Employee rewards are powerful tools, so use them wisely
19 June 2006
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This year, CMS Cameron McKenna will pay a bonus of 6.05 per cent of salary to all of its staff - both lawyers and non-lawyers. The firm tells its people at the start of each year what the firm's profit target is and commits to paying everyone a bonus of a fixed percentage of salary for every £1m by which the firm beats its target.
The bonus is in addition to, and independent of, regular reviews of salary and the firm's formal appraisal system by which the firm records, recognises and rewards consistently high individual and team performances.
Why does the firm pay a bonus if its salaries reward high performance and are (as we believe them to be) competitive? And why a bonus for all and not just for the lawyers who bring in the income or for those who record US-style numbers of chargeable hours?
A salary is best viewed as a just reward for doing a good job, while doing a great job - going the extra step in serving clients and assisting others - deserves recognition beyond salary. Higher profits, which are the product of a greater number of satisfied clients, serve well as a proxy measure for having gone beyond doing a good job; and bonuses should be based on what the firm does as a whole.
A reward system needs to be simple to explain, simple to understand and simple to administer. It must be designed to lead us to compete with other law firms, not with each other. It must also induce behaviours that reinforce the right priorities: clients, firm, self.
Camerons is an all-equity partnership with a pure lockstep, which we think is best for our clients. So it makes sense that the incentive for everyone in the firm is as similar as it can be to the incentive for our partners. It is transparent, it is consistent and it is straightforward.
Reward systems alone do not bring about major changes in behaviour. Before you introduce a reward to encourage people to do something, you need to be sure it's the lack of a reward that is currently preventing them from doing it. If there are other barriers, then changing the rewards might not help.
Camerons has learned to be wary of reward systems based on individual performance or behaviour. There's no doubt that the outcome of any reward system based on individual performance is that people will concentrate on the single behaviour they believe is necessary to maximise their reward.
It is quite hard to ensure that this single behaviour (whatever it is) is the one that will make the difference to the firm's performance, and that your firm can do without other necessary behaviours that will inevitably be neglected, or at least down-played.
You need to tell people in advance what they need to do if you want to create an incentive to which they'll respond. And, surprisingly, a reward system that rewards chargeable hours doesn't necessarily cause people to work any harder than they would anyway. They are still free to make their own choices to trade-off hours against income, and many do. The existence of the incentive doesn't necessarily result in higher profits.
Getting people to work harder is a cultural issue, not something you can buy. And, by the way, try explaining to your clients why a system that rewards chargeable hours is in their interests.
Camerons takes a holistic approach to these issues. Last year, the firm published the People Report 2005, which placed on record its approach to a wide range of people-related issues. The firm has placed client relationships, teamwork, people management and personal development at the heart of its strategy, and a transparent bonus structure that rewards the whole business, based on its financial performance, supports that strategy.