“Considering all the options”

Iberia's law firms assess the potential of more performancerelated
remuneration schemes

El Grupo de Expertos de
Iberian Lawyer aborda
el tema de la
remuneración y estudia
las ventajas e
inconvenientes de que
los despachos adopten
una polí­tica de sueldos
más flexible y
programas de
incentivos. Mientras
algunos están de
acuerdo con la relación
que puede haber entre
remuneración y
rendimiento, otros
consideran que estas
medidas en un entorno
de desaceleración
económica pueden ser
vistas como una forma
cí­nica de reducir costes.
El reto para muchos
expertos sigue siendo el
cómo evaluar el
rendimiento de los
abogados, del equipo o
del bufete, y si estos
programas de
remuneración deberí­an
dirigirse no sólo a los
abogados sino a todos
los empleados del
despacho.

Flexible remuneration is a tool that is being given closer attention by Iberia's top law
firms, especially in light of a slowdown in economic growth, reveals Iberian Lawyer's
latest Group of Experts survey.

As Pedro Cardigos at ABBC puts it: 'It is ironic that it took an economic downturn to
increase the awareness for alternative performance-based schemes and flexible career
paths.' DLA Piper's José Sánchez Dafos agrees. For him: 'Performance-related bonuses are
increasingly being demanded by lawyers. However, they do not see them as a replacement
for the fixed component of their remuneration but as an add-on to reward outstanding
performance. For law firms taking this approach it allows better cost control particularly in
a potential economic downturn.' João de Macedo Vitorino notes though that: 'Changing
fixed fees for performance bonuses during or in anticipation of an economic slowdown will
be easily perceived as a way of cutting costs or reducing salaries by both parties.'

Achieving the balance between fixed and variable remuneration is not easy. José Miguel
Jíºdice at PLMJ reports that at his firm, 'A protective minimum amount is awarded to
associates (not a remuneration but only a guaranteed payment even if the partnership does
not perform well) alongside a performance-related payment. PLMJ gives senior associates a
direct participation in partnership profits, based on points that, through annual evaluation,
will increase or decrease based on a performance that is globally analysed.' His colleague,
Rogério Fernandes Ferreira, cautions that a more flexible scheme of remuneration might be disadvantageous where there is a risk of unbalanced
distribution in the workload, both in terms of quality and
quantity, especially for younger lawyers.

What are the potential benefits or disadvantages of law firms adopting more flexible
remuneration schemes?

“A lower fixed salary and higher performance related bonuses
results in part of the business risk being passed to associates. I
would say this is a step backwards and not forwards… risk
should lie with the partners, with associates receiving a high
enough basic salary to meet their expectations and talent.
Bonuses should be to reward star performance.”
Manuel P. Barrocas, Barrocas Sarmento Neves

'We have always had a mix of fixed
remuneration plus bonus. In the last
few years we have been pushing for the
variable part to increase proportionally.
It now stands at around 20% but our
target is to get it up to a third of overall
remuneration' Anonymous, Portugal

'What must be avoided is that the
bonus scheme converts in practice to
become part of a fixed salary, and
that people consider that they are
entitled to a certain amount of bonus
even if performance is not brilliant.'
Francisco Guijarro, Hammonds

'I do not quite see the connection between flexibility of working
conditions and career paths, on the one hand, and performancebased
remuneration schemes on the other. Firms should certainly
accommodate the expectations of the new generation of lawyers.
The way they are remunerated is only a small part of the picture
and, in my opinion, not the most important one.'
José M. Balañá, Lovells

'The firm follows a long-term
strategy. We are not thinking of
changing our remuneration system.
The salary element is preestablished
quantitatively and the
bonus is linked to the overall
results of the firm.'
Lourdes Ramos, Garrigues

'Any remuneration
scheme based on
performance is positive for
law firms financially, but
young lawyers usually do
not like uncertainty in
their salaries.'
Rafael Montejo, Legalia

'All of our offices have a variable remuneration scheme that is applied to lawyers with a pre-determined
experience and category. The advantages and disadvantages of this policy vary in function of the objectivity of the
applied criteria and of their measurement. There is no greater disincentive than a performance bonus that is no
more than a fixed salary supplement, which is paid under discretionary and purely subjective criteria.'
Luis Crespo, Deloitte

If firms are to go along such a path, on what basis should targets be set and work be rewarded? how would firms
ensure that appraisals are credible through transparent and objective methods?

