Uncertainty ‘Opening the Door’ To Partner Comp Changes in 2025
Performance management discussions will likely focus more on adjusting comp downward, shifting roles or counseling lawyers out of the firm, consultants said.
May 21, 2025 at 03:42 PM
With strong performances throughout the Am Law 200, partner pay evolved and surged into a different stratosphere last year. But in 2025, systems set up to reward high performers may not be as bountiful if the economy takes a hit, and firms that came into this year expecting to go gangbusters may reduce draws and distributions for some partners, law firm consultants said.
Performance management discussions will likely focus more on adjusting comp downward, shifting roles or counseling lawyers out of the firm, they said. And while a number of firms continue to expand bonus pools, analysts say, the mix of practitioners they reward could look different, as high-end products liability, class action and labor and employment demand accelerate.
Law firms and businesses in general could be in for a “rocky” next few quarters, industry analysts say, as tariffs and federal employment cuts during President Trump's administration have ratcheted up uncertainty.
A large number of firms did make pay system and scale changes last year. But many firms also avoided it because they were already well-off, said Kristin Stark, law firm consultant and principal at Fairfax Associates.
“While there were plenty of firms making changes, there were plenty who said, ‘Hey, we’re having a great year. Let’s not rock the boat',” she said in an interview.
The current environment, she said, is "actually opening the door for more firms to explore compensation changes, because people are very concerned about 2025 being a mixed year or even a weak year for profitability and profitability growth.”
Like last year, firms are continuing to expand bonus pools, Stark said. But there’s a lot of discussion at the moment about how those bonus funds will be used, as demand for litigation and certain sub-specialties of it — high-end products liability, class actions and labor and employment — is expected to be high.
“So those practices will certainly require recognition in the bonus pool,” Stark said, adding that it, of course, can depend on the firm.
Meanwhile, she said, some firms will lose patience for practices that have been softer and end up slow again this year. That will manifest in downward compensation adjustments. That could be a particular theme for those partners who’ve had stagnant productivity and originations for several years leading up to 2025 and have increased their compensation simply because the value of points or shares at the firm has increased significantly, said Kent Zimmermann, law firm consultant at Zeughauser Group.
“Behind closed doors, there’s a discussion in many firms on how to take down people who’ve ridden the wave,” he said in an interview earlier this year. “I think that will happen more in firms, perhaps starting this year, especially given the possibility that this year might not be as good for many.”
Stark said some firms could go even further.
“So when we talk about change, they’re saying, ‘We’re not just going to bring you down in compensation, because that isn’t enough. We’re going to have to talk about a role shift, or whether you should stay at a firm, because your practice is soft,” she said, adding: “We’re seeing those conversations take place in order to preserve the profit pool.”
Still Paying Top Dollar For Some Talent
Not everything is different. Some of the forces driving the comp changes last year could very well still be key this year, said Jeff Lowe, senior managing partner and market president for Washington, D.C. at consulting firm CenterPeak.
“What we’ve seen is a continued willingness by firms to pay top dollar for top talent, notwithstanding all the changes to the marketplace. That trend has definitely not abated,” Lowe said in an interview.
“If we’ve seen anything, it’s perhaps a hesitance to pursue things that aren’t at the very highest level," Lowe said, about laterals and practices. "I think there’s maybe been a slowdown on more speculative investments, but for attorneys with well-established histories, the demand remains incredibly strong.”
He also mentioned a continuing "insatiable appetite" for partners doing private equity, funds and high-dollar financial-related practices, whether they're completely transactional or some combination of transactions and regulatory.
But, to be clear, a mixed or even down year for the industry will affect partner compensation, whether firms are considering changes or not.
Allison Murdock, managing partner at Stinson, noted that her firm has had a bonus system in place since the early 2000s, “set up to reward people for performance in the year it happens, as well as increase base compensation for the following year.”
She said the firm doesn’t have any system changes currently in the works but carefully looks at compensation every single year.
Murdock also noted the firm’s performance thus far in 2025 has been “incredibly strong,” coming off a banner year in which it eclipsed $300 million in revenue. “Of course, the overall performance of the firm is always going to impact how partner compensation works. So if there were to be an economic downturn that impacts the overall revenue of the firm and the profitability, the net profits available, of course that would impact the level of compensation that can be paid,” Murdock said. “But our system allows for that.”
Expectations may be dispositive as well, though. Brian Meegan, an M&A partner at Kupfer, a small firm based out of New York, said some firms that came into the year expecting, say, 10% growth, could have draws and distributions correlated with that expectation, and may want to revise them downward.
“Maybe you’re not being as aggressive with those quarterly distributions,” said Meegan, who has also founded multiple firms in his decades-long career. “Maybe they’re a little more conservative right now to see how things turn out toward the end of the year."
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