12 Culture and Compensation

 

When attending an event like the IBA Annual Meeting where lawyers from all over the world gather, it becomes apparent how strikingly similar lawyers are. Yes, there is a natural bias, simply because lawyers who attend the IBA Annual Meeting are perhaps a bit more sociable and outgoing than the ones who decided to stay at home. Still, despite cultural differences and a diverse spectrum of practice areas and sizes and market positions, lawyers are quite similar. Let’s call it professional deformation.

Even though on a superficial level there are common traits and similarities, having worked with law firms and partners for many years, we have found there can be great differences at the partnership level. This is what we call culture. Coming to think of it, culture might well be more important when it comes to success than an individual partner. Let me explain.

A friend of mine who is an M&A lawyer had a successful practice and a great market reputation. When at some point he could not get along with the new practice group head, it was quite easy for him to move to another firm. Both his old firm and the new firm had a top reputation in M&A and both were effectively similar in size and profitability. This lateral move turned out to be a big mistake which my friend soon bitterly regretted. His old firm was built on a culture of collaboration and trust, whereas the new firm turned out to be a nest of fighting vipers. My friend lasted three years before moving to the next firm, this time more cautious when assessing the culture. Moral of the story: same partner, successful in one culture, failure in the next. Culture is that intangible driver of success that differs considerably between one firm and the next.

 

What is culture?

Defining culture is a tough question to answer. Definitions made by authors and academics are all but clear and make references to aspects of culture that are by themselves equally vague and hard to pin down. Here is a random example: “The culture of an organisation refers to the shared values, beliefs, behaviours, and norms that shape how employees interact and work together. It encompasses the organisation’s mission, vision, and core values, as well as the unwritten rules and social dynamics that influence daily activities.” Shared values, core values, unwritten rules and social dynamics, all in all not a helpful definition to explain culture to a visiting alien from another galaxy.

Culture does not exist without the people that form part of the organisation. At the same time one could exchange a significant number of those people and the culture could remain the same. So to a certain extent, culture does exist apart from people. Reading up on culture, invariably the important role of leadership is emphasised, yet we all know leaders are not always able to change the culture of an organisation. A well-known law firm with an ultra-competitive, infighting, dog-eat-dog style culture elected two new co-managing partners in order to create a more collaborative culture. They failed miserably. The culture proved too strong for them to change. Culture prevailed over leadership. Similar dynamics can be observed in companies. Once the culture turns bad, it can be hard or even impossible to change it for the better. Fortunately there are also numerous examples where culture has changed for the good and yes, leadership can play a pivotal role. Just think of Microsoft from Steve Ballmer to Satya Nadella.

 

Stage and role

Every person has a personality, that is to say character traits and behavioural characteristics that are deeply rooted in the psyche. Personality research has converged on five stable dimensions, known as the Big Five or Five-Factor Model: Extraversion, Openness to Experience, Conscientiousness, Agreeableness, and Neuroticism. These are worth naming because lawyers as a professional group show a distinctive profile. They tend to score high on Conscientiousness, being organised, detail-oriented and goal-directed, and higher than the general population on Neuroticism, which manifests as anxiety, perfectionism and sensitivity to criticism. On Agreeableness, which covers trust, cooperation and empathy, lawyers typically score below average. This is not a coincidence. The adversarial structure of legal work selects for and rewards scepticism about other people’s intentions. The lawyer who instinctively looks for the hidden catch is doing their job. The same instinct, carried into the partnership, makes trust and generosity harder to sustain than they would be in a more naturally agreeable profession.

These dimensions describe personality as a stable underlying structure, but they do not determine behaviour in any fixed way. Within the boundaries of our personalities, we play different roles in different settings. The same person might be a guarded, exacting professional at work and a warm, encouraging coach on the football pitch. The law firm is a stage on which the actors adopt a role, one that tends to amplify Conscientiousness and Neuroticism while suppressing the more cooperative dimensions of personality. This matters because it means behaviour can change without personality changing. People sometimes flourish in a different firm, or a different role within the same firm, not because they have become different people but because a different stage invites a different performance.

This is where culture enters. Culture is one of the strongest determinants of which parts of a person’s personality will surface. In a collaborative, high-trust environment, the same individual will behave differently than in a competitive, individualistic one. People and culture exist in a symbiosis: the culture shapes the behaviour of the individuals within it, and the accumulated behaviour of those individuals reproduces or gradually shifts the culture. For managing partners thinking about compensation design, the implication is direct. A compensation system that rewards individual production and penalises collaboration does not merely respond to the competitive instincts lawyers already have. It actively amplifies them.

