Jay Ruane  00:07

Hey folks, it’s Jay Ruane, and if you’re listening to this or watching this podcast, please be sure to give us a five-star review on whatever platform you’re on. You ready, Seth?

Seth Price  00:15

Ready! 

Jay Ruane  00:16

Hello. Hello, and welcome to the Law Firm Blueprint. I’m one of your hosts, Jay Ruane. He is Seth Price, and we’re here to talk to you all about running your law firm. Seth, I got a question for you. I want to know how you deal with it, because it’s starting to creep back up again, and it’s the topic that is difficult when you’re not in a contingency firm. Although could be difficult in a contingency firm, that is, bonuses and how to handle bonuses. I have traditionally ascribed to the theory that if you are an associate working for me, and you want to make more money, go out and shake the trees, find some cases, you get 50% of anything that you generate. I’ve got one associate who seems to be doing that, doing well, making a piece of every case that he brings in, and he works, and, you know, others want to have money coming in by way of a bonus. So for us, flat fee lawyers in criminal defense, for the hourly lawyers in family law, maybe flat fee and trust and estates practice, you’ve had a lot of different immigration rights? You’ve had a lot of different practice areas. How do you handle bonuses in a non-contingency operation?

Seth Price  01:31

So I think you hit the nail on the head. My attitude and you’ve sort of morphed over time. I’ve been very loud and proud of our formula that we believe all the money on the table in our deal. A 25-25-50 deal allows people to crush it. They can. You know, the way we set it up, 50 cents on the dollar is more than you would take home if you ran your own firm. 

Jay Ruane  01:55

Sure.

Seth Price  01:55

Right? So you’re better off with us than without us. On the stuff that we bring in, 25 cents on the dollar. We now have people managing practice groups, and they get an override on people that they manage as opportunities for advancement and growth. But I don’t we have, historically have not done a discretionary bonus beyond that, because the whole point is put everything on the table and fully incentivize my attitude. We got smacked in the head when we started PI, because it’s a different ethos. People within that group are generated. It’s a much more, you know, it’s, there’s, there’s a more of a cowboy mentality, in a good way, and that people are expecting that. And so, we started with stuff that was what feels right. I think, at the end of the day, everybody at a different philosophy. More sophisticated firms may do as a percentage of profits, which I would love. That’s very, very complicated from my point of view, not from theirs, because they’re sophisticated. But I think that the sooner you get to a percentage of revenue, at very least, again, percentage profits, better. But most, most people listening to this are never going to get to that. But if you’ve

Jay Ruane  03:09

Not everybody has John knock Hazel, you know, running the numbers that is in your office.

Seth Price  03:13

But assuming that you have something that everybody’s rowing in the same direction. Again, incentivization, we’ve talked about this before. You can incentivize good or incentivize bad, and frankly, incentivization generally, if you’re not careful, can take you to places you don’t want to go, right? They’re like real estate agents. They’re incentivized to close a deal because they get paid. Do they care if you saved two or $2,000 or $20,000 or 30,000? No, because they’re getting a percentage of that macro deal. They just need to close, just need to close the effing deal which doesn’t necessarily align with you. And you have to be careful where you see lawyers churning, not pushing something to litigation, you know, or taking a settlement offer. Because yes, they could get a little bit more, but incentives could throw, you know, can go off. But I believe that most people, the sooner you get away from discretionary bonuses to something more, it’s there. So I’ll leave that. What are your thoughts on that?

Jay Ruane  04:11

So, so you have recently joined me in the non-lawyer sales, part-time thing for criminal defense.

Seth Price  04:20

We have a lawyer sales. 

Jay Ruane  04:22

Yeah, you have a lawyer salesperson. So, if I work for you, and I generate a criminal case and I bring it in, does the lawyer salesperson get involved, or are they clearly only touching?

