, I am going to exercise even though I hate exercise because I feel that I’m going to get something more valuable added on the other side. I’m going to have physical health. I’m going to have a more attractive physique. I’m going to sleep better. I’m going to eat better. Whatever it is, you know that there’s something in it for you or else you wouldn’t do it. There is also the flip side, which is what’s in it for the other person. And oftentimes when we start to have feelings of guilt and shame associated with how we compensate, the question isn’t so much one of do we feel that this person that we’re compensating deserves more than we can afford to give? But really, the question is, what is it that is in this person that we’re compensating that would have them want to work with me, for me, in my company, etc.? And that question is typically answered by going to our feelings of self worth. So if we have a tattered sense of self-worth, if we have a question around our self-worth, then oftentimes we will seek to ameliorate those concerns by throwing money at whomever is the person who is going to be in the decision making process.

 

Allison Williams: [00:07:07] And by the way, employees are always empowered to make decisions whether they perceive that they are or not. You can always choose to work where you are working or choose to work elsewhere or choose not to work. That is within the power of the employee. And there’s always a question in our heads as the owners of what would make someone choose to work here and I support our thought is oftentimes it is the compensation. Now, of course, we know the law of compensation, the exchange of value for the services rendered does require that a certain level of compensation be afforded in order for a person to feel that a particular job is worth his or her while. But when we start thinking about additional compensation, which comes in the form of a holiday bonus, that is often the extra something that we are exchanging for the feeling that we derive from the relationship that’s already in existence, meaning we feel that we’re going to have a more loyal employee by virtue of giving more money, or we feel that we’re going to have a more productive employee by virtue of giving them something extra. But I want you to really think about that from a frame of reference. If you are using your money in order to get a feeling from your employee the feeling that comes with their choosing to work with you in the future. Right. Not the actual work itself, but the feeling that you get from it.

 

Allison Williams: [00:08:32] And we’re going to differentiate that in the moment. If you’re doing it for the feeling that you’re getting, what you’re really doing is manipulating. You are seeking to alter someone’s belief in the rightness of your role for them, the correctness of working in your business for the benefit, the beneficial side of their life. Right. What they’re trying to get out of their life. You are trying to distort that in some way by giving them something that is going to to induce them to take an action that may or may not be the right action for them. Right. So in other words, it’s not really about whether or not I feel this person is going to be benefited from working for me. It is that I want to feel a certain way by virtue of giving them the money. And that is a truism. Whether or not you’re giving them a raise or a bonus or a holiday gift or a day off, if your thought in giving that to someone is how are they going to perceive me in the process, there is a distortion there. So I want you to think about it from that perspective as we go through the rest of today’s program, because there is a distinction between giving to someone as following the law of compensation, the exchange of value, the exchange of services that you give to someone in exchange for what they’re going to give to you. Right.

 

Allison Williams: [00:09:55] Reciprocity versus I am giving this to you so that you will think that I am a good person or so that you will think that I have done something good for you. Right. Because then it becomes about you, not about them. And it loses the error of mutuality. It loses that that quid pro quo that comes from two people interacting with each other. In other words, you know that they’re going to get something out of the raise or the bonus that you’re giving them. But that really becomes secondary to am I going to feel good about myself by virtue of doing this? Now, in order to dig a little bit deeper into this, we have to distinguish between what is a holiday bonus an incentive and a gift.

 

Allison Williams: [00:10:39] So I want to give you a definition for each of those so that we know that we’re talking about the same thing. So first, a bonus is something that you give. It’s compensation that you give. We’re going to use the bonus in the terms of cash or the cash equivalent. We’re not going to talk about other forms of compensation that you can give that could be equally, if not even more beneficial to an employee. But that is probably off of the beaten path for most people. Most people, when we talk about holiday bonuses, we’re talking about dollars and cents exchanged from the company to the employee. So keeping it in that framework, your bonus to someone is when they go above and beyond it, above and beyond. So let’s say you have a requirement that an associate bill fifteen hundred hours per year and in a given year, the associate billed sixteen hundred hours. Right. So that extra one hundred hours was not something that was required of them. Now it may have been quote unquote required by virtue of the work agreement that you have with them. So you may have said you are minimally required to bill a certain number of hours, but you are not to stop billing hours simply because you hit a goal. 

