Human Resource Management
in the Service Sector
Lectures 8 and 9: Law Firms
Objectives
• Understand the basic characteristics of the
sector
• Identify the traditional model of organising
and management of HR
• Consider some of the key changes in the
sector and the responses of law firms
• Identify the challenges this presents for HRM
and for knowledge management
• Focus on the key issue of remuneration and
reward, especially variable reward
• Analyse a practical case drawing on our
knowledge of theory
2
Overview
•
•
•
•
Introduction to the sector
Traditional model of organisation and of HRM
Changes in organisation and HRM
Implications for managing knowledge and
managing people
• Key issues: remuneration and reward – brief
recap
• Introduction to the case and organisation of
the task
(Kinnie et al, 2006; Hunter et al, 2002; Morris and Pinnington,
1998; Maister, 2003, Scherer, 1995;;)
3
Introduction to the sector
• Barristers and solicitors – our focus on solicitors (‘law
firms’)
• Selling an intangible service: advise and represent
clients on criminal and civil cases
• Modern law firm traced back to early 1900s – mostly
family practices before this
• Very large firms – the ‘magic circle’ (London based,
major corporations)
• Medium sized firms – mix of work mostly for
corporates
• Small – mostly private and routinised legal work
• Internal organisation into specialities – ‘practice
groups’
4
Law Firms: traditional business
model
• Wide range of legal matters dealt with
for major clients
• Partners maintained close personal
links with clients to keep and gain new
business – reputation is important
• Dedicated human capital to client and to
specialist areas – built organisational
capability
5
Traditional organisational
structure
Partners –
‘Finders’
Associates ‘Minders’
Assistants
‘Grinders’
6
Traditional organisational
structure
• Partners – sell services or create demand
(‘Finders’ of new business) and claim part of
the profits of the firm – equity – often linked to
seniority (‘lockstep’)
• Associates – (‘Minders’) who manage the
work – salaried and looking for promotion
• Assistants - (‘Grinders’) told what to do and
how to do it – no voice, no role - do the hard
legal work and research – also salaried
7
Traditional HR model
• External Resourcing
– elite recruitment – hired prior to qualification
• Training and Development
– Apprenticeship model – trained supervised and rewarded by
the partner
• Internal Resourcing - promotion
– ‘up or out’ promotion up to partner (6 years) or leave the firm
for a competitor or client – competitive – ‘tournament model’
• Reward
– ‘making partner’ – but problem of how to create the right set
of incentives to align aims of associates with those of the
partners and the firm (Morris and Pinnington, 1998)
8
High reward for
equity partners
Traditional HR practices
‘Up or Out’
Partner in 6 years
– or leave the firm
Apprenticeship
model
Elite
recruitment
9
Market changes
• Growth of in-house lawyers – clients
become more demanding
• More complex law - need for greater
specialism
• Firms become larger and more complex
• Growth of transactional work which
does not need lawyers and is more
routinised (eg personal injury, property)
10
How have law firms responded?
• Strategic planning and marketing – becoming
more like businesses
• Structural changes – board structure,
managing partner, directors of functions
• Growth of a sectoral approach combined with
the traditional practice group approach – eg
become specialists in health and local
authorities
• Flatter structures and more devolved
organisation
(Hunter et al, 2002)
11
Changes in the HR model
• Tiers of partners who were rewarded differently –
salaried partners
• External staff brought into senior positions – lateral
hires - (‘rainmakers’)
• Greater specialisation earlier
• Non-partnership tracks established
– Senior associates – need to retain or recruit in highly valued
but low profit areas
– External staff brought in as senior associates
• Semi-professional staff brought in (‘paralegals’) to do
the routine work
12
• Performance controls – typically chargeable
time, fees against targets and time charged
against targets
• More benign promotion systems not solely
focused around partnership
• Promotion criteria
– Getting new business, fee earning ability, technical
skill, getting on with clients, getting on with peers,
management ability
– Self regulation of performance
– Monitoring by peers and clients
13
Implications for managing
knowledge and managing people
• Recognition that knowledge is a competitive
asset – need to manage knowledge
strategically
• Larger firms have sought to manage their
knowledge – often using IT systems for
explicit knowledge
• Importance of tacit knowledge and client and
network capital – how to convert this tacit
knowledge into explicit know that could be
codified
(Kinnie et al, 2006; Hunter et al, 2002)
14
The HR
Wheel
Resourcing
Human
capital
Social
capital
Network
Capital
Intellectual
Capital
Client
Structural
Capital
capital
Organizational
Capital
Pay and Reward
15
Delivery
Challenges presented to HRM
• Resourcing: technical skills and fit with wider culture
of knowledge sharing
• Training and development: improve specialist
knowledge and create greater versatility
• PMS: improve performance and stimulate knowledge
sharing and discretionary activities
• Reward: individual performance and encourage
commitment to the interests of the firm
• Involvement: retain valuable members of staff and
create feelings of loyalty and commitment to the firm
• Our focus is on remuneration and reward
16
Remuneration and Reward in
‘High Trust’
• Bases for rewarding performance: job,
person or performance
• Fixed and variable pay systems
• Performance pay: some key questions
• Introduction to the case study
17
Strategies for Reward: job, person or performance?
JOB
job rate
job rate and
performance
pay
skill level in
job
PERFORMANCE
commission
piece-rate
PERSON
Competence/skillbased
skill-based
and
gainsharing
18
Fixed Pay Systems
Individuals
Group
Unmeasured
performance
Individual contract
only
Rate for the job
Measured
Performance
Performance targets
(sanctioned)
Job and finish
(variable time)
Measured Day Work
(sanctioned)
Job and finish
(variable time)
19
Variable pay systems
Individual
Group
Output
Piecework (general)
Commission (sales)
Performance pay (targets)
Team bonus (targets)
Gain sharing (geared)
Profit sharing (geared)
Input
Skill/Knowledge (Learning)
Competences (behaviour structured)
Merit Pay (behaviour unstructured)
Share ownership
ESOPs (stakeholders)
20
Performance Pay: some key
questions
• ‘the explicit link of financial reward to
organisation, group or individual performance’
• What performance? – what are the key
criteria, what is being measured
• Whose performance? – individual, team, firm
• How is it measured? – how is the data
collected, from whom?
• What is the mechanism? – link to
performance management system?
• How is it paid? – financial and non-financial
21
‘High Trust’
• Local law firm - medium sized and growing
fast
• Strong emphasis on culture and values
inclusive and mutual respect – building social
capital – sharing work and knowledge
• Issue of how to reward their staff who
contribute to the success of the firm while
reinforcing their values
22