By Kevin Donoghue, Solicitor Director of Donoghue Solicitors
I’m proud that, at Donoghue Solicitors, we do things a little differently.
It may be uncomfortable to hear, but like every other law firm, we are in business, not charity. Even though we spend a lot of time and money giving back to our community, being professional means that we often have to make commercial decisions.
We’re not being selfish.
Our regulator, the Solicitors Regulation Authority, demands that we run our business properly.
Rule 8 of the 10 mandatory SRA Principles says that all solicitors must:
run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles
As a solicitor and member of the wider legal community, I approve of this. It does no one any good to see law firms go out of business, especially clients.
But it is possible to run a commercial outfit and still put clients first. This view led me to think early on about how I would recruit and incentivise staff. This matters because without good quality, motivated people working for the firm it would soon cease to exist.
I trained to become a solicitor at a nationwide firm. Coming from a place where people are spread out and often have little to do with each other, I knew that I wanted to keep things small. It was, and remains, important to me that we focus on building long-lasting relationships with clients and staff. One way to do this was to recruit and pay people based on both their technical abilities and client care skills.
With this in mind, I decided to buck the trend of many law firms and pay my staff a salary without a performance-related bonus. Here’s why.
Staff Bonus Structures
Often law firms, particularly in the accident claims sector, pay “fee-earning” staff (solicitors, legal executives, and paralegals) a low salary which they can then supplement with a performance-related bonus. Solicitor’s firms have different ways of doing this, but they are all target-based.
- Some pay bonuses on hours billed;
- some on fees received;
- others on cases opened or closed.
- Some firms pay a bonus on annual performance;
- some on monthly performance.
- Some are individual based;
- some department based;
- others use complicated combinations of the above.
There are five consequences, all of them negative in my opinion, of paying staff performance-related bonuses in solicitor’s firms:
- The client suffers. This was the most important point for me when I decided against paying my staff a bonus. For clients, there are five main problems:
- When deciding whether to take on a new client, lawyers could refuse to take cases which, on their face, are not guaranteed winners but might have arguable prospects. From the bonus driven fee-earner’s point of view, why should they invest time and risk their bonus on a case that might not win? This situation could result in genuine claimants being denied access to justice. (N.B. This is not the same as the reasons for declining a case on a “no win no fee” basis, which I have written about here.)
- Harassed lawyers chasing bonuses might not have the time for proper client care, resulting in dissatisfied clients and poor instructions, which could result in things being missed, the claim being under-settled, and/or the client having to make a complaint.
- Those same solicitors or other lawyers might leave the firm if they feel that the bonus system is unfair. They would be replaced by someone new, who has to spend time getting to know the client and the case. This is time-consuming, frustrating, and worrying for the client.
- If the case is transferred from a lawyer who has left the firm, the client could be refused representation by another over-worked but appropriately skilled fee earner because they don’t have the time to invest in inheriting a former colleague’s case, or they think it doesn’t have good prospects of success. This might result in someone less qualified or able taking the case, which is a problem for the client, the lawyer, and the firm.
- Finally from the client’s point of view, pressure on fee-earners to bill monthly or annually could result in a case being under-settled just to hit a bonus target. As a result, the client might get compensated sooner but they could lose out on the full amount of compensation they deserve. This could result in a professional negligence claim.
- It creates a “me first” culture. Lawyers may be reluctant to help their colleagues with cases, court hearings, meetings etc. as this takes away from their own time and bonuses. And, at the year-end, the person who received the help may get a bigger bonus and greater recognition for the following year, leading to resentment and jealousy. It also creates a toxic atmosphere at work which results in higher staff turnover, which as I mentioned above is bad for both the clients who have to work with another lawyer and the firm which has to replace them.
- Fee-earners can refuse to “share” clients with each other and across departments for fear of losing that client to a competitor within the firm. This helps no one, not least the poor client who could be missing out on quality representation and then has to go through the hassle of finding another solicitor elsewhere. Lawyers may also refuse to share contacts and potential referrers of work, leading to lost clients to other firms.
- Solicitors and other lawyers often spend time brainstorming ideas and cases to maximise their prospects of success. The law is a knowledge-based job, and knowledge is best shared. But bonuses create a culture of jealousy which limits sharing of ideas. This could lead to clients losing their cases, and making complaints and/or claims against the firm.
- Bonuses are difficult and time-consuming to manage. I attended a management course a while ago where a managing partner who had inherited a firm which had a bonus system said that, despite radically changing it, they still had to spend time refining it every year. They are a waste of everyone’s precious time and resources, which could be better spent helping the client (see point 1) and each other.
An Alternative to Staff Bonuses
Given all the problems with performance-related bonuses I have described it is a wonder to me that anyone uses them at all. Instead of this dysfunctional system, I decided when setting up the firm to make the client the focus of staff performance, not the bonus a lawyer could potentially take home. That way we all benefit when a client succeeds in their case, when we learn something which we share (staff training is continuous and thorough), and when we grow as a firm.
For example, my colleague Daniel Fitzsimmons recently settled a case for Mr. AN. A minibus driver knocked Mr. N off his bike. AN suffered personal injuries, property damage, and other losses. Daniel worked with Mr. N, me, and (trainee legal executive) Hannah Bickley to make sure that:
- AN’s case was properly and fully detailed;
- he got complete and accurate medical evidence from the right specialists; and
- he was put in the position he would have been in if the accident didn’t happen. (This is the purpose of tort law in personal injury accident claims.)
Cases like this are all about teamwork, and Mr. Fitzsimmons treated AN as a member of the team. He involved him in decisions and took the time to discuss matters, demonstrating excellent “client care”. When it came time to settle, Dan negotiated hard and kept pushing for more when other lawyers on performance-related bonuses may have settled early to hit their targets.
Daniel recovered £4,600 for AN plus his legal costs, which was an excellent settlement. We’re proud of the job we did. AN was happy too. He was a helpful and co-operative client and has become a friend of the firm.
From a management point of view not dealing with bonuses (or the office politics they create) means that I get to spend more of my time
- winning cases for my clients as I am a practising solicitor as well as the Director of the firm,
- managing the firm’s growth, and
- ensuring that we are progressing as a group.
I am proud of the fact that, since I started Donoghue Solicitors over four years ago, we have never lost a member of staff. Our clients and contacts know us all well and we have satisfying, long-lasting relationships.
And because we don’t pay performance-related bonuses we can invest more time in looking after our clients and getting on with the serious business of helping them win their compensation claims, which is what we’re here for after all.