{"id":755,"date":"2016-05-12T14:48:22","date_gmt":"2016-05-12T14:48:22","guid":{"rendered":"http:\/\/www.graciotti.com.br\/site\/?p=608"},"modified":"2017-02-08T18:41:54","modified_gmt":"2017-02-08T18:41:54","slug":"remuneracao-de-socios-em-escritorios-de-advocacia-as-varias-solucoes-para-a-equacao","status":"publish","type":"post","link":"http:\/\/www.jpgraciotti.it\/en\/2016\/05\/12\/remuneracao-de-socios-em-escritorios-de-advocacia-as-varias-solucoes-para-a-equacao\/","title":{"rendered":"Partners Compensation in Law Firms: the several solutions for the equation"},"content":{"rendered":"

\"remunera\u00e7\u00e3o<\/a>There are dozens of books about this subject, but anyway I am going to dare to write down some very simple and objective topics (remember that I am an engineer) so that everyone can think about \u00a0them\u00a0 in a fast and pragmatic way.<\/p>\n

Structurally, there are two basic forms to remunerate the partners of an office: the most traditional one is the appropriation of the net income and its distribution to the partners depending on the effective participation of each one in the company and, the second one, a more aggressive one, is the remuneration based on the performance criteria. That is when the problems show up!<\/p>\n

In the first form, the difficulty is found in defining what exactly the participation of each partner is, as the law offices are not equity companies. What I have been usually stating is that the equity or asset (using accounting terms) of an office goes down the elevator every day and goes home, that is, if no lawyer returns in the following day, the value of that office is zero (what is worth only is the value obtained from the sale of existing physical assets which is very low). The real value of an office is in its accumulated experience and in the people who hold it!
\nThe exact definition of the share interest of each partner is really complicated as there is one relativization aspect between each one due to the experience, partnership time, clientele, etc. (we will elaborate this topic later on) and highly volatile, being frequently changed due to personal and market factors.<\/p>\n

The second form also presents difficulties to be implemented due to three factors: i<\/em>.-Consensus among the partners for the definition of which will be the performance indicators and their weights;
\nii.-The<\/em> lack, and almost always, of numbers and reports with a certain degree of reliability and finally and;
\niii.-<\/em>Which internal department or person will make the evaluation (objective as well as subjective) of the engaged partners !<\/p>\n

Now, having posed the difficulties, let us now go to the attempt for the equation solving! For the solution of any equation, we need to contextualize and define their assumptions, variables and factors (no variable elements).<\/p>\n

The assumptions in this equation (that are applicable for the two forms referred above) are the following:<\/strong><\/p>\n

1 \u2013 Maturing and institutionalization of the company<\/u>, i.e., all the operational and strategic decisions\u00a0 must be\u00a0 organized and assumed with professionalism, aiming\u00a0 the best alternative for the good\u00a0 and the perpetuity of the institution and shall be fully exempt from egos and personal interests. As I see it, this assumption is more difficult and a few offices are managed this way.<\/p>\n

2 \u2013Affinity in terms of the philosophical thinking of the company<\/u> (what type of offices we want to be) and alignments of objectives in the short, mid and long term.<\/p>\n

3 \u2013 Firmness in the relations among partners<\/u>, moral, ethical and personality affinities and mainly professional and personal respect (the \u201camalgamation\u201d that unites the partners).<\/p>\n

The \u201cfactors\u201d of this equation of several variables (which are exactly the shareholding interests) are the elements that are inserted in the equation that define how the partners will be \u201crelativized\u201d among themselves at every period (usually 1 to 2 years<\/strong>). For illustration purposes, I refer to some of them below and that shall not be regarded as the only ones, as each office may choose and define others depending on the focus that it wants to imprint to the company. Two types of factors are shown, the objectives obtained from managerial and accounting reports and the subjective ones obtained from evaluations (to be defined how) of each partner.<\/p>\n

It is always good to remember that for each cause there is a consequence\u00a0 and the definition of the mix of factors will determine, in the mid and long run, how the partners and the entire team\u00a0 will behave.<\/p>\n

