Align or Decline: Making Partner Compensation Reflect Law Firm Objectives

Transcription

1 Align or Decline: Making Partner Compensation Reflect Law Firm Objectives FEATURED FACULTY: J. Mark Santiago, Member, KermaPartners Gary B. Fiebert, Executive Director, Schulte Roth Zabel LLP

2 Speaker Info J. Mark Santiago, Member, KermaPartners Mark is a member of KermaPartners and leads the United States practice. He is located in the New York City office. Mark has consulted to the legal profession for more than 25 years. He led successful project teams in the areas of outsourcing, mergers & merger due diligence, strategy development, firm restructuring, financial management, partner compensation, shared service center feasibility studies and merger integration planning and implementation engagements. Mark led teams that developed the Business Case rational to out-source the administrative functions for the two largest law firm outsourcing projects in the United States. He conducted due diligence studies for some of the largest law firm mergers in the United States. Identified significant issues for the acquiring firm to consider in the merger value proposition. He also led the restructuring of mid-sized law firm that identified non-strategic practices and attorneys, outsourced administrative functions and focused firm on core competencies. PPEP increased by 35 percent in one year. Mark managed the design and implementation of pay for performance Partner compensation systems featuring 360 degree performance feedback and linking partner compensation to firm strategy. Gary B. Fiebert, Executive Director, Schulte Roth Zabel LLP Gary B. Fiebert is an executive leader with over 20 years of experience in strategic business planning, finance, firm management, organizational change, human resources and marketing. In addition to his current position as Executive Director at Schulte Roth Zabel LLP, Mr. Fiebert has held senior management positions at a number of law firms, including KMZ Rosenman, Rosenman & Colin LLP and Mudge Rose Guthrie Alexander & Ferdon, as well as at national management consulting firms, including Gilbert Tweed Associates, Gafrey Associates and Touche Ross & Company (the predecessor firm to Deloitte Touche Tohmatsu). Mr. Fiebert holds a Bachelor of Engineering degree in Industrial Engineering from New York University and a Masters of Science in Management Engineering from Long Island University. He was certified as a Management Consultant, the Law Practice Management Section of the NYS Bar Association, the LFA Caucus of the Association of Legal Administrators and a member of the New York City Executive Directors' Group. Mr. Fiebert is a regular speaker at industry conferences and seminars, focusing on the development and implementation of innovative solutions to achieve longand short-term strategic objectives.

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4 Align or Decline: Making Partner Compensation Reflect Law Firm Objectives Worldwide Advisors to Professional Service Firms Contents History of Law Firms Objectives of Law Firm Compensation Guidelines for a Partner Compensation system Model Partner Compensation System Worldwide Advisors to Professional Service Firms 2 1

5 All law firms are dividedid d into three types Julius Caesar XXXIX BC Worldwide Advisors to Professional Service Firms 3 I. Those that lose money... and CLOSE II. Those that make a little money... and EXIST III. Those that make a lot of money... and PROSPER Worldwide Advisors to Professional Service Firms 4 2

6 Firms That Make Money Recruit and retain the best attorneys. Attract the best clients with the most challenging matters. Create the most robust administrative support infrastructures. Worldwide Advisors to Professional Service Firms 5 What type of firm do you want to be? Worldwide Advisors to Professional Service Firms 6 3

7 To Be One of the Best, You Must: Develop a focused Business Strategy. Implement a supportive Marketing Plan. Drive your Business Strategy and Marketing Plan with a comprehensive Compensation Program. Worldwide Advisors to Professional Service Firms 7 Having lost sight of our objectives, we redoubled our efforts. Peter Drucker 1985 Worldwide Advisors to Professional Service Firms 8 4

8 Objective Create a Partner Compensation Program that links individual Partner pay to their achievement of specific financial and strategic objectives that tbenefit fitthe Firm as a whole. Worldwide Advisors to Professional Service Firms 9 Guidelines: Clear, transparent process. Evaluative criteria supports strategy. Partner goals support the strategy. Compensation has identifiable parts. Rewards tied to performance. Worldwide Advisors to Professional Service Firms 10 5

9 Components: Process Firm Strategy Departmental Business Plan Compensation Philosophy Partner Business Contracts Worldwide Advisors to Professional Service Firms 11 Components: Process Firm Strategy Investment document Compensation Philosophy What a firm pays for and why Partner Business Contracts Individual, id specific, measurable commitments Individual Self-assessment at year-end Worldwide Advisors to Professional Service Firms 12 6

10 Components: Process Departmental Plans: Roll up of individual id partner contracts. t Reviewed & approved by department leaders. Annual performance reviews conducted by Compensation Committee. Individual id Performance Reviews. Individual compensation decision explanations. Worldwide Advisors to Professional Service Firms 13 Components: Criteria Native American wisdom holds that when you discover that t you are riding a dead horse, it is best to dismount the dead horse and find another one! What do lawyers do? Worldwide Advisors to Professional Service Firms 14 7

