Partnership Practices and Structure
Partner Compensation Systems
Redesigning partner compensation systems comprises a large part of our practice. Partner mobility, large collaborative teams and volatile earnings have all put strains on partner compensation systems. We have advised dozens of firms over many years on adjustments to their compensation systems. Some of these engagements have resulted in very minor changes; some systems have been more profoundly modified. Because our advice is based on a long-term understanding of both the intended and unintended consequences that may follow changes in compensation systems, we can help firms avoid risky experimentation with their own systems. In addition to the systems we have adjusted, we also know well many other firms' systems through our work evaluating mergers/acquisitions, developing earnings improvement programs, considering firm governance structures and developing firm strategy.
The structure of a firm's compensation system is integral to the firm's success - strategic, economic and cultural. However, if not approached with due care, modifications to the partner compensation system can be more destabilizing than the deficiencies of the system itself. Our deep experience in this area helps our clients stay on task and make changes to their systems when required with minimal disruption to the firm's practice and culture.
Partnership Structures
We help clients evaluate their current partnership structure (and tiers, if variable) and work with them to design and implement changes when appropriate. We have found that most firms are uneasy about whether their partnership structures serve the firm and its partners well. These engagements typically help clarify the roles and expectations of partners at various levels, whether or not they involve formal equity/non-equity or other title distinctions. We typically help the firm develop better shared understanding of admissions criteria, definitional expectations, longer term progression and compensation expectations and the strategic implications and alternatives for the firm associated with various career path approaches. Structural outcomes can be significantly affected by practice types and firm clientele.
Partner Retirement Systems
Non-qualified partner retirement systems at some firms are under fiscal and demographic pressures as the baby boomer generation moves towards retirement. It often does not take much for these systems to become unaffordable and unsustainable. For some firms they are also strategically isolating. We help firms evaluate existing programs. We have extensive experience working with firms to make significant reductions in the potential future obligations as fairly as possible across the entire range of partners in such a way as to gain support for such changes across the partnership. In this economy firms will have greater challenges striking the best balance between manageable firm obligations and partners' personal planning in the face of diminished personal portfolios.
Partner Capital Systems
We have worked with a variety of firms to evaluate and modify their existing partner capital systems. We also have knowledge of hundreds of capital systems in place in firms across the U.S. and Europe based on our work on other engagements such as evaluating capital systems in mergers and developing approaches for the combined entities. Our benchmarking data from the Hoffman Alvary Survey on Law Firm Economics provides us with up-to-date knowledge of industry norms and trends in this area.
Governance
We advise our clients on all aspects of firm governance. These engagements often involve a review of the firm's standing committees and management positions as well as a review of nomination and election procedures. We have been involved in developing descriptions of responsibilities for partners in various management roles from Chairmen to Practice Group Leaders. We often advise firms on issues related to succession planning and best practices for transitioning management control to the next generation of firm leaders.