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Resolving conflict between partners and overhauling partner remuneration

Resolving conflict between partners and overhauling partner remuneration

I have previously written several articles in the Edge Communiqué[1] regarding the resolution of partner conflict.

In writing this article I want to start a discussion about a different aspect of partner conflict than I have previously written about, and that is the extent to which entrenched conflict between partners can impede a reconfiguration of partner remuneration or the setting up of an entirely new partner remuneration system or set of processes, and what steps can be taken in order to remove that roadblock.

In a recent law firm engagement, where I was involved with a colleague in the overhaul of a partner remuneration system, it was necessary to get the partners aligned around the proposed new remuneration system. In the context of the particular engagement, achieving an alignment was relatively easy as the partners, broadly speaking, had shared goals in relation to the new remuneration system and there was generally a very good functional relationship between the partners.  Nonetheless, as will usually be the case, we had to hold several rounds of discussions with the partners and with the firm’s steering group in order to achieve partner buy-in to the principles of the new system, before getting down to the nitty-gritty of implementation.

There will inevitably be competing interests and goals in any case where partner remuneration is going to be reconfigured, or a new system or set of processes put in place. It is always going to be necessary to have rounds of conversations and, in a sense, to mediate between those conflicting interests and goals in order to come up with an acceptable new system.

I have recently encountered, in a couple of different situations, a somewhat different situation, going above and beyond the typical need to achieve alignment.

Over the last few months, I have had discussions with a couple of law firms and their retained ‘remuneration’ consultants with regard to their challenges around sorting out a reconfiguration of their remuneration systems.

In both cases, a clear impediment to the work required to do the ‘usual’ alignment described above is that there was an entrenched conflict between two or more of the partners. In the one case, there was a fundamental and quite nasty conflict between two of five senior equity partners. Two of the equity partners had reached a stage of almost complete breakdown in their relationship.  They had all but stopped talking to each other. When they were obliged to talk to each other it often ended in heated acrimony, with the other partners having to intercede to smooth things over.  It was proving impossible to make decisions about a possible new remuneration process because any discussion involving the two partners would descend into a shouting match.  One of the other three partners commenting on what was going on described the situation as completely dysfunctional; “we are at a loss to know how to proceed. And every year the annual remuneration discussion brings the firm to the cliff edge.  It is an exercise in brinkmanship where, every year, at least one or both of the partners threatens to leave the firm which would be disastrous”.

In the other case, there was a difficult and entrenched conflict between some of the more junior equity partners and some of the most senior equity partners. There was (very much in summary) bad blood between the more junior equity partners and some of the senior equity partners.  The junior equity partners held various grievances – including grievances about the alleged marginalisation of women by some of the more senior equity partners; and grievances about the alleged ‘protection’ from ‘consequences’ of a couple of the senior equity partners, whose behaviour to some of the more junior equity partners was regarded as unacceptable.

In both cases it was proving impossible to get anywhere close to the meat of discussions about a revamp of the remuneration process – let alone to decision-making – because the discussions always ended up being derailed by discussions or disagreement about the ‘unresolved’ conflicts outlined in summary above.

My thinking about how to resolve these conflicts is emerging. I would welcome contributions and reactions to this short introductory piece.  These contributions and reactions will help to shape my thinking, and I will be reflecting on those contributions and reactions before writing a further article, which will hopefully in turn help others trying to change their remuneration systems but hitting a roadblock or roadblocks in doing so.

My provisional thinking is as follows:

So 3 key points in summary:

[1]  All of my previous articles can be read in the repository of articles at www.edge.ai

Jonathan Middleburgh

Edge Principal consults on senior human capital issues and coaches senior legal talent in both law firms and legal departments. A former practicing lawyer who is also trained as an organisational psychologist, Jonathan has a wide range of experience helping law firms and legal departments to develop their senior legal talent so as to maximise business outcomes.