The system drives away top talent, stalls innovation, and frustrates clients
Most debates around compensation in law firms focus on technology trends or future-proofing the profession. However, there is a more important consideration: keeping and retaining talent. The traditional billable hour model is failing — not just lawyers but also firms that rely on them.
Beyond tech: the real compensation challenge
I’ve seen this firsthand. As a junior lawyer, I navigated an opaque compensation system with billable hour targets and discretionary bonuses. I now run a business, managing revenue, expenses, and cash flow — and, most importantly, employing lawyers.
The most essential part of the firm is the people. The people are responsible for delivering the legal work, getting clients, keeping clients, and all the other less glamorous administrative tasks. Without the right people, technology is underutilized, clients are underserved, and the business model unravels.
If law firms want to attract and retain the best people and keep their clients happy, they need to rethink what they reward. That means moving beyond billable hours as the primary measure of value.
Talent is being punished for efficiency
I always struggled to understand the billable hour model. I worked with a brilliant student who became an exceptional lawyer. This lawyer was “rewarded” for her talent and hard work with more files and responsibility. The more she worked, the more she was asked to do, yet the less she earned per hour. She worked hard for years but was not rewarded for her efficiency, talent, and value. Eventually, she burned out and left private practice — a net loss for the firm.
The high-achieving lawyers quickly realize that their compensation in the traditional model is based on time, not quality or efficiency. They are unhappy and often leave. This model ultimately drives away exactly the kind of people firms want to keep.
What the next generation of lawyers wants
Despite many complaints from more senior lawyers, younger lawyers are not rejecting hard work. They’re rejecting systems that treat them as billable units, not people. To be constantly accessible by email but unable to afford a home makes long hours seem less attractive. These lawyers want to be part of firms that value balance, fairness, and purpose. If firms want to attract this generation, they need a culture that rewards more than just hours billed.
Otherwise, the result is attrition, disengagement, and a quiet exodus of talent from firms.
Turnover comes at a steep price for firms. Onboarding, lost institutional knowledge, and disrupted client relationships are costly, even if not quantified.
Clients feel these consequences too. They value continuity and efficiency. When firms experience high turnover due to unsustainable compensation models, clients may feel the impact through inconsistent service or the loss of trusted advisors. In this way, compensation isn’t just an internal matter — it directly affects client satisfaction and loyalty.
Broken incentives are holding firms back
Compensation models that prioritize individual billing targets also undermine collaboration and mentorship. They discourage knowledge-sharing and innovation. There is no incentive to build efficiencies that will benefit other lawyers at the firm; reinventing the wheel is rewarded.
Lawyers are incentivized to hoard work rather than improve processes or support colleagues, and junior lawyers miss out on vital hands-on training.
Each firm needs to consider what it values and the types of behaviours that it wants to reward. Then, the consequences of the proposed compensation scheme need to be considered.
Some firms are experimenting with alternatives: profit share, competency pay, team bonuses, value-based billing, or hybrid models. There is no one-size-fits-all solution, and it depends on the type of firm.
Transparency builds buy-in and trust
Once the system is in place, there needs to be buy-in. Transparency is key to building support for any new model. Many lawyers, especially those earlier in their careers, see high hourly rates and large client bills and assume firms have more money than they likely do. But the reality is more complex. The cost of running a firm is substantial. Rent, insurance, technology, licensing fees, professional development, and taxes add up. Without visibility into these expenses, it is easy to misunderstand how compensation decisions are made.
Greater transparency fosters trust, reduces resentment, and helps everyone, from junior associates to senior partners, engage more constructively in conversations about value and reward.
The legal industry's future will not be driven only by technology or client pressure — it will be shaped by the people who choose to stay. Firms that want to thrive must move beyond outdated compensation models and start valuing what truly matters: their people. Lawyers must look beyond traditional compensation models to attract and retain the best people.
Faren Bogach will participate in an interactive panel entitled “Will traditional compensation models survive the future of law?” at the Canadian Lawyer's Canadian Legal Summit in Toronto in October.