 

Regional cultural aspects

It would be a mistake to treat law firm culture as a purely internal phenomenon. Every partnership exists inside a society, and that society carries its own assumptions about authority, trust, hierarchy and time. These assumptions are so deeply ingrained that most people who hold them are entirely unaware of doing so. They become visible only when they collide.

In the US and UK, law firm culture tends toward low power distance. Partners challenge each other in meetings, and a junior associate who spots a flaw in the senior partner’s argument is expected to say so. The hierarchy is functional rather than ceremonial. In contrast, many Latin American law firms are shaped by cultures where personal authority matters more than institutional rules, where the founder’s word carries more weight than the partnership agreement, and where the question of who you know is as important as what you know. Jaime Fernández Madero, my co-author, has worked extensively across Latin America, and has seen the pattern repeat: firms where a strong founding generation holds authority intact function well until that generation departs. The transition then becomes existential, because the culture was built around people rather than structures.

Charles Handy, in his book The Gods of Management, described this using Greek mythology. The Zeus culture is the culture of the founder: highly centralised, driven by personal loyalty, resistant to process. The Dionysus culture is the culture of the professional: autonomous, transactional, fiercely protective of individual sovereignty. Law firms in Latin America often begin as Zeus cultures and must eventually transition to something more institutional. The firms that manage this survive. The firms that do not, where the founder holds on too long or fails to transfer authority, tend to fragment. The most talented young partners leave first.

Looking at compensation in the Latin American context, the case changes slightly. Since money is objectively distributed among partners, with each receiving a certain portion of the profits, the power struggles mentioned above become more complex. During the years when the founders are present, their authority covers any uncertainties and internal fights, regardless of the system used. When their power diminishes or they retire, the immediate levelling effect changes the rules of the game. EWYK seems the easiest way to solve the situation because it is so objective. However, that objectivity is only superficial because partners start competing against each other and hoarding clients and teams. In the last ten to fifteen years, the trend in Latin America toward a broad modified lockstep demonstrates the effort to establish a consensus system applicable within a relationship culture. The struggle between political power and objective rules is always present, often making rules a point of reference rather than a strict standard for objective application.

The concept of time also differs between regions. The Anglo-American legal tradition operates on what could be called monochronic time, where schedules are rigid and punctuality is viewed as a proxy for professional reliability. A partner in London or New York views a meeting delay as a breach of contract. Conversely, many Latin American professional cultures lean toward polychronic time, where human relationships and the flow of conversation take precedence over the clock. This changes the very nature of a partnership meeting. In the UK, the goal is to exit the meeting with a list of deliverables. In Latin America, the goal is often to strengthen the consensus and trust required to execute those deliverables later.

The Chinese legal market presents a different dynamic, shaped by Guanxi, the network of interpersonal obligations, and Mianzi, the concept of face. Hierarchy is more pronounced than in the West, influenced by Confucian concepts of filial piety and respect for seniority. Decisions are often a top-down process where senior partners hold a degree of authority that would be seen as paternalistic in a Western context. Communication is high-context, relying heavily on what is left unsaid, non-verbal cues and the status of the speaker. A critique may be delivered through an intermediary or through subtle suggestion to preserve the recipient’s dignity. For a visiting partner from London or New York, the Chinese firm can feel opaque. This is not dysfunction. It is a different operating system, and the mistake is to assume yours is the only one.

Within Europe, there are differences worth noting. In German firms, the culture tends toward what Germans call Sachlichkeit, a commitment to objectivity and technical precision. Decisions are reached through an exhaustive, consensus-based process where the most logical argument backed by data typically carries the day. French law firm culture is often defined by a more top-down intellectual hierarchy rooted in the traditions of the Grandes Ecoles. Rhetorical skill and intellectual flair are valued as much as technical accuracy.

These regional patterns are caricatures, obviously. Every firm is a mixture. The caricature is useful not as a description of any individual firm but as a pointer to the default settings that reappear under pressure. In a crisis or in a high-stakes negotiation, people tend to revert to what they were taught before they were taught anything else. The globalisation of the legal industry has diluted many of these distinct regional markers as elite firms adopt what could be called a transnational culture. In a global firm with offices in Frankfurt, Paris, São Paulo and Beijing, the internal culture is frequently a deliberate third culture designed to smooth over the very differences described above. Ignoring these underlying currents altogether can lead to significant friction in partnership integrations or international mergers. A firm’s success often depends on its ability to acknowledge these regional tendencies as a baseline while allowing enough flexibility for individual variance.

Founders and culture

The founder of a law firm is not merely its first partner. They are the original cultural architect, and the culture they create, often without intending to, can outlast them by decades.