 

Allison Williams: [00:11:52] If a client has a need that needs to be serviced, so it may be, quote unquote, extra hours, but that those extra hours might be expected based on what is the agreement that you have with that employee. But let’s say I think we all know that whether you have a low billable hour requirement or you have a high billable hour requirement, the requirement is typically what the average employee is going to be pursuing. So most people, in the middle of the bell curve, right, we’ve talked about this concept of the bell curve before. The start of the bell curve are the great underachievers. The far right side of the bell curve are the high overachievers. And then you have a stratification of people in between. And you may have people in your company that tend more toward the high achievers. Right. We all would rather have super high achievers as achievement goes, because they’re easier to manage, they’re easier to motivate.

 

Allison Williams: [00:12:50] They get things done for us, you know. So there’s definitely a quality issue. And most lawyers are seeking higher toward, you know, to the far right of the bell curve in terms of who they have. But if we look at companies that have staying power, everyone is not an A plus plus plus player. Even the most egotistical owner of a business has to acknowledge that if you’re evaluating people, you cannot have everyone be perfect and have a truly honest assessment of your people. There is always going to be in the various different skills that are required in a business, particularly a law firm business, because we’re professionally licensed, you’re always going to have distinctions between where someone is relative to others. So there’s going to be someone who is the exceptional and there’s going to be, there might be other people who are simply good or above average. Right. So you don’t have to have awful compared to exceptional, but you do have to have exceptional and then somewhat less than exceptional. So if you’re looking at that as a standard and you’re looking at where people fall on the bell curve, the bonus is going to be to get people rewards for giving something extra above what they are required to give. OK, so you might also have a bonus system that is competitive in nature whereby people are going to be aiming to best each other in order to get a bonus. And there are definitely books out there that talk about the game of work and how you can structure something like that. But in most law firms, you’re going to have a bonus system that’s built on either the individual or a group of individuals. Right. The Family Law Department or the Criminal Defense Department or the Real Estate Department. They’re going to have a goal and then they’re going to exceed the goal. Ok, and that’s where you start to get into the incentive plan, which we’re going to talk about next.

 

Allison Williams: [00:14:47] But for purposes of the bonus, know that the bonus is something extra. OK, the bonus is also typically in one of two categories. You can either have an incentive pardon me, you can either have a defined bonus, meaning if you exceed requirement by a certain amount, you’re going to receive a bonus or you can have a bonus that is discretionary. And most small offices have a discretionary bonus because if John is making it out of the park, but the rest of the firm is falling way behind, either because you had underperforming employees or because economic circumstances changed or because you in a given year made a lot of strategic changes and maybe your growth has not yet materialized. And you reward John as the overachiever. You can still do that in the context of a bonus, not so much in an incentive plan, even though you can write an incentive plan that would do that. Most incentive plans would not do that. But the bonus recognizes that someone has done something that they were not required to do. OK, so you want to have a sense with a bonus, did the extra enhance the person’s required activities in the firm, whether it was that the person was required to serve clients in a certain way and you started to get a lot of client applause, meaning that person was going above and beyond for clients or perhaps, you know, you could have a bonus in the sense of intake. Right. The person was required to schedule a certain number of potential new clients to meet with a selling person in the firm, whether that’s an attorney or a non attorney.

