Equality of gender and ethnicity are hot topics – they are important and rightly so. This is because entrenched attitudes and blatant disparities in pay and job prospects can cause great sufferance. For some the Orwellian mantra that “all animals are equal, but some are more equal than others” seems to have become a foundation of their remuneration policies.
But there are many other ways in which people can be discriminated against in the workplace. What about equality of contribution, or achievement, from a remuneration and career perspective?
Lack of structure
A concern is that very few businesses are sufficiently formalised and structured to gauge the broad range of factors influencing job role and pay in an effective or fair manner.
And for a professional services firm, with partners and team members at different career points, with different skillsets and levels of ownership, how do you divide that profit cake?
Even after the team has been paid, are all equity holders (aka partners) on a level playing field? Where they are paid equally you have a simple system – but we all know that partners contribute different things, at different levels, at different times.
Unfortunately, the system of equal profit sharing effectively avoids reviewing and appraising the performance and contribution of partners. This for many is viewed as an easy option but it does mean that rewards are based on survival rather than contribution.
There are so many different criteria upon which they could be judged: departmental financial performance; their own fees and recoveries; business development. And then you have things such as technical performance (i.e. CPD), management and leadership performance…for example, what if one team has much higher turnover of team members than others because of the leadership style and ethos?
When it comes to equality, what you really need is an equality of assessment.
Of course, that’s easier said than done. Much work needs to go into creating such an assessment.
And even if criteria can be agreed upon, the next vital part of the process is aligning them with their impact on remuneration.
If, for example, you operate in a multiple-partner firm where all profits are shared equally – it’s difficult to say that one partner deserves more and another less. You may well think that, and you may be correct (and others may agree), but it can’t be done overnight and without a buy-in to the concept from those involved.
Incremental change to remuneration policy
Instead, why not introduce a modest discretionary element based on one or two simple, measurable, criteria. Perhaps departmental profit, or new business. Then, over time, the discretionary element can be increased as a proportion and more detail added to the criteria by which the ‘discretionary pot’ is divvied out.
You will also need to think carefully about other situations that arise: maternity or paternity leave; or a partner taking on an official role for a period of time – or perhaps someone having to go part time for personal reasons. These must be considered in terms of remuneration and bonuses.
Setting criteria can sometimes lead to unwanted behaviour. Has someone popped along to a conference to claim CPD points without attending sessions? Is a partner trying to claw all the revenues from a client, when some of it should be allocated to another team?
One thing to consider in terms of due diligence is to introduce 360-degree reviews on a partner appraisal, to give you more objective and balanced commentary.
Test your tests
And there will always be questions about the robustness and validity of the reviews: so be prepared to have it stress-tested, in other words: review the review system. Remember that measuring performance where KPIs don’t exist will require clever thinking, and judgement – that can’t be avoided. The trick is it be fair, consistent and transparent where possible.
Finally, I believe that you can’t go all the way in terms of the discretionary element – the basic remuneration is, in some ways, the glue that binds the firms and its partners together and here an element of equal profit sharing may be the key.
Derek Smith is a senior consultant at Foulger Underwood.
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