In the early years, the founder’s personality becomes the firm’s operating manual. How they treat associates, how they handle a difficult client, whether they share credit or hoard it, whether they bring other partners into their matters or prefer to work alone: all of this is observed, imitated and gradually institutionalised. The founder does not write a policy. They set an example, and everyone else reads it. Because founders put into action a firm that did not exist before, the culture is created simply by their acting in accordance with their personalities and traits as a person and as a professional. So culture is totally intuitive and spontaneous.

The shadow of the founder is most visible when things go wrong. A founding partner who is brilliant but volatile creates permission for volatility throughout the firm. Partners who shout in meetings are tolerated because the founder shouts in meetings. Behaviour that would be unacceptable in a more disciplined culture becomes normal, because the person at the top modelled it. The dark side of the culture is rarely named. It is simply what is done here. Those who do not adapt normally leave the firm or stay in a silent role.

Firms with many founders are more complex because not all founders are the same. The combination of different personalities might produce confusion and eventually lead to different tribes or groups within the firm. Unless this is addressed, it might create a crisis and even spin-offs in the future. Other firms learn to absorb the best of each founder and develop into great firms. That happens after years of internal discussions and, eventually, governance and culture crisis.

The transition when the founder departs, whether through retirement, death or displacement, is one of the most dangerous moments in a firm’s life. Without the founder acting as the living embodiment of the firm’s values, the shadow of the leader begins to recede, leaving a vacuum that is sometimes filled by competing interpretations of the original mission. Partners who previously aligned their behaviour to suit the founder’s expectations may begin to assert their own disparate management styles, leading to a fragmentation of the cohesive environment that once defined the office. During this phase, the firm usually moves toward a more bureaucratic or democratic model of governance. This shift can sanitise the culture. The unique, often idiosyncratic energy that made the firm distinct is replaced by a more corporate, predictable atmosphere. The firm must transition from a personality-driven culture to a systems-driven one, and the survival of the culture depends on whether the remaining leadership can successfully translate the founder’s personal vision into a set of enduring principles that can be taught to new recruits who never met the original leader.

In Latin America, the Family and Friends model influenced the market for many decades, delaying firm growth and evolution. Some founders in those firms remained attached to the old model and prevented change. Others understood the change was needed and adapted the culture to meet the market’s new demands. Leadership transitions were not discussed properly and were delayed. The most promising young partners left, leaving behind the most condescending and sometimes less productive ones until the very end. The transition from a Zeus to an institutional Dionysus has defined much of what legal markets in Latin America are like today.

Founders do not follow a particular rule regarding compensation. Some prefer to maximise entrepreneurship among young partners and establish EWYK systems. Others prefer equity schemes, fixing equity percentages for partners based on their own judgement. During the initial years that is not a problem because founders are respected, and sometimes feared, and they also secure the clients. Collaboration is easier in those initial stages. Compensation is not the determining factor initially, as talent and client service define success. However, the initial system impacts the future culture. EWYK will create a more individualistic culture from the start and equity schemes will be easier to evolve into the various lockstep models used today.

 

Dimensions of culture

While people are at the origin and the core of a culture, culture is not described in the same dimensions as a personality. The very concept of partnership refers to a group of people that have common interests and pursue a particular goal or vision as a professional or business venture. This joint vision would suggest that common goals should supersede other individual interests that might exist within the partnership and, if there would be a conflict between them, the partners will endeavour to put things in order to make the common good prevail.

But law firm partnerships work differently. For many partners the law firm is the vehicle to achieve personal success, together with other partners that are pursuing the same purpose. Achievements result from personal effort and capabilities. They will share a name, some common resources for efficiency purposes and, occasionally, some shared projects and interests. This sounds too extreme but if you dig down below, you will find many partners feel that way.

It is true, though, that the increasing sophistication of the legal market has made the idea of shared goals and interests more necessary than before, and therefore concepts like collaboration and growing partner interaction are goals to be developed within the firm. The question remains, however, as to how much partners have changed their essential perception of what it means to be a partner.

An initial question that comes to mind is: is it more important to foster the quality of the firm and its collective strength, or my own individual reputation and success? Should partner competition be something harmful for the firm? This brings to mind a concept analysed in the world of management: co-opetition, which means a healthy balance between cooperation and competition. Ambitious people like to compete with others to prove that they are good and can improve. Competition makes them better, but is that even true among peers in the same organisation? Yes, but in a context of co-opetition, when partners compete and collaborate simultaneously.

A famous example of this phenomenon is the dynamic that developed between John Lennon and Paul McCartney. Both were highly creative musicians who could do extremely well on their own. They were also deeply ambitious and wanted recognition for their individual contributions. When McCartney wrote and recorded 'Can't Buy Me Love' as a solo composition in January 1964, Lennon felt the competitive pressure acutely. He responded with a burst of extraordinary productivity: he wrote ten of the thirteen songs on the *A Hard Day's Night* album, including the title track, which he composed overnight after the film needed a song to match its new title[1]. Yet this constant challenge and rivalry never obstructed their permanent musical collaboration. Each recognised the talent of the other and wanted the other's input to improve the final quality of their songs. The result was arguably the most celebrated songwriting partnership in the history of popular music.