 

Allison Williams: [00:16:29] And ultimately, that person did not meet that goal, that person exceeded that goal, right? You can even have a bonus for a manager, right? The manager could have responsibilities in terms of mediating disputes and managing activities such as payroll or benefits in the firm. And if you have that type of person in your office, perhaps that person’s metric of measurement is how quickly these issues get resolved or how advantageous they are in resolving them. So if you have a manager over things like your benefits, you can have a metric that would say if you save us more money in year two than year one, i.e. because you shopped around and got us a better deal or because you started to, you changed our broker and our broker was able to recommend a better product for the firm. And overall, overall, employees are happier. That might be a situation where your bonus is going to be more beneficial. It’s going to be based on more beneficial behavior, even though it’s not based on something as quantifiable as, say, a billable hour. OK, now the next type of holiday incentive or bonus, the next category of compensation plan would be the incentive plan. Now, the incentive plan is tied to meeting a metric, OK? A bonus can be simply I’m giving you extra because you gave extra.

 

Allison Williams: [00:18:02] But it tends to be geared toward an assessment of the employee as a whole versus an incentive plan requires that whatever is the stated KPI has been met or exceeded according to the terms of the incentive plan. So that could be, again, billable hours, right? Pretty easy to say. You were required to bill fifteen hundred hours. You met that goal and you billed sixteen hundred. And so we’re going to give you 10 percent of the revenue produced for every hour over the required number of hours or whatever the dollar amount is that you are fashioning. Right.

 

Allison Williams: [00:18:38] You can make it very specific. You can make it specific to any role that you have in your office. Right. You define what they are required to do and then they must meet or exceed that requirement in order to hit a benchmark that will trigger an incentive. And typically, these types of incentives are designed to drive behavior. So when you think of bonus, you think of extra and extra can be more amorphous, even though it shouldn’t be too amorphous, or else people don’t have any way of knowing whether or not they will get a bonus. Even if it’s a discretionary bonus, it still should have some nexus to what the person does so that they can, so that they can reasonably expect whether or not a bonus is even within their wheelhouse. But for an incentive plan, it is usually tied to something very specific. So, for instance, you can have variable incentive plans across different people in the firm. So for the receptionist, you might have a certain requirement of how they conduct themselves at the front desk, how they answer the phones if they are overall a pleasant person, and that is a requirement of the job. But they happen to be so warm and inviting that people love to come to your firm and refer people to your firm because they get such a great greeting and they specifically reference the receptionist in online reviews. They reference the receptionist when they send people to your office.

 

Allison Williams: [00:20:00] That is the above and beyond standard. That is a little bit more amorphous because how do you really quantify it? Be a nice person, right? That would be where someone would get a bonus. But let’s take that same role. The receptionist, the receptionist could also be a part of an incentive plan, and that usually is tied to something more quantitative. So you might say you’re going to be required to answer the phones. But we want you fielding an increasing number of phone calls with less time with people on hold. So that means that person needs to develop the skill of not just being pleasant on the phone, but navigating adeptly between calls when a lot of people are calling in at once. So instead of law firm, please hold. Something we always recommend that you not have your receptionist say. Right, when their secret shopping. You don’t want to have them become an automaton, but you want them to be able to take a person who’s on the phone and gently place them on hold if the priority is to get to the next phone call before it either rolls to voicemail or rolls over for someone else. And sometimes that may not be possible. Right. There have been times where in my law firm we’ve had seven or eight people calling in because, you know, there’s just a lot going on that day. You have a lot of activity. You have a lot of urgency of activity.

 

Allison Williams: [00:21:23] So there are times where it’s just not, it’s not possible, in which case you don’t want to penalize your receptionist for what may be a systems issue if you don’t have enough people answering the phone so that that role can be, you know, executed the way you want, but in this scenario, if the goal would be if you’re trying to get the receptionist to evolve, to be able to more quickly move people off the phone, let’s say this person tends to want to chat it up with employees or chat it up with with people on the phone, clients, potential clients, et cetera. And everyone loves it. But even as they love it, they still are, you know, it’s still not serving you as the business owner. Right, because she’s not being so much more friendly that it’s getting you something. It’s just a part of her job to be friendly. But now she needs to grow and learn how to be friendly and also move people quickly to the next caller or the next place in the firm so that the next call can be fielded. And in that scenario, you might want to measure the number of calls she’s getting to at present and then give a specific KPI of increasing the number of calls that she fields in a given period of time. A given hour, a given quarter, a given day, whatever it is, so that she can be pacing to move her skill set up in that area.

