15 March 2024

Bonuses In European Law Firms – A Developing Trend?

IR Global


IR Global is a multi-disciplinary professional services network that provides legal, accountancy and financial advice to both companies and individuals around the world. Our membership consists of the highest quality boutique and mid-sized firms who service the mid-market. Firms which are focused on partner led, personal service and have extensive cross border experience.
In January, Swedish firm Mannheimer Swartling announced a change in its bonus scheme for associates.
European Union Law Department Performance
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In January, Swedish firm Mannheimer Swartling announced a change in its bonus scheme for associates. The bonus is no longer assessed on hours worked but operates as a profit share, thought to be equivalent to 2 months' salary. This aligns the associate bonus to the firm's pure lockstep model for partner remuneration and represents a shift from the previous billable hours-based approach.

In February, Kromann Reumert in Copenhagen also moved away from the billable hour as the primary basis for bonuses. Now billable and non-billable hours count equally, and contribution to business development, sales, knowledge management, leadership, collaboration and matter performance (assessed by reference to KPIs) will also count towards the bonus. 33% of bonus amount for associates (and 50% for partners) is dependent on firm performance, so everyone has a sizeable stake in the firm's broader achievement.

Do these changes amount to a trend? We will have to see. The common factor in these developments, in different jurisdictions and with different remuneration models, is an emphasis on things other than contribution to earnings in evaluating lawyer performance. The old adage is that what gets measured gets managed (as Peter Drucker actually said): if the incentive is billable hours, inevitably effort is directed to that and so there is a negative impact on the non-billable activities that build teams, the firm's practices and, arguably, its sustainable future. These changes are about aligning the focus of motivation with the team and the firm, and away from the individual. The simple act of measurement should increase the lawyers' motivation to perform in the way the firms desire.

Or so they hope.

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