The problem is not a healthy competition among partners. That helps in making better lawyers. The problem is when this turns into a harmful and sometimes toxic relationship in which the partners not only want to be better but would also prefer their fellow partners to look worse in order to enhance the difference. This, of course, has negative implications for the firm and the clients. This is not the co-opetition practised by Lennon and McCartney.

Thinking specifically about law firm cultures, autonomy and trust might well be the most relevant dimensions of culture. In a partnership there is an inherent tension between the autonomy of the individual partner and the collective. Being a partner in a law firm is individualistic by nature. It is the individual partner who bears the responsibility for a matter. It is the individual partner who has to meet certain performance targets. Independence, personal accountability and duty of care are ingrained in bar regulations. Partners are not employees, they are co-owners and as such they are all equal. Finding the right balance between the individual and the collective can be tricky. It is this balance that becomes one of the defining elements of a firm’s culture. The level of partner autonomy will limit the powers of a firm’s leadership. It will also heavily influence the level of cooperation between partners and practices. Autonomy will also be reflected in partner compensation, and we will get to that later.

The second most relevant dimension of culture is trust. Trust in the quality and the good intentions of fellow partners, trust in the leadership and confidence in the quality of the firm. Trust is certainly not a given. When it comes to their personalities, lawyers typically have a below-average score on Agreeableness. This is also closely tied to the nature of the profession. As part of their daily activities, lawyers have to always look for the sneaky tricks the opposing parties are trying to play in order to disadvantage the client. You cannot just trust the other party. Lawyers, working as individuals and being self-reliant, generally like to be in complete control. As a consequence there is a tendency to be sceptical when it comes to the quality of fellow partners. They may prefer to use their own model of an SPA rather than one created by a fellow partner. Trust is not natural for a lawyer. It requires a conscious effort to establish. Some partnerships have low trust and others high. This makes trust a dominant determinant of a firm’s culture. Like autonomy, trust will be reflected in the compensation system.

Besides autonomy and trust, there are other dynamics that define a culture, ambition being one of them. Ambition could be defined as a self-starting drive to become better: better clients, better mandates, higher reputation in the market and higher profitability. In assessing ambition, it is important not to focus on a firm’s leadership but on the actual sum of the individual partners. Not in words, but in their actions. Sure, leadership will always be ambitious and there will always be pressure on the leadership to take the firm to the next level. The problem is these are just words. Effectively leadership can achieve very little without real-world actions from the individual partners. Some individual partners will be ambitious, but others not so much. The level to which there is a shared ambition, or lack thereof, is a characteristic of a firm’s culture.

Ownership would be another dimension of a culture. Do partners sit back and wait for the leadership to handle issues, or do they feel a personal responsibility to act? A low level of ownership will mean that it will be very hard to change anything that involves the partners. Leadership can take brilliant initiatives. If partners remain passive it will all remain in vain. Ownership could also be described as a passive versus active attitude. Previously we mentioned the motto “Road Maps, not Roadblocks”. This mindset is very much connected to ownership, which creates a can-do mentality and a self-starting attitude. Do not wait for things to change for you. Take action and change them yourself. When thinking about the virtues of ownership, we need to consider that there are also partnerships with a strongman leadership style. The strongman will act as a benevolent dictator expecting obedience and no discussion when it comes to executing orders. There will be little appreciation for ownership in such partnerships.

 

Collaboration

There is a limit to how much an individual partner can achieve when working alone. Being surrounded by other talented individuals has a motivating and inspiring effect. There is also a necessity in collaborating with other practice areas, because in today’s specialised practice it has become increasingly unlikely that a matter will one-dimensionally revolve around one area of specialisation.

If a law firm could melt the brains of all partners together, the result would be unbeatable. Just imagine all talent, all ingenuity, all experience, all creativity combined in one. Since there is such a strong business case for cooperation, many law firms try to incentivise collaboration between partners and practices. The execution of such a strategy and the expected level of success will largely depend on the culture of the firm. Cultures that are high on autonomy and low on trust will have a hard time succeeding. No compensation system will materially change that. Money will not substitute for trust. Yet large numbers of law firms are going through great lengths contriving and implementing intricate systems to stimulate partners to collaborate more on matters and on new business.

If there is one thing we have learned throughout this book, it is that the relation between culture and compensation is a one-way street. Culture influences compensation, but compensation alone cannot influence culture.