 

Allison Williams: [00:22:45] So any time you think about an incentive plan, you really want to be thinking about what is it that this employee or this department or this role in my office needs to accomplish. So it could be something like you want to have your associates learn how to crisis manage for clients, meaning they’ve learned how to do that for their own clients, and maybe you have some mid-level people and some babies or you’re, or you’re contemplating bringing in a baby. Right. So you want your your mid-level associate that has maybe five to seven years experience. You want that person to grow in the skill of being able to handle client complaints, client concerns, client urgency, et cetera, so that when new lawyer comes in, a new lawyer can go to a more experienced lawyer rather than going to you as the business owner when there’s an issue with a client. So in that scenario, you would want them to, you would want to define what it is that they need to accomplish, what skill they need to accomplish. Right. That could be attending a class. It could be listening to recordings of you handling such disputes. It could be meeting with you to play how they’re going to handle these things in the future. And if a dispute actually arises, having them handle it, to see that they have integrated their knowledge and see that they are developing in that area.

 

Allison Williams: [00:24:12] Right. So the incentive is that they have to do certain activity relative to where they are right now. That evidence is a measure of growth and accomplishment in a particular area. Now, the final type of financial remuneration that we give at the holidays, that’s not a holiday bonus or an incentive plan is simply a gift, OK? A gift connotes generosity that was not required. It’s a thank you. So it could be, you know, more often than not, gifts tend to be lower. They don’t have to be, right. You can give tens of thousands of dollars away and gift money if you have it available to give. But a gift is usually implying that either the firm didn’t meet its number or didn’t grow to the extent projected, but notwithstanding that, notwithstanding the fact that people did not achieve in a way that would entitle them to additional compensation under the law of compensation, they have done something for the firm. Right. So it could be that you’re giving a gift because you appreciate that people on your team have supported each other. Right. And I know a lot of people that are choosing to give a holiday gift this year rather than giving a bonus or rather than even exercising their rights under their incentive plans, because some people will have defined incentive plans. But under the incentive plan, people did not meet their incentives this year for a number of reasons.

 

Allison Williams: [00:25:45] Some of those reasons we understand it could be all of a sudden your paralegals are working at home with their children at home school, and it’s not feasible for them to produce the same number of hours during the defined workday. So maybe they had to flex their hours or maybe you allowed them to simply continue to work nine to five while also having responsibilities that were not work responsibilities like home schooling, because they didn’t choose to be in the situation and they were otherwise a good employee before COVID hit and life happened. Right? So they may not be able to produce at the same rate that they were before. And you may have elected to allow that in your firm because of who you are as an owner or the choices that you made for the business. But you also would recognize that if they had an incentive plan that said you have to bill a certain number of hours in order to achieve an incentive pay at December, that they wouldn’t be eligible. And so rather than simply say, well, you’re not eligible because you didn’t do what you were required to do, you could say, I’m going to give you a gift, because even though you didn’t do what you were required to do, you still gave a lot, notwithstanding everything that you had on your plate. Right. So it’s recognizing good behavior. It’s recognizing dedication, loyalty, advancement.

