Financial incentives are The Am Law 200's favorite motivational tools, but their value is limited, and they carry risks.

Patrick J. McKenna and Edwin B. Reeser

(Reprinted with permission of The American Lawyer, November 01, 2011)

Every year, firm leaders devote vast energy to pursuing the perfect blend of financial incentives to influence attorney behavior. Their quest is premised on deeply held assumptions about the motivational power of money and a belief that if management can just get the compensation scheme right, attorneys will adjust their actions.

Money does motivate us. Professionals need to feel that their compensation is commensurate with their contributions and in line with what their peers earn. Financial rewards can be one way to express appreciation and acknowledge a job well done, but it is not the only way. The fact is that the more a firm uses money as a motivator, the more likely it is to suffer negative effects.

In fact, obsessing about money and regarding it as the primary way to manage partners may well be the most common way that firms expose themselves to dire unintended consequences. There is ample evidence that the relationship between compensation and behavior is far more complicated than a carrot-and-stick approach suggests.