Seth Price  04:35

No they’re out. same as, same as your and because they’re a lawyer, I can give them a percentage or a fee per, you know, etc. So to me, those are the easy ones, because there’s metrics. And look, if you’ve had an amazing year you want to do something, who am I to say no? But generally, my attitude is, you know, we pay a lot. We’re a competitive job market. We don’t want somebody guessing. Nobody should be working for the bonus. They should be working, knowing what they can make and that, that’s what’s there. I think it gets more complex when you leave that world and you move into the non-lawyer space, where I’ve had a lot more adjuncts. I feel confident we are doing right by lawyers 100% putting everything on the table, nobody. I don’t think in all these years, anybody’s come looking for one or asking for one, in the sense that, once we got our act together with the 25-25-50 model, it’s been years, and in PI with percentage of revenue, where you know what you’re getting, it’s not discretionary. You brought this in. Now the issue becomes, if somebody in PI a case gets kicked for a year, we have a big, big case with a major with a major defendant, and they just fired their national counsel and brought in a different counsel for this case. That’s not you, but it’s likely not going to resolve this year because of that, because these new guys have to build your hours and make their money. Now, all that percentage is great, but if your person doesn’t make the money, either you’re going to make it up, or they’re leaving. Nobody’s sitting there. If the person’s on track earnings, something we see in the sales world. I could talk about that from the BluShark perspective, on track earnings is a standard thing in sales. You get a base and a commission on top, and you have an on-track earning. And you have people that, if they’re used to making 240 a year, and this year, something breaks a big client doesn’t sign at the last minute, and they’re at 160-200, whatever it is, you have a risk factor of losing them and so all of that’s well and good until they don’t make enough based on your formula, in which case you have a risk factor.

Jay Ruane  06:52

Yeah, I mean a major risk factor of having them put out, you know, 10s of 1000s of dollars and say, say you have somebody who’s generated a case, they’re working it, they leave. They get that true up to get you to get them to that point, and they’re like, “Hey, I see on the coming year, my revenue is not going to match. I can leave.” But then they’re taking a percentage of all of these cases with them for, you know, because they generated the case. So they’re either taking the file with them or staying with you, and somebody new has to work it. I can see that being a big problem. I mean.

Seth Price  07:31

You know it’s funny, because you see this big law deals with this all the time. I remember, you know, and you’ve seen this. How are you? And Simon was a pretty famous when law firms get an FU number settlement, whatever it is. A big case, that’s one of those moments where it’s a risk factor for the firm. You see people pick up and bail. And I think you’ve seen it in Connecticut. You know firms, you know it is so, and that was not without even getting paid. So, you know, we are dealing with, you know, it is that’s on the macro level. But big, big law has that as a real deal. Even smaller firms, I’m sure, when there’s a big number where somebody’s like, I’m close to retirement, I got my number, I’m gone, or I want to do something else, or you’re a pain in my ass, and now I have enough money that if I don’t, I can build something somewhere else for two years. You know, whatever it is, it’s not nothing. So to me, I want everything transparent, but just like the incentivization for salespeople, if you incentivize something, it’s going to happen, right? Good or bad, and you got to be careful.

Jay Ruane  08:39

So I have incentivized 50% on anything that you generate, and I’ve gone forward and said to lawyers, anything you generate this quarter, you get 100%. I just want to see if you can do it. And I still have associates that aren’t generating a thing. So that’s not an incentive for that.

Seth Price  08:56

Look, I love Jay for this, right? You’re showing that you can’t. And if you listen to our friend Andrew Finkelstein, he’s going to tell you, I don’t want it. Go generate the business for them. That’s not their business. So like, yes, I know. Just like you cutting off Avvo back in the day to see what would happen, you did another bold move. It’s interesting. I would say that you know the next step. Let me throw this at you. What about staff? Now? Again, some staff.

Jay Ruane  09:22

That’s where I was going with this. How do you properly classify? Like with a contingency practice, I think you can take, okay, we’re going to do 1% of everything settled this quarter goes into a pool. And every, you know, everybody in that pod is going to get a piece of it, depending on you know, their role in things. I can see how it’s very easy to do. What do you do? Hourly or a flat fee? How do you bonus?