1 \u2013 Capturing \u2013 This is probably the most famous one and more easily obtained in any office, representing the quantity (in amounts) of clients obtained by a given partner in a given period.<\/p>\n

2 \u2013 Portfolio \u2013 What percentage each partner holds from the total client portfolio of the office. To obtain it, it is necessary to have a correct and updated record file of each partner and his\/her client.<\/p>\n

3 \u2013 Production – What is the value generated by the partners and\/or by his\/her team in relation to the total generation of the office.<\/p>\n

4 \u2013 Maintenance: This is probably the least used one and more difficult to obtain. It represents how much of the clientele was kept in the office (taking the increase, decrease or loss of revenues into consideration).<\/p>\n

5 \u2013 Strategic Vision \u2013 What is the capacity of each partner to interfere and add positive insights in the office strategy.<\/p>\n

6 \u2013 Financial \u2013 Economic Vision \u2013 It is the capacity of each partner to analyze and understand the entire financial functioning of the office.<\/p>\n

7 \u2013 Team Management \u2013 It is the affinity of each partner to manage and motivate his\/her team and the people in the company.<\/p>\n

8 \u2013 Technological Updating \u2013 More and more this attention to the novelties and the technological trends becomes important and essential when one thinks about the life of an institution in a horizon of 5 to 10 years.<\/p>\n

9 \u2013 External Recognition \u2013 represented by the participation in associations, entities, intellectual and academic production in order to project and to consolidate the name of the institution in certain areas.<\/p>\n

10 \u2013 Dedication Time \u2013it represents the time each partner has dedicated in his\/her life towards the institution.<\/p>\n

Finally, the variables (to be found) are the participations of each partner<\/strong> and the equation then assembled would be like this:<\/p>\n

(n1* f1 + n1*f2+…n1*f10) + (n2* f1 + n2*f2+…n2*f10) …… +(nn* f1 + nn*f2+…nn*f10) =100%<\/p>\n

_________________ \u00a0 \u00a0__________________ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0__________________<\/p>\n

f1+f2+f3+f4+……+f10\u00a0\u00a0\u00a0\u00a0 f1+f2+f3+f4+……+f10\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 f1+f2+f3+f4+……+f10<\/p>\n

where:<\/p>\n

\u201cf\u201d is each one\u00a0of the defined factors<\/p>\n

\u201cn\u201d is the evaluation of each partner in each factor.<\/p>\n

As already mentioned, in any form of profit distribution or remuneration for partners, be it traditional or aggressive, the definition of the factors to be used and their relative weights\u00a0\u00a0 among themselves will determine the result of the equation, which, in the end, will determine how the institution will behave internally and externally.<\/p>\n

Finally, every company is a living entity that evolves and is molded according to the internal interactions and the market influences. I reiterate that the offices are not different and are also changeable along the time and this ends up inserting another factor in our equation: the time itself.
\nOne shall always have in mind that the solution of the equation is not eternal and unchangeable because, as the office grows and adapts to new conditions, some of its factors may and must be reassessed.<\/p>\n

Which is the ideal solution? What should the reassessment time be?<\/p>\n

In my opinion, there are not ready answers for these questions. Each Law Office must find theirs!<\/p>\n

The support by an outsourced and experienced consultancy firm which is also exempt from internal political interactions may indeed help in the working out of this challenge as well as in the definition\u00a0 of the management model and the future strategy.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

There are dozens of books about this subject, but anyway I am going to dare to write down some very simple and objective topics (remember that I am an engineer) so that everyone can think about \u00a0them\u00a0 in a fast and pragmatic way. Structurally, there are two basic forms to remunerate the partners of an<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[17,1],"tags":[],"_links":{"self":[{"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/posts\/755"}],"collection":[{"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/comments?post=755"}],"version-history":[{"count":2,"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/posts\/755\/revisions"}],"predecessor-version":[{"id":862,"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/posts\/755\/revisions\/862"}],"wp:attachment":[{"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/media?parent=755"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/categories?post=755"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.jpgraciotti.it\/en\/wp-json\/wp\/v2\/tags?post=755"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}