Points mean prizes as DLA moves away from 'mistrusted' and 'opaque' remuneration system
Partners welcome reforms as part of co-CEO Levine's drive for greater profitability outside the US
February 08, 2016 at 08:35 PM
5 minute read
It has been a long time in the making, but DLA Piper's recent approval of a swathe of pay reforms will finally bring the divided remuneration structures of the international and US partnerships more in line.
More pressingly for the those in Europe, the Middle East, Africa and Asia Pacific, the changes – which form part of a suite of reforms pushed through by global co-CEO Simon Levine in the year since he succeeded Sir Nigel Knowles – mark the end of a system partners have branded 'mistrusted' and 'opaque'.
Having made a manifesto promise to reform remuneration, a new points-based pay system proposed by Levine has recently been approved by a vote of the international partnership. The new model is based upon partners being allocated points for hitting a number of performance criteria, with the value of a point being decided on a monthly basis. The US partnership already uses a points-based system to reward its partners.
Partners and ex-partners from the international LLP agree that the former remuneration system, through which partners were paid based on their performance over the course of a year, was broken, and reform was required.
"It was essentially mistrusted, because the process was broadly opaque," says one former partner.
It's a move away from a one-eyed view of performance which put disproportionate weight on certain metrics
Under the old system 'matter partner' billings was one of the key metrics used in deciding profit share, whereby a partner assigned as being responsible for a particular piece of work or client was rewarded with a larger profit share. One former partner talks of "all sorts of bad behaviour related to securing the matter partner status of a file".
Another former partner agrees saying: "People were trying to play the system, you would bring a client in and discover somebody had them registered on the system already."
The new system aims to "encourage people to be more radical and work for the collective by making your point worth more rather than just making your own share higher", says one DLA partner.
It aims to encourage partners to work across practice areas and geographies by rewarding collaboration and the cross-referral of work, rather than squabbling over clients.
There is only so long the core of the business will be prepared to fund the loss making far flung corners
Another DLA partner says: "It's an attempt to bring together a holistic view of partner performance and to move away from a one-eyed view of performance which put disproportionate weight on certain metrics not to the benefit of the firm as a whole."
The firm moved to an all-equity structure in 2012 and another motivation for the change was seen as ironing out anomalies caused by that switch. One former partner says: "You had old equity and equity lite, we got all the downside of being an all equity partnership with none of the benefits."
The recent changes, which have also seen a shake-up of the bonus system and the introduction of a mini lockstep for new partners, form part of a wider drive under Levine and co-chief executive Jay Rains to increase profitability. The pair has introduced a focus on seven main practice areas: real estate; insurance; banking and financial services; energy; life sciences; technology; and media, sports and entertainment.
Former partners argue that there is a level of resentment within the US LLP at the lower profitability of the international partnership, and within the international partnership, frustration with poorer performing regions such the Middle East and Australia that have been subsidised from the centre.
A former partner says there were "frustrations as to why international wasn't cutting it", and adds: "There is only so long the core of the business will be prepared to fund the loss making far flung corners."
It will take a while before the efficacy of the Levine reforms in boosting the profitability and potency of the international partnership can be measured, with the remuneration changes not set to take effect until 1 May.
However, there is a sense that a shake-up was needed, with the old system rewarding behaviours antithetical to the firm's stated aims and not encouraging partners to play to the strengths of a firm with a wide geographic base by referring work and cross-selling to clients.
Although, as one partner says, you will never had an algorithm that perfectly balances contributions and drawings, with well over 75% of the partnership approving the new system, its introduction is clearly welcome.
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