Linda, firstly can you tell us a bit about your career to date and your role at Kingsley Napley?
After graduating from Warwick (with a degree in English Literature) I worked in PR and publishing for three years before travelling for a while then doing the CPE and LPC. I got articles (and some funding for my LPC!) from Kingsley Napley, which I joined as an articled clerk in 1990, qualifying in 1992 at the age of 30. I spent most of my career in the criminal team, as a partner from 1997. I became a joint managing partner in 2004, together with Jane Keir (now the senior partner) and Keith Laws. I became sole managing partner in 2007 and I’m now in my third three year term.
Your team offers a comprehensive range of services but what do you see as the firm’s main growth areas?
We aim to grow from our existing areas of strength, which are essentially litigating/ resolving problems, usually for individuals, many of whom are high profile. Our focus on international families moving to or working/ living in the UK is also a growth area for us and our top ranked immigration team help to differentiate us here. We also act for a number of major regulators in the professional discipline sector and this is an area for growth from strength.
The legal sector has evolved hugely over recent years so how do you – as managing partner – manage the process?
By keeping up to date with what is going on, for example through managing partner networks, conferences, training sessions and relationships/ friendships and then thinking about, discussing with colleagues and applying to us what seems most relevant. I actually think the period we are going into is going to see considerably faster, bigger change than we have had until now.
What are your predictions for the legal sector over the coming years?
That law will increasingly be provided through ABS models which will allow for law ‘firms’ to be managed and led by professional managers rather than owner/ producers (lawyers). It will also mean lawyer partners/ members work and provide client services alongside non-lawyer professionals. This will be a challenge to the traditional, managing partner managing lawyers, model and I think that challenge will increase with the passing years, as lawyers – and non-lawyers – coming into the profession see it as the norm.
The change in structure will also mean for greater external investment which will again be a challenge for those firms whose partners wish to retain control; again, I think the impact will increase rather than diminish over the coming years. In order to survive, law firms will have to become better at what they do and only do those things they are very good at and specialised in, and can do very profitably.
You’re a well established and well known London based firm but would you ever consider opening an office outside of the capital – either in the UK regions or abroad?
Yes, I would, but only if there was a real business imperative for doing so. In other words, it must be client driven.
Kingsley Napley has been in the press recently following your decision to put more emphasis on performance-based remuneration when determining its partners’ pay. How and why did that come about?
In about 2005 we moved from pure lockstep to a modified lockstep (freer movement up and – theoretically – down the lockstep) with a small (£100,000) bonus pool available to be distributed. This worked in that it resulted in detailed appraisals, more open discussion of performance and contribution, greater willingness to award current contribution – which meant much faster, more fluid movement up the lockstep and willingness to distribute the bonus pool.
However, it was still relatively inflexible as a remuneration tool in terms of limited ability to distinguish between partners on the same points, especially plateau partners and an unwillingness, in a very collegiate equity partnership, to bring partners down the lockstep.
What were the main aims and objectives of introducing the system?
Our aims were to more flexibly match remuneration to current – as well as long term – contribution. We wanted to introduce a system that retained some certainty and collegiality but would be increasingly able to recognise and reward its real stars, manage underperformers (but who still deserved a place in the equity) without reducing their points and would manage any ‘windfall’ effect on incoming partners (whose remuneration to date was determined solely by the points awarded on entry, which is formula driven).
Was the team in favour of the idea when it was first discussed or did they need some persuading?
I should emphasise that the new system only applied to the full equity partners which is a relatively small group (currently 13). I knew that the highest performers in the partnership wanted a more flexible remuneration system. I was also aware that a number of our peer firms operated more flexible systems, combining a lockstep element with a merit based element. I researched the various models and wrote a detailed discussion paper setting out why I felt we needed to change and outlining some of the models we might use and demonstrating how they might work in our equity partnership. We then had a couple of discussions based on the issues arising out of my paper. I went on to create a small working group of three equity partners (including me) to discuss which model we would recommend, and why.
As a result of those discussions, I wrote a further paper setting out our recommendations and the likely effect in terms of remuneration. I made clear that in order to balance certainty with fairness (reward matching contribution rather than number of points) the remuneration committee would make gradually bolder decisions and that the medium term objective would be to increase the percentage of profit distributed on merit from the current 35% of budgeted profit to 50%.
The partners did not really need very much persuading. I think that is because there is a high degree of trust that the firm will be fair to them. This trust is supported by the fact that the outcomes of appraisals and remuneration recommendations of the four-person remuneration committee, together with the reasons for those recommendations, are written up and circulated to the whole of the equity partnership.
What’s the reaction been like internally since you introduced the new system?
As noted, it only affects the (currently 13) equity partners. One partner registered concern at their drop in remuneration but when I set out again the reasons, the person in question understood and did not appeal formally. The methodology of the remuneration committee involved ranking partners in to four ranks. Those in the bottom rank objected to that being published to all the EPs. So this year we may not publish the formal rankings although the remuneration committee is likely to use them as a starting point for distributing the merit element of the remuneration.
I think the main pressure in coming years will come from the higher performing partners to ensure we are sufficiently robust in our differentiation between partners and to move to distributing a greater percentage of profit through the merit element – i.e. on the basis of current contribution.
Many commentators think this model is the way forward and other firms will follow suit. Would you agree with that prediction?
If their experience is like mine, yes. But firms – and equity partnerships – are very different in their composition, barriers to entry, performance management and profitability. So I wouldn’t presume to predict what other, very different, businesses will do.