Seth Price  09:55

We have historically put as much as possible into the salary. like that’s been again for a bunch of reasons, like to me, I’ll give you an example. I’m going to come back to this in a second answer your question, because I’ve seen this, I’ve had a schism where in the PI department, which may have historically had slightly lower bases, a an extra paycheck at the end of the year, something like that meaning and that I got it was tough because I now have issues within my firm. I mean, most people maybe I have this issue, but you’re going to have is, as you open different practice areas with different the weight and that what makes people tick in the PI department may be different than other areas, and it’s we just had an issue with, like incentivization on hitting certain KPIs. And it became an issue because somebody rolled it out to one department, and it was not clear, like we had an internal issue where we needed to clear with but it was, it’s not ironic, but we were dealing with the idea that there are should, just like your children, just because one kid gets something, should somebody else. Now, there may be bitterness, and you see that with the kids, but there are times when some kid needs something, has earned it, or what have you that the carrot may work really well for one kid, whereas the other kid gets a steady allowance and doesn’t need it. Where the other kids give him an allowance, he’s not going to do anything. You have to actually incentivize behavior where you get something for doing it. I’m using that as I’m using that as I’m trying to I’m trying to work on the analogy. It’s not perfect, but we have seen different sensibilities, and it’s something to watch out for. What you’re going to get very quickly is, if you think people don’t talk, they do. And we’ve run into issues where we want to be able to do things differently. And it’s not always seamless. It makes sense to us, but it may not make sense to the person in the trenches.

Jay Ruane  11:42

Yeah. I mean, you know, what do you do? Do you take it a, do you create a profit pool out of that practice group, regardless of what it is, and say, okay, then sit down with everybody. Say, what’s a fair distribution? Because then you can, people can get from the top down. Do you talk about, hey, we put it all on the table in your offer. There are no bonuses with this job, right?

Seth Price  12:10

We don’t go as extreme, but, you know, we’re not hiding the ball either. It’s this is not, you know, there are places where they pay like, if you’re making 40 grand, there damn well better be some bonuses. Right? Versus, you know, things and like, there are bonuses and incentives, but that’s part.

Jay Ruane  12:29

So, I have paralegals that are now making six figures 100 grand as their as their salary, and I did not when we, you know, put, we explained our reasons for increasing their salary and expectations and having those I did not to my own error say, and by the way, you know, there is no annual bonus anymore, because you’re kind of getting it, you Know, with a 25 but then Christmas came last year, and I got a Slack message, Hey, so what? No bonuses, and I’m like, You got a $25,000 raise this year.

Seth Price  13:11

but this Okay, gotcha so this is I’ll take. We take what you did, and Jay every does everything, bigger and better, I’m now tipping. I mean, I’ve always tipped like a 20% I do, but I’m now Jay Ruane, tipping.

Jay Ruane  13:24

30 plus percent always.

Seth Price  13:27

No, no, no, no, no. It wasn’t that. I mean, I haven’t gotten there yet, but what I’m doing? I’m doing the I got a table at a crowded sports bar with my whole family. The kids aren’t drinking. They can see this lady cringing. I added her 20 bucks at the beginning of the night. Said, Thank you so much for getting us this table. Whole dynamic changed. You know, we then tipped on the meal, but going in, this was a person that was bitter. I’ve always tipped on the last night at a hotel. No, no meaning cleaning the room. I just It’s how I was raised. You clean, you tip on the way out. But, and I don’t really want anything more. They take they clean the room. I don’t need it, but I anyway, I’m trying to en channel my inner Jay Ruane. That said, let’s take this. You have a person, they’re at 60 grand. They asked for a raise. You have a bunch of choices. You can go to 65, you go to 70, you go to 65 with a 5k guaranteed bonus, or target bonus. I say the target is once you say a number, you don’t give it. You’re fucked, right? So the question is, if you’re you’ve got a person at 60, you know, you need to raise them. What’s the ideal mix? What’s you know, do you could do a $2,500 bonus and put them at 67 6750, you could do 70. And so essentially you went to 70, using your example right there, and you could say, Look, we and it gets part of the conversation. Do you want it in salary, or do you want it in bonus? And I see many new hires want the salaries they can count on. They. Bank it, they know what’s going on. And I think that if it’s presented that way, where it’s a choice and you’re part of the conversation, you don’t get the surprise. Why no bonus versus Hey, I’m doing I have $25,000 to raise. Would you prefer it to be? Do you want 85 as your base with a $15,000 bonus? Do you want 90-10? And again, there are times when you care and times you don’t. But the advantage of the bonuses, if somebody leaves, you don’t owe it, right? It’s you have the time value of money until then. It’s not great for cash flow at the end, when you have to do it, but it’s that balancing act. In theory, you could be doing the putting money aside, but we’re not. We’re never getting that sophisticated to do that. So with that, I, you know, I on signings, we often have this, and I think we’ve split the baby, where somebody wants more of a starting salary than we want. We have all those different risk factors, and I’m very often splitting the baby. But can you get to a base or keep the base where it is and put everything in? God forbid, the person makes it for 12 months, right? Somebody in January, if you make it the year, it’s a $70,000 a year. It’s a very it really allows you different psychologically. And when they’re in, then you’re not getting any money until the end.