 

Allison Williams: [00:27:06] You can have people that advance in their career in certain areas, but they under produce in others. So I’ve had years where I’ve had attorneys on my team do something remarkable in their career that’s going to enhance their career and by association advance the firm, because whatever they did in their career might be highly marketable for the firm. But they didn’t meet billable hours. Right. So that the incentive plan is based on meeting billable hours. They’re not eligible to receive a financial incentive based on that. But they did something else that mitigates their underperformance in one area in consideration of another. So you have to really think about that from the perspective of what it is that you are offering. And you want to be very clear about the language that you’re using with your employees so that there is not an entitlement feeling of we get a bonus simply because we’re working on December or December 1st, December 15th, December 31st, whatever it is, whenever you pay out your bonuses. Right. Because I think a lot of times what owners recognize when they are deciding the bonus question, they often recognize, oh, crap, I have paid a bonus every year for the past seven years. And people just expect in December that they’re going to get a bonus. And I haven’t really had a lot of conversation with them about why it is that I pay bonuses or what it is designed to do or why it is an equal exchange of value, meaning compensation.

 

Allison Williams: [00:28:36] So it could be an incentive plan that people just trigger in their mind is going to be paid out in December. Or it could be that it’s called a bonus, a holiday bonus, but they’re not doing anything to really receive a bonus. Right. So they might be good employees. They might even be great employees, but they’re not doing something above and beyond what you require as your standard. So if they’re not doing something extra and you are giving them something extra, then that is a one way transaction that really is more of a gift. But you’re calling it a bonus. OK, and so when people have that realization, oh, crap, there’s this expectation, then the guilt and shame is triggered when the owner does not meet the expectation of the employee. Because the quid pro quo that you as the owner are envisioning is, you are employed and you do X, Y and Z. However, what has been communicated is, employees I care for you so much that I’m going to give you X dollars at the holidays. So then the employee’s expectation is that the quid pro quo that comes for this bonus is that I happen to be employed, not I happen to be employed and exceeding my billable hours or in managing client crises better or scheduling more potential new clients for the firm. It becomes a miscommunication by omission, if you will.

 

Allison Williams: [00:30:05] And so when the owner realizes that they have set up this mismatch of expectations. Right. Employee expects to get it because they’re employed and owner expects that you will get it only if the firm is producing a certain amount of money and only if you do certain things, then oftentimes there’s a triggering of guilt and shame, particularly guilt, because the owner perceives that he or she did not lead the employee to a reasonable expectation.

 

Allison Williams: [00:30:34] And so then they want to fall on the sword and say, well, it’s not really fair to my employee that I not pay them because they are still living up to their end of the bargain when it comes to compensation in December because they’re still here. Right. And even though that should not have been their expectation, I led them there. So how can I now renege on what our agreement is, our tacit implicit agreement. 

 

Allison Williams: [00:31:03] And so what I always tell people is there is never a good time to do a reset other than right now. So that means regardless of what your circumstances are, when you realize as a business owner, that you have set up a poor expectation in the minds, the heart of the heart, the eyes, the ears, the brains of your employees, the time to do that, is never going to be never to do it. OK, never is never the right time. I hope that that makes sense. Right.

 

Allison Williams: [00:31:41] The idea of avoiding it or simply opting not to have the conversation or opting not to fix the problem because you caused the problem in your view, by setting up this expectation. That is not the right answer. So in other words, you can’t continue to use your bank account as the feel good Friday moment in time in your law firm simply because that’s what you’ve done in the past. And when we’ve got plenty of money. Yeah, writing a check for 10, 15, 20, 30, 50, whatever, thousands of dollars simply because it feels good might not be so bad because, all right. I could have had thirty thousand dollars in the bank, but now I have twenty thousand dollars in the bank because I paid ten out, even though under my thinking I really shouldn’t or under my thinking I really can’t afford to. I’m going to do it anyway because I set up this mis-expectation.

 

Allison Williams: [00:32:38] That is not good financial management, so I want you to think about that from the next topical area that we’re going to cover, which is really the mindset around compensation. So when you, whenever you have these feelings that come up about how was I supposed to handle the situation, I feel so bad because I really wanted to pay out an incentive plan. And what I created was a gift structure. And I pay a gift in December and now I can’t afford to pay a gift and I feel guilty.