'Objective goals (for instance, turnover) may be
sometimes unfair but are certainly easier to
apply and control. However, you must be ready
to deal with some exceptions and to be flexible
in some cases.' Raimundo Segura, Cuatrecasas

'What is difficult to establish are objective
criteria. There will always be a measure of
subjectivity in the drawing up of those
objectives or in the appreciation of their
achievement.' Francisco Prol, Prol & Associados

'Ideally we must reward individual team and
firm performance in respect of all lawyers and
non-lawyers. But that is not feasible for everyone.
As we see it, the level of reward differentiates
partners from senior associates and these from
the other lawyers. As you progress you should
benefit more from other colleagues work.'
João de Macedo Vitorino, Macedo Vitorino

'In the case of my firm, I feel that it is still
only justified for lawyers to be included in
a fixed and variable pay scheme, although
I can understand that non-lawyers could
also be included in this type of package.'
Pedro Guimarães, F. Castelo Branco & Asociados

'Appraisals should be conducted on a 360 degree basis – the associate's input on how to improve the firm is
just as important as the firm´s appraisal of the associate´s performance.'
Manuel P. Barrocas, Barrocas Sarmento Neves

'I believe that the trend is there, but it could still
take time to consolidate. Valuation should be
objective, fair and clear, with objectives set out
from the start, but again some degree of
flexibility may need to be introduced. Clearly this
should mainly apply to lawyers, not to
non-lawyers in a law firm.'
Jose Ignacio Jiménez-Blanco, Clifford Chance

'Targets should be set transparently
and on the basis of very objective
methods, as is already being done by
companies in other sectors. In fact,
lawyers are advising those companies
on how to reward and target flexible
remuneration schemes.'
Joan Roca Sagarra, Roca Junyent

Indeed, Raimundo Segura at Cuatrecasas notes that
flexible remuneration, 'may not be appealing for junior
associates as they may feel insecure as to what their final
remuneration might be. In addition, they can hardly
influence the achievement of the goals normally chosen to
quantify the bonus.'
Support for flexible remuneration is not universal
though. As one Portuguese managing partner noted: 'A
lower fixed salary and higher performance-related bonuses
result in part of the business risk being passed to
associates. I would say this is a step backwards and not
forwards. Most firms here still operate on this basis which
could be described as 'eat what you kill' depending upon
how the bonus element is structured. It can lead to
unfairness and unhealthy competition between associates
and should be discouraged.'

Setting targets

Our experts agree that setting achievement targets, and
striking a balance between performance measurement,
objectivity, transparency and fairness can be difficult.
Cuatrecasas has turned to technology, as Antonio Hierro
explains: 'We have designed an entirely transparent
computerised tool that will enable us to make more
objective the professional assessment of all of us who work
at the firm.'

Other firms assess their associates against a matrix of
functions that they would carry out as future partners,
such as product delivery (technical excellence), profit
delivery (billing and cost control), client management
(responding to clients), business development (winning
new clients and cross-selling) and resource management
(staff motivation and teamwork). Few firms focus on just
the achievement of billable hour targets by associates or
consider the bonus to be that useful in enhancing
retention. Others concede that an unhealthy competitive
environment between associates could lead to overrecording
or 'padding' situations.

Interestingly, several respondents highlight the need for
associate appraisals that also feed back information and
ideas to management. As one managing partner explained:
'Appraisals should be conducted on a 360 degree basis –
the associate's input on how to improve the firm is just as
important as the firm's appraisal of the associate's
performance. To be credible and constructive, associates
must understand the importance of their contribution.'

“Considering all the options”

Garcia-Sicilia

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