Partner profit sharing – the new pressures

Partner profit sharing – the new pressures

We are all used to hearing and reading about growing competitive pressures from existing law firm rivals, from new entrants, and from the increase in efficiency led process improvements, as well as steadily increasing demands from clients to do more for less.

These pressures are putting strains on the profitability models of most law firms but are also causing internal tensions as the stars, rainmakers and major contributors in firms themselves become more demanding internally.

The problem is that although equity partners and members are technically self-employed, they have (unlike many true freelancers) traditionally been able to gain some safety and security in their profit sharing by means of a fixed profit sharing element that prevails even when profitability or performance varies.

As last year’s performance is often a major factor in determining this year' compensation, it is usually a while before a major downturn or upturn in a partners performance makes its way into the compensation package. Hence, even in the most meritocratic of performance related systems, partners can remain reasonably confiden

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About the author:

Nick Jarrett-Kerr LL.B is a member of Edge International, a leading global consultancy to law firms.  He is one of the leading UK and international advisers to professional service and law firms world-wide on issues of strategy and all important business issues facing firms today.  .

He is a regular writer and speaker on management and leadership topics.  Prior to becoming a consultant, Nick (who is a solicitor by training) was for eight years the Chief Executive Partner of UK Law Firm Bevan Ashfordduring a period of enormous growth starting in the depths of the 1989-1992 recession.

In the last few years, he has consulted to firms in more than twenty different countries on four different continents

Nick is the author of  two books – Law Firm Strategy – After the Legal Services Act( 2009; Law Society Publishing) and the recent best-selling Special Report Tackling Partner Underperformance in Law Firms (2011Ark Group).Nick has a regular monthly column in Managing Partner magazine, covering issues that are top of the mind for professional service firm leaders. Nick is alsoVisiting Professor at Nottingham Trent University where he leads the strategy modules for the Nottingham Law School MBA strategy modules. 

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