 

Allison Williams: [00:33:08] OK, so guilt presupposes wrongful action, OK? When we are feeling guilty, we are in our minds believing that we did something wrong, OK? And it also presupposes that you owed the amount that you chose to give to the people that you’ve chosen to give them to you. Right. And when there is an entitlement on the other side of your choosing to give to someone. Right. I choose to engage in this behavior because you are entitled to receive it. What is written out of that discussion is what you as the business owner are entitled to receive in exchange for what you’re giving. So in other words, it is both a dysfunction of putting others first, and I don’t mean putting others first in the sense of leaders eat last quote unquote. I mean putting others first to your own detriment. OK, because if you are prioritizing others, that is one thing.

 

Allison Williams: [00:34:06] If you are prioritizing others to the detriment of your business, meaning you don’t have it, but you’re going to pay it out by virtue of taking a loan or you’re going to pay it out by virtue of not taking the salary, or you’re going to pay it out by virtue of not making an investment in the future. What you are really doing is saying that my need as the business owner to feel good about myself supersedes your needs as the employees to have a fiscally sound employment, you know, experience.

 

Allison Williams: [00:34:39] You’re basically saying I am going to put your mask on first using an analogy from the plane. Right. We all have been on the plane where the stewardess or steward says everyone in the event of an emergency, the masks are going to drop down. Put your mask on first before helping your neighbor. If you as the person flying the plane, the pilot does not put your mask on first and you decide that all the people in the back of the plane making them feel good going into the back of the plane, stepping away from the controls to go pat them all on the head when the plane is going down nose first. You are not doing something for them. You are doing something for yourself.

 

Allison Williams: [00:35:20] You are being selfish now, I don’t say that to be judgmental or to be critical, I have done this before. Most people that I speak to have done this on some level. Right. There is an expectation placed upon you as a business owner. And many times those expectations are really in our own head. But an expectation, whether it’s real or fictitious, it exists.

 

Allison Williams: [00:35:44] Right. And it gives us a feeling about ourselves if we don’t meet or exceed expectations. And in those years when we were able to exceed expectations, we got to feel really good about ourselves. So this is not something to feel bad about, but it’s something to be aware of, because when you are prioritizing the feeling that you get out of giving to someone rather than what it is designed to do. i.e. I’m giving to you in exchange for services rendered if it’s an incentive plan. Or bonusing behavior because you went above and beyond. Or as a future incentive plan, because you can have incentive plans that are designed to incentivize someone to remain employed.

 

Allison Williams: [00:36:28] Right. In consideration of what you’re doing today, you’re going to represent that you’re going to stay with us for the next six months, the next year, whatever, in order to receive a certain amount of money today. But there is an expectation of mutuality. And if you don’t put that into your relationships with your employees, you are having an inappropriate relationship with your employee. You are using them to satisfy your ego. OK. Now we learn this behavior all throughout our lives. We learn this behavior from parents, from friends, from teachers, from people in society. Right. We we very much have seen how people, whether they are in positions of authority or otherwise, can say in exchange for you making me feel good about myself, I’m going to give you something or not. Right. And I don’t like to use politics a whole lot as an example, because I know that politics are politically charged and speaking myself as a moderate, I can oftentimes understand perspectives on both sides, even though many of my friends on both sides can’t see each other’s perspectives, I often find myself kind of dead smack in the middle. But one of the things that has recently come about, and I don’t have any right leaning friends who support Donald Trump, so if you are somebody who supports Donald Trump, you might want to turn this moment away. But, you know, one of the things that Donald Trump recently said was, you know, he was not going to, assuming that the that the coronavirus vaccine that if it became available, he was not going to make it available to the state of New York because of his feelings about Andrew Cuomo, the leader of New York.