Jay Ruane  16:26

So how many bonus treats does Scout get when scout comes to the office with you? Does every office have a thing of treats for scout?

Seth Price  16:33

He does have a thing of treats. He’s good with everybody, but the delivery guys. Delivery guys are not his friends. So I think that when dealing with this, we’re constantly trying to figure out, what is the like, what is that mix? And so a I think you avoid that the slack is a bad thing. Something wasn’t communicated. You did a 25% raise or and actually a one could be a third rate, a 1/3 raise from 75 to 100 so that that should be pretty clear, that said to me, one of the things you’re sort of not struggling, and I struggle with, but is that is that balance of what is upfront, what is bonus, even if there is no bonus, there’s always a gift or something nominal as a thank you. But it really became an issue. And it was interesting, because the PI department, historically, the numbers have caught up over the years, paid a slightly lesser salary, in my opinion, so that it was easier to justify that. But now imagine me having the conversation back with people where it was all in salary, so they know here I’m like, “Hey, Jay, you should have told people on that raise.” nothing I can say is going to no matter what I say in the beginning, if somebody else gets bonuses a department, it really makes it tough and to distinguish.

Jay Ruane  17:52

Yeah, I mean, you know, I have, I have done a couple of different things, and I really need to dial this in as I, you know, go forward, because in years, I have done no bonuses for lawyers. You make good money. You make, you know, well into six figures. As a lawyer, why should I have to give you a bonus? I done the extra week of pay.

Seth Price  18:11

You do if you’re doing it right. I mean, I treat people as a partner who’s getting what they’re getting, and that they determine it, and that, if you again, it’s a

Jay Ruane  18:21

Your situation is unique, though, because it’s a revenue split of retained business. So they know, if they close two $10,000 cases this week, they’re getting 50% of that.

Seth Price  18:31

And over time, I’m starting to layer that, you know, on our next episode, I want to talk a little bit about particular the family law space. The idea of, this could be done anywhere. We talk about the junior attorneys teasing the next episode. We talk about Junior attorneys who really shouldn’t be going to court day one. And how can you assembly line work harder and criminal than other areas? Pi is common, but how can you assembly line work to bring people in? So spoiler alert.

Jay Ruane  18:58

We’ll talk about that in our next session. But before we wrap up today, I want to talk to you a little bit about you know, we’ve got the perplexity browser out. We’ve got ChatGPT launching a browser. Claude now has a desktop app, and clearly Google is losing some of its dominance in search, and the more browsers that come out the you know, the more people are defaulting to AI. I don’t know what percentage of the population and the demographics of the people that are defaulting to AI, but how is AI and these new platforms impacting search traffic? Because obviously it’s got to be something that, you know, if Google had 95% of the of the of the volume of search traffic back in, you know, October of 2022 they’re not at 95% now they’re probably..

Seth Price  19:57

Just below 90, you know, again, that was a big deal when they.

Jay Ruane  20:00

But just below 90 is huge. 

