Contact: James Igoe
Deloitte
Public Relations
+44 (0)20 7303 8247
A significant number of law firms operating bonus plans are not seeing the cost benefit of their arrangements, according to a survey conducted by Deloitte, the business advisory firm.
A survey of 43 leading UK law firms (45% in the Top 30 by turnover), indicates that bonus structures operated in the legal sector typically consist of either broad-based arrangements for all employees; or ‘bespoke’ fee-earner plans linked to individual productivity targets such as chargeable hours.
Around one-half of participants in the survey operating an incentive scheme have some form of broad-based arrangement, which generally pay out a fixed level of reward to all staff based on firm-wide financial objectives. These schemes are viewed as delivering the least ‘value for money’, in terms of impact on both firm and individual performance.
Indeed, around two-thirds of firms operating broad-based arrangements are currently looking to review their plans. Typically, the reasons stated are that they are not valued by participants, or do not sufficiently reward and incentivise outstanding individual contributions.
Around one-half of firms operate incentive structures designed for fee-earners which are linked to productivity targets. These schemes are perceived as having delivered greater value. The majority of firms operating fee-earner plans consider them to have had ‘quite a lot’ of impact on individual behaviour. However, the survey results suggest that there is ‘room for improvement’ in recognising that increased chargeable hours should not be the only strategic focus for delivering firm success.
Bill Cohen, partner and remuneration specialist at Deloitte, commented: “An increasing number of law firms are introducing bonus arrangements which deliver significant levels of reward for outstanding levels of productivity. It is expected that the prevalence of these plans will increase over the next few years. While these arrangements can support the strategic goals of law firms, both in motivating staff to deliver financial objectives and attracting and retaining key talent from the market, it is important to ensure that these are designed to mitigate the risk of encouraging negative behaviours”.
Furthermore, while the majority of survey participants identified the key purpose of their incentives as to motivate employees to deliver future performance (rather than attracting or retaining staff), it is important to note that bonus arrangements are not the only driver in incentivising staff performance.
“Bonuses are not the only way to motivate and retain staff, and when firms are designing incentive structures it is important that these are considered in the context of other factors such as career progression; training and business development; and the cultural values of the firm” added Cohen.
However, as the levels of incentive opportunity continue to increase as a result of responses to competitive market movements, particularly within the largest law firms, the focus on bonus arrangements within the legal HR environment is likely to continue.
Ends
Notes to editors
About the report:
Participation in the survey was extended to the UK’s ‘Top 100’ law firms (by turnover), as well as a small number of international firms operating in the UK.
43 firms responded to the survey, and the sample consists of a fairly even distribution of different sized firms, with around 45% in the Top 30 (by turnover). The survey was conducted by questionnaire.
About Deloitte:
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other’s omissions. Services are provided by member firms or their subsidiaries and not by DTT.
Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.
The information contained in this press release is correct at the time of going to press.