 

Culture and compensation

The culture of a law firm will directly affect the preferred compensation system. High autonomy and low trust will have a natural fit with a compensation that is strongly tied to individual partner performance. It is easy to see that this could work out very well for a number of individual partners, but also that it will likely restrict the competitiveness of the firms as a whole due to lack of collaboration.

We have seen examples where an M&A partner could not take on a really big, high-profile and lucrative mandate, only because fellow M&A partners refused to let their associates assist on the file. These partners feared that they themselves might miss out on a mandate due to lack of capacity because their associates were engaged helping out in the other file. High autonomy, low trust compensation can turn out to be harmful for the firm as a whole.

For a compensation system to be seen as fair, it needs to fit the culture of the firm. This can be most easily illustrated with full lockstep firms that are culturally relatively high on autonomy and not high on trust. As lockstep by definition requires a strong collective and a certain minimum level of trust, it is easy to see that frictions will arise when trust is absent. We actually see this a lot these days.

Because most law firms do not properly analyse the characteristics of their culture, but at the same time are aware of the drawbacks of EWYK and lockstep, we have seen a rapid rise of the modified lockstep over the past decade. This may seem a safe option, but it often leaves partnerships dissatisfied. The firm does not manage to meet its strategic objectives and the partners cannot escape the feeling the compensation distribution is somehow unfair. Compensation is not a substitute for culture, nor a driver. It should be an echo.

 

Ayn Rand and Nietzsche

Over the years I have been reading most of Nietzsche’s works. Also sprach Zarathustra[2] is among my favourites. The Übermensch, the individual who creates his own values, who does not wait for the approval of the herd, who finds meaning in his own excellence rather than in social convention, is a genuinely powerful idea. I understand why it resonates. I understand it even better when I see it operating inside law firms.

But let me start with Ayn Rand[3], because Rand is where Nietzsche’s ideas arrive in the legal profession, via Silicon Valley.

Rand’s philosophy, known as Objectivism, holds that the individual is the highest moral authority and that the pursuit of rational self-interest is the only legitimate ethical foundation. In her novels The Fountainhead and Atlas Shrugged, the heroes are the creators: architects, engineers, industrialists who produce value through their own genius while the collective mediocrity around them attempts to pull them down. The villain is always the same. It is the looter: the person who takes what others have produced and redistributes it under the banner of fairness or need. Rand presents this as the fundamental conflict of human civilisation. On one side, the productive individual. On the other, the parasitic collective.

Forty years after her death, Rand achieved cult status in Silicon Valley. Peter Thiel, Travis Kalanick[4] and Elon Musk have all cited her. The appeal is not mysterious. For a venture-backed founder convinced that they alone can see what others cannot, the idea that your wealth is mathematical proof of your virtue is enormously attractive. It provides a moral framework that converts selfishness into heroism. In the tech ethos, the market is objective reality: if you created something of immense value, the money you accumulate is simply your due.

This worldview has migrated into law firms along with everything else that has migrated from Silicon Valley: the aggressive lateral hiring, the performance-weighted pay, the belief that one exceptional person is worth five competent ones. It provides the moral vocabulary for the EWYK system and for super-tier compensation. The argument runs like this: the rainmaker who generates thirty million in fees is a creator. The partner who generates five million in fees from the work the rainmaker provides is a looter. Any compensation model that transfers value from the first to the second is a violation of the natural order. The argument is seductive. It is also incomplete.

Rand’s heroes are self-made. Law firm partners are not. Every partner who generates thirty million in fees does so because a firm spent years training them, built a brand that clients trusted before the first meeting, provides associates who execute the work, and maintains the infrastructure that makes the whole operation possible. Remove any of that and the thirty million becomes five, or zero. The rainmaker is not a lone producer. They are a person standing on a platform built by others who has convinced themselves the platform is irrelevant.

This is where Nietzsche is more honest than Rand, and also more dangerous. Rand was a rationalist. She believed in objective reality, in reason, in the idea that the best argument wins. Her heroes are cold and logical. Nietzsche’s Übermensch is nothing of the sort. He is Dionysian: driven by passion, instinct and the Will to Power. He does not earn his dominance through a transparent calculation of value. He asserts it. Nietzsche was fascinated by how the strong impose their own definitions of good and evil on the world, replacing what he called slave morality, the morality of the weak built around humility, suffering and deferred reward, with master morality: the morality of the powerful, which holds that what is good is whatever serves the strong.

In a law firm, Nietzsche is recognisable in the partner who does not make a rational case for their compensation. They simply demand it. The threat of departure is implicit. The other partners concede, not because they have been persuaded, but because they are afraid. Over time, this partner accretes power the way Palpatine[5] does: through accumulated fear rather than demonstrated merit. The compensation committee learns not to argue. The firm gradually reorganises itself around the avoidance of this one partner’s displeasure. I have seen this in firms on every continent. Nietzsche himself provides no solution to it. He celebrated the Will to Power as an expression of vitality, but he did not particularly care whether the institution being dominated survived. For a philosopher, that is philosophically consistent. For a managing partner, it is a governance crisis.

