To Bonus Or Not, That Is The Question

It must be that time of year again. Following on from my comments in my last blog, and from an excellent posting by Peninsulawyer (see here for the post in question - I do recommend that you read it), there is a prominent news item today in 'The Lawyer" in connection with a bonus payment from Slaughter & May to  its staff (not, apparently, its partners). The web site reports that S&M will be paying fee earners a bonus in the amount of 5% of earnings while support staff will get 2.5%. 

The last lines of the reports state that the firm made an estimated £504m in the 08/09 financial year (yet again promoting an obsession with turnover - but that's a completely different rant) with average PEP thought to be about £2.25m. The suggestion is that S&M have had a bumper year and are being a little mean. "Roll on Friday" goes further. In a story marked "Exclusive" (which must be some sort of new meaning of the word since the story is in general circulation), RoF reports the "Some of the firm's lawyers are pretty hacked off... its associates are all flat to the boards".

I never thought that I would be an apologist for Slaughter and May, but I think that the firm might be displaying a little good sense here and that reports are choosing to ignore a few important facts.

• As "Roll on Friday" does acknowledge that "...the firm didn't make any redundancies" - an important thing to note in the context of most other firms chopping posts with rather gay abandon.
• A 5% bonus in a difficult economy is still pretty good - over £4,500 for a 3PQE lawyer
• The firm is acknowledging support staff with a 2.5% bonus - perhaps less than they would like, but it's still a bonus payment.
• Yes, S&M have announced a pay freeze for 2010 - but how many clients do you think would be happy to read about their lawyers profiting excessively in difficult times?

In my opinion, Slaughters seem to be trying to walk a narrow line between acknowledging the hard work of the staff, while remaining prudent with their cash - i.e. investing the future.

The sort of short-term thinking that sees a good 6 months and demands immediate bonuses is exactly the sort of thing that helped the economy into a mess. In an ideal world all bonus payments would be linked to productivity (both personal and firm) over a medium term period of time and would not simply look at a few good months or deals.

I think Slaughter & May staff should consider that they may be some of the lucky ones this year - they are in a sold firm, provisions seem to be in place for future investment and development, and they are getting a bonus when many lawyers in other firms will not.

Outsourcing Revisited

With the announcement from Slaughter & May that they are "in talks with an LPO [LegalProcess Outsourcing] supplier", the legal world is again aflame on the subject of outsourcing.

I have already written once on this subject (here) and James Dunning had more to say on the subject (here), but I remain concerned that the notion is not always going to be thought through by some firms. The implication from some of the press coverage is that "if Slaughters are doing it then it's mainstream and so we should all be doing it...". Let me just set down some of my concerns:

• Slaughter & May are not yet outsourcing anything. They are "in talks" with a supplier. That can mean anything, or nothing.
• I wrote before about client concerns. How will a client feel about work being outsourced? What safeguards will be retained? Consider a medical example. A routine piece of surgery can, one might argue, be carried out anywhere since its simple and so should be carried out as efficiently as possible - which might mean in a small local hospital, or a private clinic. That's fine unless something goes wrong. I'd prefer to pay a little more to have a procedure done in a large teaching hospital so that, if the less that 1% chance of failure occurs, I will be surrounded by highly trained (and so expensive) people who can step in and take over. The same is true for a "simple" client matter. 99 times in 100 there will be no problems - but what will happen in those 1% cases? Who will be there to step in and sort things? How quickly will the lead lawyers find out that there is a problem.
• Consider this too - how often has a client told you that a piece of work will be simple - only for you to find that it's not? How commoditised can legal work - especially that of the largest firms handling the more complex tasks - be?
• How will the data protection act apply. My (somewhat limited) understanding is that special measures will be required if private or personal data is to be processed outside the EU (or EEAA). Will outsourced "partners" have full access to the matter files? Can they perform adequately if they do not? I know of firms where the partners (that's the partners in the law firm - sorry for the confusion) have concerned about secretaries from other departments having access to files - never mind employees of different companies.
• How will outsourced work be fitted into staff reviews and bonus considerations? How will departments react to not being able to pad hours on "grunt work"? At what point will the law firm's "value added" come into the process? I'm not sure how happy I would be to receive a bill from a partner briefly reviewing outsourced work and stating "it's fine".
• How will the law firm control the outsourcing third party. What skills will be required to manage the relationship. I'm sure that legal knowledge and training will not help much - so who will manage the liaison?

This is not to say that I think outsourcing is a bad thing. It is probably a good thing - but care must be taken before jumping onto the bandwagon. It needs to be the right thing for your law firm and you need to be absolutely sure that you fully understand what benefit the firm and its clients will receive.