Monetary incentives can lead to unbalanced workloads
To maintain a competitive advantage, professional service companies need employees with a strong knowledge of the firm and its workings. Managing these valuable employees can be a challenge. Management of strong-willed executives, who value their autonomy and are pursuing their own interests, is one of the biggest challenges of human capital intensive companies.
Employees who know the firm are valuable but can pose a risk
According to an article on the website of the INSEAD business school, partners of major law firms have a tendency to become involved in many projects and not share work fairly.
In firms where compensation was largely merit-based, lawyers were more likely to use their specific knowledge of the firm to obtain more projects than would be considered efficient. They chased especially high-profile projects with financial and reputational benefit.
In firms with compensation systems based on seniority, there are fewer incentives for such behaviour. Partners are more willing to share clients and projects. More efficient allocation of specialisation is then possible.
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