Rand and Nietzsche also diverge on something important. Rand believed that power must be earned through productive work and voluntary exchange. She was explicit that her heroes do not achieve their status through force. They create, and the market recognises the creation. Nietzsche’s Übermensch is not constrained by this. He imposes his values. The distinction matters in a partnership: the Randian partner, if you take the philosophy seriously, should accept that a partner who creates more value deserves more of the profit, but so should they if the positions were reversed. The Nietzschean partner does not apply the logic symmetrically. They apply it when it benefits them and resist it when it does not.

What both philosophies fail to account for is what happens to the institution that carries them. In Atlas Shrugged[6], when the creators go on strike and withdraw their talents, the economy collapses. Rand presents this as a vindication. The creators were essential, and now the world knows it. The thought experiment works in the novel. It does not work for a law firm, because the world the firm depends on is its own clients and reputation, and these are built collectively over years by everyone in the institution, not only by the top earners. When a firm tips into Randian logic and begins to act as if only the rainmakers matter, it systematically disinvests from the mentoring, knowledge-sharing and institutional continuity that make the platform worth standing on. The top earners do not notice at first, because their own revenue holds up. They notice when the firm’s reputation no longer justifies a premium in a lateral pitch, or when the best associates stop choosing the firm, or when the first significant departure triggers a second.

The Randian logic also provides the intellectual engine behind formulaic compensation models. In a Randian world, A is A, and value must be objective and measurable. A formula-driven system, that is to say Eat-What-You-Kill, is the ultimate Objectivist tool because it treats the partner as a sovereign producer. It uses hard metrics like billable hours, client origination and collections to create a transparent ledger of worth. The super-tier compensation seen in firms like Kirkland & Ellis or Quinn Emanuel acts as a Randian market signal: if a partner generates twenty million in value, they are rationally entitled to nearly all of it. Any attempt by a compensation committee to tax that partner to support a struggling practice group is viewed as a violation of the productive individual’s rights.

Nietzsche, by contrast, provides the psychological framework for black box compensation models. Unlike Rand, who believed in objective truth, Nietzsche believed that truth is whatever the most powerful individual can make others believe. In a black box system, a small, secretive compensation committee determines pay based on discretionary factors that are never fully disclosed to the broader partnership. This is a Nietzschean exercise of the Will to Power. The committee acts as the master class, and the partners must perform to please the masters without ever knowing the exact rules of the game. A Nietzschean would argue the black box is the only way to reward the intangibles of leadership and dominance that a simple spreadsheet cannot capture.

Jones Day, perhaps the most famous practitioner of the black box model, has long argued that keeping compensation secret prevents internal competition and fosters a team-first mentality. However, 2025 saw several high-profile lateral departures where rival firms like Kirkland & Ellis and Paul Hastings used transparent, formulaic offers to attract rainmakers who were frustrated with the opacity at their current firms. For these partners, the black box was no longer a symbol of trust but a source of suspicion, as they feared their high earnings were subsidising underperforming colleagues.

Cravath, Swaine & Moore serves as the definitive case study for this shift. For over a century, Cravath was the gold standard of the lockstep model, the antithesis of Randian individualism. However, the pressure from the lateral market eventually forced Cravath to modify its system and introduce a nonequity partner tier. Cravath realised that if it did not offer its most productive partners a payout that matched their market value, those partners would find a firm that would. By 2026, even the most traditional firms have incorporated individual performance metrics that resemble the formulaic models they once derided.

The firms that built the most enduring reputations in this profession were not built by Übermensch figures operating above the collective. They were built by people who understood that the institution would outlast any individual partner, and who chose to invest in it accordingly. That is not weakness. It is not slave morality. It is the only rational long-term strategy. The Randian model produces impressive short-term numbers. The legal profession is littered with the wreckage of firms that followed it to its logical conclusion.

The evidence for this is not theoretical. Law firm history offers repeated instances of mergers that failed to produce the integrated cultures their architects intended, because the partners who merged continued to behave as they had always behaved.[7] The culture did not travel with the nameplate. Partners who had spent careers treating client relationships as personal property did not stop doing so because a new letterhead appeared. The compensation system had built that disposition into them, and no structural change at the firm level altered the underlying incentive. When competitive pressure arrived, the old behaviours reasserted themselves. Culture is not changed by announcing a new structure. It is changed when the compensation system makes the new behaviour the rational choice and the old behaviour a financial liability.