 

Allison Williams: [00:38:14] And it was jarring that you would say, I’m going to penalize the entirety of a state by the representations of its leadership. But let’s assume for the moment that whatever the state faces is as a result of its leadership. That is a very real circumstance where someone in a position of power is saying, I need to feel good about myself. And what you’re saying and doing doesn’t make me feel good. So if you keep saying and doing things that don’t make me feel good, things like wear a mask, things like it is dangerous for you to be out in large spaces, in large gatherings if you keep saying those things. I don’t get to feel good about myself as the president and therefore I’m going to penalize you by not giving you something that you need, i.e. the vaccine. So that’s a pretty extreme example. OK, whatever your politics, I don’t know anyone that feels that that is the right way to behave in leadership. But putting aside for the moment who said it and what political party they’re with, I think we all have seen in different circumstances where negotiations behind the scenes end up with you give me X or else I’m not going to give you Y, right. It’s very much a matter of I want to exchange value for value. And this is not talking about general negotiations.

 

Allison Williams: [00:39:36] I’m talking about where someone wants to feel a certain way. Right. I don’t get to look good to my constituents unless you give me X and we see that in politics all the time. Part of the looking good to constituents is about keeping their job right, being elected again. But part of it is about looking good and feeling good as a person. So I want you to think about all the different ways that you’re compensating someone based on how you feel because they are gratuitously happy or proud or pleased or looking up to you or or thankful for you if you are getting an ego boost out of that. I want you to think about all the ways that prioritizing giving money that you don’t have, either you don’t presently have it or you don’t have it without taking on debt or you have it. But there’s a concern about what’s going to happen in Q1 of twenty twenty one, because you either don’t have a well written business plan or if you have a well written business plan, you don’t have a business plan that’s going to be sustainable based on changing verticals, adding practice areas, whatever it is that’s going on in your business. Right. Some people, Q1 is just normally lower than in the future. So whatever goes on in your business, I want you to think about it from this perspective. And I want you to really give thought to what happens if you have to make a choice between cash in hand today that I need for some other purpose and cash that I could give to an individual in the form of a bonus.

 

Allison Williams: [00:41:14] OK, so think about it from the perspective of do I grow my business or do I give money to this individual? Do I grow my business or do I give raises? Do I grow my business or do I advance people into higher positions with more compensation? Now this is again operating under the idea that this is not the law of compensation. So if you are choosing to make decisions about advancing people or compensating people based on what they have earned, we’re not talking about that. We’re talking about where our emotional needs are being met through the way in which we compensate people. OK, and I want you to really give thought to the question of do you consider how it feels when you ultimately do compensate someone? Because if you’re considering it, if you’re considering how you get to be the hero or the zero, how you get to be perceived by others, how you get to be touted as the best boss in the world, how you get to be voted as a great workplace based on how much you give.

 

Allison Williams: [00:42:23] If you’re doing that and it’s about how you feel in the process and not about what the compensation is going to engender in terms of behavior in the employee for the benefit of the whole, then you are contributing to an individual to the detriment of the whole. And this logic still applies whether you are doing that for an individual employee or you’re doing it for your entire workforce. Right. If you’re giving money to your entire workforce and it’s going to be taking away from the fiscal soundness of your business or it’s going to be taking away from the fiscal goals of your business for next year, then ultimately you are prioritizing your own feelings over the well-being of your business and which is really the well-being of all the people who work in the business.

 

Allison Williams: [00:43:11] OK, so you really have to think about this. And if you are doing that, you are not alone. I’d say more people than not when I ask them why and how they compensate, how they feel about the person, either how I feel about the person, I like them so I want to give them more. Or how I feel about the person. I like feeling like I’m successful by paying them a high salary or I like feeling like they’re going to look up to me because I gave them a great bonus. Those issues are very common, whether people acknowledge them or not, like, these are usually off the record conversations that I’m having with people. These are conversations that I have with people that consult with Law Firm Mentor. It’s people that I’ve spoken to in the legal community where I work. It’s people that I’ve spoken to at conferences I’ve attended. So this is pretty widespread.

