Another well-intentioned and
innovative reform to a law firm's partner compensation system has been aborted.
The senior management team at one of
the United Kingdom's better-managed law firms, Addleshaw Goddard, has
been forced, by what appears to be unexpectedly strong opposition from some of
their partners, not to go forward with a proposed transition from lockstep
compensation to a scheme more strongly oriented toward partner performance. The
story is summarized in an
article today at The Lawyer website.
The apparent strength of the
opposition suggests that The Lawyer's headline characterization of the changes
as a "rejig" might be an understatement. Any shift from lockstep
compensation toward performance-based compensation is always a substantial
change with long-term implications.
My colleagues and I at Walker Clark
advise our clients to involve all equity partners, as well as those who are
likely to become equity partners within the next two or three years, at the
early stages of any review of the partner compensation system or adjustment to
the firm's equity distribution.
If the partnership is relatively
small, we can do this at a partners meeting dedicated exclusively to the topic
of compensation. In larger partnerships, we usually conduct a
confidential, detailed survey about partner compensation issues. We also make
sure that every equity partner is invited to have a confidential interview with
one of our team. Nobody is excluded.
This can sometimes be time-consuming
in the short term. However, our approach can identify areas of broad consensus on
with the final details can be built. It also identifies areas of disagreement
and potential objections before management spends time developing proposals
that have little chance of being adopted. It eliminates "surprises" that can
undo even the best-intentioned, careful work by the management team.
If a managing partner or senior
partner finds it necessary to "sell" proposed changes in partner compensation
to a significant portion of the partnership, this is a usually an indicator of
flaws in the process by which the proposals were developed, such as:
- Management might have underestimated the significance
of the proposed changes to the partner compensation system.
- Some significant detail might have been overlooked.
- The changes might have produced unexpected and, for
some partners, undesirable results that might not have been apparent when
the proposal was finalized for presentation to the partnership.
- A partner or group of partners were excluded from the
process or otherwise made to feel disenfranchised.
This does not mean that management
should hesitate to advance well-reasoned, thoroughly-considered compensation
proposals because opposition is expected. To do so could give greed a
veto. My colleagues and I have seen law firm partnerships that were paralyzed
by the self-imposed need for unanimity - not just about compensation but about
even minor decisions.
However, by investing the additional
time and resources early in the process, management can improve the chances
that the ultimate results will be better, not only despite reasoned opposition
but also because of it.
For more information on Walker Clark
advice and services in the area of partner compensation systems and equity
redistributions, go to the
Walker Clark website.
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on the Walker Clark Worldview
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