 

How to change the culture

Culture seems to lead a life of its own. It can exist without the specific people who created it, absorb new people and reproduce itself in them, and resist deliberate attempts to change it. When I described a firm earlier where two new co-managing partners failed to create a more collaborative culture, the reason was not that they lacked skill or authority. The culture was simply stronger than they were. Culture can more easily deteriorate and turn bad than improve and flourish. This is not an argument for fatalism. It is an argument for honesty about what can and cannot be changed quickly, and through what means.

In my experience, culture is not changed by announcing a new set of values, by redesigning the compensation formula, or by running a partner retreat with a trust exercise and a keynote speaker. These things happen all the time. They produce a brief improvement in mood, which fades within six weeks. What changes culture is a sustained shift in behaviour, visible and consistent, from the people with the most power in the firm. Not from below. Not from the managing partner’s speech. From the partners who are watched because they matter: the rainmakers, the opinion leaders, the ones whose approval others seek.

In partnerships like law firms, it is best not to overstate the importance of leadership, as culture will inevitably limit leaders in their ability to change a culture for the good. Why? Because culture reflects the values of the relevant majority of the partners. This does not mean that a leader has no influence. On the contrary, a clever leader could start and mediate a process by which over time the culture evolves in the right direction.

Step one might well be improving communication between partners. It is again and again surprising to see how little partners actually communicate with each other. Lack of communication is one of the root causes for lack of trust. Partners are quite often highly opinionated about each other, without properly knowing what these opinions are actually based on. Partner A could say that partner B produces sloppy work, without ever having seen a document produced by partner B. Partners typically also have no understanding of each other’s practice and clients. Improving meaningful communication between and among partners is probably the most important step in any process aiming at changing the culture of a law firm.

When I say meaningful communication, I should be clear about what I mean. When partners sit and have drinks or dinner together after a partner meeting or a retreat, they typically have a good time and seem to get along really well. This might be deceptive as casual superficial social interaction is very different from meaningful communication. Meaningful communication assumes sincere interest in what is motivating the other, and it requires addressing the potentially thorny issues. Meaningful conversations require a reasonable level of trust but will equally help in creating and enhancing trust. There is nothing we trust less than the unknown. The more we know and the better we understand, the easier it becomes to trust.

We are not advocating that partners must become friends. Perhaps on the contrary. It will typically be preferable to keep the relationship professional in order for it not to blur judgement when required. When relations between some partners become too close, this can stand in the way of objectivity. It could also create a sense of favouritism or others feeling excluded. Partners should get along well on a professional level.

Apart from stimulating and improving communication among partners, when changing a culture it will also be important to be transparent, consistent and reliable as a leadership. Again there is nothing we trust less than the unknown. Leaders must demonstrate that they have no hidden agenda and they should treat all partners with equal respect. No favourites, no gossip. For changing a culture leaders must lead by example. It is recommended to show a certain generosity. Generosity meaning not just pursuing self-interest. For a partnership to work well, a reasonable amount of generosity is required. Partners cannot only act out of self-interest aiming to maximise personal gain, both financial and reputational.

The core of a strong culture is a strong sense of collective. The collective can only thrive if all the individuals that make the collective are prepared to also invest in the collective. It is not realistic to expect the collective only to give. A collective will only benefit when it is being invested in by every individual partner. Abstaining from pursuing raw self-interest will in the end be serving the self-interest. Generosity will be rewarded. Law firm leaders that want to change and improve the culture should in this aspect lead by example.

Lack of a shared ambition is a common issue when it comes to culture. In changing the culture, firms want it to become more ambitious. In doing so one is well advised to acknowledge that ambition can be quite scary. Some partners will fear it means working all hours and never seeing their families again. Others might fear that they will never be able to meet the bar with their practice. At the same time the already ambitious partners might get frustrated if things only improve at a snail’s pace. Managing these different anxieties simultaneously is one of the genuine difficulties of cultural change.

When a partner who is visibly powerful genuinely involves young partners in their matters rather than using them as assistants, something shifts. When they pass a client to a more suitable colleague without demanding a credit arrangement, something shifts. When they speak up in partner meetings about a colleague’s contribution instead of only their own, something shifts. These small acts, when performed by people who are powerful enough that self-interest cannot be the explanation, have a multiplier effect that no communications programme can replicate.

 

Outstanding service delivery

One of our favourite methods for changing the culture in a law firm is implementing a programme to achieve outstanding service delivery. This approach has proven to be very successful because it involves and rallies literally everyone within a firm. To reach a culture of outstanding service delivery, you need the partners, but equally the person at the reception desk, the billing department, and so on. A programme to reach and anchor the highest level of service delivery also has an advantage in not being threatening. If partners were pressured to become, let’s say, more entrepreneurial, some would feel uncomfortable and not participate or even sabotage. No one will be against elevating the level of service.