 

Allison Williams: [00:44:01] And, I want to give you this last final thought. If you are thinking about giving a bonus or executing an incentive plan when your business does not have the resources and you’re going to take from your business to give to an individual, that signifies a self-worth issue. And if you have a self-worth issue, it’s not likely just showing up in your compensation schema, but it’s likely showing up in a whole host of other areas in your business. OK, so we got to get that fixed. What I would say to you, for those of you that feel bad, for those of you that feel guilt about not being able to afford the same amount of bonuses or even any bonuses at all relative to what you paid in the past, I would highly recommend that you do the deep work of really auditing your motivations for the payments that you’re giving. And if there are thoughts that come up and you come to a realization that this is really more about how someone else will perceive you than about what they have earned in terms of what you want to pay them, then this is the, this is the time right now to course correct and say I’m going to prioritize the good of the business, which is for the good of all of us, leader included, and not pay out. If it is a matter of, you believe that someone has earned, then there may be ways that you can alter what you have planned to give.

 

Allison Williams: [00:45:31] Right. I’m certainly not suggesting that you ever fail to meet an obligation where you have established that obligation. So if you have a written work agreement with someone and there’s an incentive plan, that’s a very different conversation. You obviously have to, you have to honor what your representations are. But if there is kind of an off the record or maybe less well established incentive plan, there’s kind of an expectation. It’s called a bonus, but there really is an expectation there. Then maybe the way that you handle that is by altering what you give. And what you give is not cash, but you give days off. You give some other form of remuneration to your team in order to accomplish the giving that you want to achieve. And then finally, if what you really want to give is a gift and you have been giving gifts, you have just referred to them as something else. What you might want to start doing now is inculcating your culture with understanding how money works in your culture. OK, now this does not have to be opening up the books and showing everybody everyone’s everything, right. We’re not suggesting that you have to have an open container. Some people choose to have an open container, but even when they do that, they usually don’t disclose who’s earning what for a whole host of reasons.

 

Allison Williams: [00:46:42] Some laws, some states actually prohibit that. But whatever your state allows, most people are not choosing to open up the books that wide. Whether you’re opening the books or not, you still need to let people know what sorts of things are influencing their compensation because people spend their behavior on what they value. So if you value something that is going to lead to more compensation for a person, it is in your best interest and their best interest that you tell them, tell them what sorts of things are going to earn them that incentive pay out at the end of the year.

 

Allison Williams: [00:47:18] Tell them what sorts of things that they need to be growing in. And this is not an annual review type stuff. This is every so often you are inculcating your culture with these are the things that matter to the firm. It matters to the firm how much you bill. It matters to the firm, how you treat our clients. It matters to the firm, how available you are to your teammates when someone is overextended. It matters to the firm how frequently you are on the phone getting people scheduled. Right. Whatever the role is, you want to speak globally about the values of your firm so that everyone, no matter what their role is, can see how they can start moving themselves in over-performance in the areas that really matter to the firm so that when it is time for an incentive, they know whether or not in their heart of hearts, they have earned it or not.

 

Allison Williams: [00:48:08] Ok. Now we can have a whole separate conversation about compensation systems. And at some point I’m probably going to bring someone on to the podcast to do that. But I wanted to give you all that that line of thought for how you can start to transform your culture into one that is more driven by performance than simply, I take care of people because I’m a paternalistic boss and it feels good to give away money at the holidays. All right, everyone, I am Allison Williams, your Law Firm Mentor. Thank you for tuning in to another episode of The Crushing Chaos with Law Firm Mentor Podcast. Have a great day.

 

Allison Williams: [00:48:59] Thank you for tuning in to the Crushing Chaos with Law Firm Mentor podcast. To learn more about today’s guest and take advantage of the resources mentioned, check out our show notes. And if you own a solo or small law firm and are looking for guidance, advice or simply support on your journey to create a law firm that runs without you, join us in the Law Firm Mentor Movement free Facebook group. There you can access our free trainings on improving collections in law firms, meeting billable hours, enjoying the movement of thousands of law firm owners across the country who want to crush chaos in their law firms and make more money. I’m Allison Williams, your Law Firm Mentor. Have a great day!