11 Components: Criteria Change riders. This is the way we have always ridden this horse! Dead Horse? What dead horse? Appoint a committee to study dead horses. See how other firms ride dead horses. Harness several dead horses together for increased speed. Worldwide Advisors to Professional Service Firms 15 Components: Criteria Thou shall not: Measure what you do not want done! Change the goal posts for anyone! Measure what can t be accurately reported! Make an exception, just this once! Worldwide Advisors to Professional Service Firms 16 8

12 Components: Goals If you want to strengthen/expand existing client relationships include team success and cross-selling as a measure in the partner contracts. If you want to build team work measure originations i at the team not individual level. Worldwide Advisors to Professional Service Firms 17 Components: Compensation Client Service Client Development Activities Associate Development Firm Administrative Service Public Service Worldwide Advisors to Professional Service Firms 18 9

13 Components: Rewards All components are not equal! Some contributions tib ti (partner contribution tib ti roles) are move valuable than others. Beware of the halo contribution effect. Reward based on role definition, iti not just numerical results. Do not overcompensate to make-up. Worldwide Advisors to Professional Service Firms Degree Performance Feedback System Vision and Strategy Development Firm Vision and Strategy Documents and Departmental Business Plans Assessment and Evaluations Performance Data Compensation Philosophy Goal Setting Role Definition and Performance Measurement Criteria Individual Partner Strategic Plans Individual Partner Self-assessment Forms Firm-level Assessment of Partner Performance Communications Annual Compensation Decision and Individual Needs Assessment Pay Decisions Worldwide Advisors to Professional Service Firms 16 10

14 Questions? Worldwide Advisors to Professional Service Firms 21 J. Mark Santiago Phone: Reproduction of any or all of the slides in this presentation are prohibited without the express ess written consent of KermaPartners a e U.S.A. C 2011 KermaPartner Worldwide Advisors to Professional Service Firms 17 11

15 Align or Decline: Making Partner Compensation Reflect Law Firm Objectives Presented by Gary B. Fiebert Executive Director Schulte Roth & Zabel LLP Center for Competitive Management Webinar Gary B. Fiebert Gary B. Fiebert 919 Third Avenue New York, NY Gary B. Fiebert is an executive leader with over 20 years of experience in strategic business planning, finance, firm management, organizational change, human resources and marketing. In addition to his current position as Executive Director at Schulte Roth Zabel LLP, Mr. Fiebert has held senior management positions at a number of law firms, including KMZ Rosenman, Rosenman & Colin LLP and Mudge Rose Guthrie Alexander & Ferdon, as well as at national management consulting firms, including Gilbert Tweed Associates, Gafrey Associates and Touche Ross & Company (the predecessor firm to Deloitte Touche Tohmatsu). Mr. Fiebert holds a Bachelor of Engineering degree in Industrial Engineering from New York University and a Masters of Science in Management Engineering from Long Island University. He was certified as a Management Consultant, the Law Practice Management Section of the NYS Bar Association, the LFA Caucus of the Association of Legal Administrators and a member of the New York City Executive Directors' Group. Mr. Fiebert is a regular speaker at industry conferences and seminars, focusing on the development and implementation of innovative solutions to achieve long- and short-term strategic objectives. 12

16 Agenda Who Are We? What Are Our Business Objectives? A Client-Focused Strategy Keys to Success Partner Performance & Compensation Who Are We? Personality of the firm is an amalgam of the personality of our partners Strive to be a destination firm, not just a provider of legal services Viewed as leaders in the practices we cover 13

17 Who Are We? SRZ s differentiation in the marketplace is based on guiding principles: We don t want to replace local counsel or advisers We don t want all the work just work to which we provide value We don t want to be everything to everybody What Are Our Business Objectives? Revenue generation Increased profitability Sustained growth Stability 14

18 A Client-Focused Strategy Focus is on the financial services industry Growth of firm based on needs of clients Neither a Global nor National firm A Client-Focused Strategy Capitalizes on strengths Addresses weaknesses Reflects clients needs, priorities and expectations Reflects growth opportunities Demands staying ahead of the curve 15

19 Keys to Success Firm does not track origination Client-focus is natural outgrowth of service standards Allows us to build multi-disciplined client teams organically Encourages collaboration and communication Clients benefit: Keeps service quality high and bills reasonable Ensures the right lawyer and legal resources are employed on any given matter Keys to Success Client service teams are multi-functional Apply a multi-disciplined approach/perspective to every transaction and case Identify opportunities easily Expand depth and breadth in client relationships Clients benefit 16

20 Keys to Success Maintain our culture: client-focus and teamwork Listen and respond to our clients Manage our service portfolio effectively for the future Nurture younger partners and future leaders Partner Performance & Evaluation Partner Personal Overview (PPO) Self evaluation to provide the Compensation Committee an accurate appraisal of a partner s actual contribution and views on the contributions of others 17

21 Partner Performance & Evaluation PPO Should Include: Principal matters Non-billable matters Business origination efforts Business referral efforts Strategic initiatives Minder relationships Particular accomplishments, awards and recognitions Negatives Others who have helped Contributions to morale Views on current point allocation Questions 18

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