Warner Norcross Says Pay System Makes Difference

June 5, 2002
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GRAND RAPIDS — Thanks to John Grisholm's thrillers and Sen. Hilary Clinton's now-they're-here, now-they're-not Rose Law Firm records, the public has the view that all lawyers are paid according to the number of billable hours they amass in client service.

Yet not quite all lawyers' paychecks are cut on that basis.

One of the state's major firms, which is headquartered here — Warner Norcross and Judd LLP — employs an older method that harks well back into the last century and that has become fairly rare.

Yet the firm's managing partner, John Tully, says what now might be called the Warner Norcross system of payment is one of the main reasons for national recognition recently accorded the firm from within the profession.

The National Law Journal recently named the 70-year-old firm as last year having the lowest attrition rate — 4 percent — among the top 250 law firms in the United States.

Moreover, it was one of two Michigan firms and one of only 115 in the nation also honored by inclusion in a book entitled "America's Greatest Places To Work With A Law Degree."

Tully attributes that honor to the fact that, in a highly competitive and even combative profession, the attorneys at Warner Norcross enjoy an office life virtually free of rancor.

And the major reason for that relatively serene existence, Tully told the Business Journal, is that the firm has eliminated internal competition for billings and compensation, the prime reason being to foster teamwork.

Lawyers, like many other professionals, usually earn income almost as if they were independent contractors, their checks ordinarily increasing or decreasing depending upon revenue strictly from the clients whom they personally serve.

But Tully said Warner Norcross employs lock-step compensation.

This means that attorneys with the same seniority receive the same income, predicated on the entire organization's performance.

"We sometimes make some modest adjustments at the partner level," Tully said, "but those adjustments are the exception, not the rule."

One Warner Norcross partner, Dan Gravelyn, who moved into the firm from another practice in Chicago, told the Business Journal that at first he was dubious about lockstep earning — that he preferred pay based directly on hours billed.

But Gravelyn, a trial lawyer, since has become a believer and recently authored an article for an industry publication, The Wall Street Reporter, which describes the Warner Norcross system in some detail and elaborates upon the advantages of lockstep compensation.

"It's just a reality that people respond to financial incentives," he said, "and when you get some particularly competitive people, you sometimes can have some discord." Gravelyn left unspoken the fact that law firms have been known to break up because of the animosity arising out of such discord.

But he and Tully said that sort of in-fighting just isn't a factor at Warner Norcross.

What happens, the two say, is that cases move seamlessly up and down the letterhead, going to the professionals best suited to handle them.

"What we have done here," Gravelyn said, "is eliminate incentives for attorneys to hoard work or to spend more time on a project than a project merits."

Tully explained that the system began to evolve a half century ago when former partner Harold Sawyer, yet to serve his four terms in Congress, headed the firm.

"Sawyer was an outstanding trial lawyer," Tully said. "He was one of the best in the country and certainly the best in the Midwest. But he was more concerned about building an organization than about making more money himself."

He said, in fact, that Sawyer created sort of a self-imposed glass ceiling for himself.

"You had somebody who was really good," Tully said, "but he would not take out of the firm what he could have, so that no one else could say, 'Well, gee, I'm getting shortchanged here.'"

Tully said lockstep compensation was an informal arrangement in the firm until the late '70s. Since then the partnership has formalized and refined Sawyer's example to the point that he believes Warner Norcross is almost unique.

"When I first started practicing back in the '60s," Tully said, "a lot more firms were doing this. We were not the proverbial hen's tooth.

"But today when you mention it to somebody at a conference, they just look at you for a minute and then ask how you do it."

To Tully the "how" relates to careful recruiting of people who want to be team players.

He said the firm brings in eight to 15 new attorneys a year, roughly half of them from West Michigan, the rest coming from just about anywhere.

"When we go to law schools," Tully said, "we talk a lot about our culture and, frankly, to a lot of people it doesn't appeal. They want to go somewhere where their economic potential is unlimited.

"What we stress is the fact that we have a very sophisticated, highly-refined practice in an area where you can enjoy your life and we don't chain you to the desk.

"To people who find that appealing and who meet our standards — and we do have very high standards — this seems to please them.

"But you also have to be totally committed to the client. And if that means sometimes you have to put in 14 hours a day … well, you just do that. But we don't normally demand that kind of time out of our people.

"This all helps us with our primary mission: To provide the best possible client service and, over the long term, to be recognized nationally as the best law firm in Michigan," he said.

Achieving a national reputation, Gravelyn pointed out, isn't as difficult as one might imagine, thanks to the firm's early embrace of information technology. (The firm currently has an extensive Web site that includes a Michigan environmental law resource page, a trusts and estates law page and a human resource law page.)

The company has offices in Detroit, Muskegon and Holland but Gravelyn said its clients are found all over the country.

He also noted the firm is the only one in Michigan to belong to TerraLex, an international affiliation of over 140 firms in 91 countries.

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