Seth Price  20:03

Yes and no, it is and it likes again, according to the Ahrefs conference recently, 2% of people are searching there. Now, again, as of the launch of this podcast, there is ChatGPT, search, no local, but there’s search of websites. Great. It will. It is changing. Google, obviously, is doing everything it can to protect that space, you know. And when they add AI in as an answer, I think this is less the wild west we saw in the late 90s, when all these different browsers were out there. You know, it’s going to be a while before my mother in law downloads something new on the computer, anything she she’s stuck with the Bing that came with a Dell computer, right? That’s at best. So to me, what I’m watching is, you know, where, like, Who cares who delivers the fact that whether ChatGPT or whether it’s Google with its own AI, to me, what’s exciting to watch is, how is AI search different than the traditional Google algorithm, and will they, will a whole algorithm move with it because they’re going to want to monetize it, or is it going to be this is AI search, and this is the trusted Google algorithm that gives you answers that are better than the AI algorithm, that may not be as And again, you know how it goes, I think nobody’s going to get rich betting against Google here. You know in that Google has the traffic. And then while ChatGPT is cool to you and me, as long as it’s an AI search, if it’s on the existing search browser, people are not going to download something separate to get the ChatGPT result, if Google AI is giving you the answer you want.

Jay Ruane  21:44

Well, that’s true, but here’s an interesting thing, and I’m going to make a sort of an analogy that I don’t know if it works, but do you remember? I’m sure you do. There was a, I don’t know if it was Jamaican or Haitian, woman who was on TV late night. Who would you call, and she’d tell your fortune, and she’d read the tarot cards, or whatever. Remember Mistress Eileen or something like that? You remember? Do you remember that

Seth Price  22:13

There were a bunch of people back in the day.

Jay Ruane  22:14

Okay, so also all of those numbers, the adult phone things, their whole thing was, get you on the line, keep you on the line for 20 minutes, because they were billing you by the minute, and that’s the thing. So they’d have long conversations with people and the like, and there was some FTC problems with that, and they got shut down and all this other stuff. But the interesting thing to me about a Google search versus an AI search is that a Google search, Google wants to give you the best answer right up front. That’s always been sort of their core mission. Hey, you want this. This is the best answer to your question in organic position, number one. Now they’re throwing in LSAS. They’re throwing in AI things. They’ve got the map back, but still, their whole message was number one is your best response, right? 

Seth Price  22:57

The answer you want, right? 

Jay Ruane  23:00

It gets you the answer you want. The AI stuff, though, is giving you an answer and then saying, I can do this, this and this. And so it’s AI is looking to engage people more with their answers, maybe forcing the refinement, adding options, pulling other data, so that it has more of a colloquy with you than Google does today.

Seth Price  23:23

I mean, in theory, as it learns, it may like, just like the Google algorithm built something, the AI algorithm could say, hey, take the entire Google algorithm and tell you know, and then make it better. I mean, that’s what’s the sort of the mind blowing part, which is you, this is today. Imagine what it’s like a year, two years from now, where it knows, before you even sit down what you want.

Jay Ruane  23:49

Yeah, I mean, that’s the thing. Like you got to wonder about where we are going with this stuff, and how we can position ourselves now. I mean, one of the things that you know I recently did is I put out a new book, you know, all about criminal trials. I got it right here. It’s now available on Amazon. If you’re a criminal lawyer, you can get you can pick that up. But, you know, I’m trying to do the things that makes LLMS and AI products see me as authoritative, because it’s not like I can build links necessarily, to get ChatGPT. Because the llms haven’t put out their page rank thesis as to what matters. I mean, we do have some knowledge as to what they’re going to in terms of directories and the like. But it’s not as simple as being able to read a doctoral dissertation like it was at the beginning of Google, right? 

Seth Price  24:40

Exactly So I don’t think we need an LLM to tell us that Jay is authoritative, but your point’s well taken, and that the book is probably, you know, a good hedge. Now the question at some point, will they be real? Hey, this was a self published nonsense book, versus this Simon and Schuster. The jury is out as to how sophisticated it will get, but I like the way you’re thinking. and I can’t wait for, you know, I know we got to go now, but I can’t wait to get back, and I’ve been thinking a lot about summer programs and stacking work within the law firms. And want to be able to make sure that we talk about that next.

Jay Ruane  25:15

All right, folks, that’s going to do it for us this week on the law firm blueprint. Of course, you can take us on the go anywhere you want to go by subscribing. To our podcast, be sure to give us that five star review, and you can catch us live every Thursday, 3pm Eastern, 12pm 12pm Pacific, live on LinkedIn, live in our Facebook group, the law firm blueprint, that’s going to do it for us today. I’m J Ruane. He is Seth. Price. Bye for now.