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Thomson Snell & Passmore’s equity partners reject meritocracy

Decide everyone but themselves should have merit-based pay

7 August 2015

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By Manju Manglani, Editor (@ManjuManglani)

The UK's oldest law firm, Thomson Snell & Passmore, recently conducted a review of its reward and remuneration structures.

The equity partners decided that all staff should have a merit-based element to their earnings, but that they would stick with a virtually pure lockstep for themselves.

"There is a merit-based element for everybody other than equity partners, which for me is really interesting," the firm's first CEO, Simon Slater, told Managing Partner.

After benchmarking Thomson Snell & Passmore's approach against the market, the firm's equity partners decided to retain the status quo.

"We found there was no appetite at all amongst the equity partners for a merit element," said Slater.

"And I think that the reason for that is that they would say that the current system isn't broken - it's not preventing us from doing anything."

The equity partners also agreed to retain the length of their traditional lockstep structure.

"We were advised that the norm for a middle-market law firm these days is seven or eight years - ours is ten years," he said. "But, we concluded to leave it as it was."

While the 18 equity partners rejected merit-based pay for themselves, they decided to retain it for all of the firm's staff, including salaried partners.

Last year, about 12 per cent of available profits were shared with the firm's staff of 180 people, according to Slater.

"We have a bonus scheme for salaried partners, we have a bonus scheme for lawyers and we have a bonus scheme for support staff, for senior managers. And that is applied by reference to personal performance and contributions as well as the firm's performance," he said.

"It is just very interesting that as a group of partners they don't want to apply the same thought processes to themselves."

Instead of having merit-based pay, Slater and the firm's senior partner, James Partridge, conduct performance reviews of each of the equity partners.

"We hold them to account for their contributions on the basis of peer pressure and clear objective setting," said Slater.

As part of that dependence on peer pressure to ensure high performance levels, the firm is currently piloting 360-degree feedback for its equity partners.

Each of the firm's eight heads of department are also "held to account" on a quarterly basis by Slater.

"I meet with them and track progress against their business plans and identify any support that is required to keep them on track," he said.

In the financial year ended 5 June 2015, Thomson Snell & Passmore reported turnover of £16.8m, up 11 per cent on the previous year.

The firm has set itself a target to achieve turnover of £25m by 2020, representing a compound annual growth rate of about eight per cent.

Resisting market trends

Many law firms are moving towards either a hybrid of merit-based and lockstep remuneration or a primarily merit-based reward system for equity partners.

A 2014 Managing Partner survey on talent management in law firms found that 83 per cent believed that their firm should use a balanced scorecard to measure fee-earner performance. But, only 30 per cent said their firm was using this approach to performance management.

Among the firms which have done so, RPC has implemented a points-based "pure meritocracy" system which measures equity partners' long-term contributions to the firm.

"It's what we call a partnerial meritocracy and it's not at all driven by metrics; it's driven by behaviours," managing partner Jonathan Watmough told Managing Partner.

Kingsley Napley has also moved its full-equity partners from "a virtually pure lockstep to a merit-based system, underpinned by a flexible lockstep", according to managing partner Linda Woolley.

For Slater, it's important for Thomson Snell & Passmore to make reward and remuneration decisions independent of market trends.

"I am all for modernisation and the future. However, I quite like businesses that look at whatever everyone else is doing and think 'you know what? We're going to do opposite'," he said.

"Why would we slavishly always say that if this is what the market is doing we must the same? Look at it - yes, we have done, but in fact we have decided in terms of the lockstep, the remuneration will not be changing."

Thomson Snell & Passmore traces its history back to 1570. Slater, who is a marketing professional, is the firm's first CEO.

 

 

 

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