Having a shared ambition throughout the firm to reach and implement the highest possible level of service delivery to its clients also creates a common goal and as such a stronger esprit de corps. Since outstanding service delivery is strongly focused on the client and requires attention to every little detail, it will help in turning the culture more collaborative, more client-focused and more quality-driven. All great ingredients for creating a better culture in a law firm.

Reaching a natural level of outstanding service delivery is not something that can be achieved overnight. It will require focus and endurance. These are also great attributes for a healthy culture. It is our experience that rolling out an outstanding service delivery programme often is one of the most effective starting points for a cultural evolution or revolution.

 

How compensation can become an obstacle

This is a book on partner compensation. In the context of culture we mentioned earlier that compensation is often an obstacle when it comes to changing a culture for the better. In one of the previous sections it was outlined how certain cultures have a natural fit with certain types of partner compensation. What we want to explain here is how compensation can effectively sabotage or slow down efforts to improve or change the culture of a firm.

All forms of compensation come with performance targets and measurement thereof. This could be directly tied to a partner’s compensation as in EWYK, or indirectly as in the classical lockstep where all partners are expected to contribute within a certain bandwidth. Setting individual performance targets and measuring on an individual partner basis will inevitably lead to some extent of individualistic behaviour. It is in a way like being instructed in an aircraft that in case of emergency you should put on your own oxygen mask first before helping others. Partners will first secure that they meet their personal targets before participating in initiatives or helping others.

This is a primal instinct which is hard to overcome. We have mentioned trust before and stressed how important it is to create and maintain a high-trust partnership. Generosity we have likely not highlighted sufficiently. Being a partner in a partnership requires not principally acting out of primal self-interest. In order to have a beautiful garden, a thousand flowers must bloom. In order to have a successful partnership all partners must do what is in their capacity to let the other partners shine. The self-interest should always come second to the interest of the collective, except for when you decide to leave. The importance of generosity for creating a strong and healthy partnership is generally poorly understood. There is so much emphasis on individual performance that the interest of the collective and the interests of others get completely overshadowed.

There is a bit of a Catch-22 situation here. We are surely not advocating that there should be no performance targets and no performance measurement. We think this is important information that partners need to effectively run their practices. At the same time targets can be an obstacle, limiting the performance of the firm as a whole. More on this can be found in Chapter 6 on quantifying performance.

Culture is not a set of values on a website. It is the sum of what partners actually do when the compensation system gives them a choice between self-interest and the collective. Generosity, the willingness to let the other partner shine, to pass the client, to share the credit, cannot be manufactured by a formula. But it can be destroyed by one. The firms that sustain a genuinely collaborative culture over time are the ones that design their compensation to make generosity the rational choice, not a sacrifice.

Culture defines what is possible in a firm. Compensation determines whether it happens. A firm can articulate a compelling vision of collaboration and shared purpose, but if the compensation system rewards individual origination and penalises knowledge sharing, the culture will remain an aspiration. The formula, year after year, is louder than the words.

 

[1] John Lennon, interview with David Sheff, Playboy, September–October 1980. The broader pattern of competitive co-operation throughout the partnership is discussed in Mark Lewisohn, The Complete Beatles Recording Sessions (Hamlyn, 1988) and Steve Turner, A Hard Day's Write: The Stories Behind Every Beatles Song (Carlton, 1994)

[2] Friedrich Nietzsche, Also sprach Zarathustra (Thus Spoke Zarathustra), first published 1883–1885.

[3] Ayn Rand (1905–1982), Russian-American novelist and philosopher, founder of the philosophy of Objectivism. Principal works: The Fountainhead (1943) and Atlas Shrugged (1957).

[4] Peter Thiel (b. 1967), co-founder of PayPal and Palantir Technologies, early investor in Facebook; Travis Kalanick (b. 1976), co-founder and former CEO of Uber Technologies. Both have publicly cited Rand’s influence on their thinking.

[5] Palpatine: the primary antagonist of the Star Wars saga, who accumulates absolute power through fear and manipulation while maintaining a veneer of institutional legitimacy.

[6] Ayn Rand, Atlas Shrugged (1957). In the novel’s climax, the world’s productive individuals withdraw their talents, causing civilisation to collapse  - Rand’s demonstration that creators, not collectives, sustain society.

[7] The German firms that merged in the 1990s did not change their compensation architecture at the point of merger. Partners continued to behave as they had in their predecessor firms, treating client relationships as personal assets, resisting cross-referral, and prioritising individual credit over institutional depth. The culture each firm had built through its compensation system survived the merger intact and, under stress, prevailed over the nominal integration.