Reed Smith: the future model?
22 February 2010
4 October 2013
3 October 2013
16 December 2013
6 March 2014
18 November 2013
Greg Jordan, the global chairman of Reed Smith, was locked away in one of the boardrooms in the firm’s New York office last week with several other key members of the management team. Their task? Wading through the annual equity partner compensation allocation process.
The week before Jordan had paid a visit to a couple of his firm’s European offices, Paris and London, to check up on local developments. Jordan’s trip also provided The Lawyer with a chance to catch up with him and take stock of how Reed Smith was faring after a landmark year.
For Jordan’s firm last year was not only a landmark one because it was one of the toughest on record - many firms can say that. For Reed Smith 2009 was also the year when Jordan and his core management team reshaped the firm in a way that could set a template for scores of rivals.
Last autumn Reed Smith smashed its lockstep remuneration system for its associates, replacing it with a three-tiered merit-based structure that looks set to become the industry norm.
Then, towards the end of the year, the firm turned its attention to its partners, in particular its US non-equity partners.
“In the fourth quarter of last year we launched Project Alignment,” said Jordan. For once the snazzy name of this law firm project was apt. It was designed to align all of the firm’s non-equity partners globally in respect of the financial stakes they have in the business.
The upshot was that the US tier was ’invited’ to invest up to 15 per cent of their salaries into Reed Smith as an equity stake in return for continuing partner status. Those who chose not to risked losing their partner tags.
“We developed this model, then canvassed the partnership,” said Jordan. “The idea was that everyone would then have a stake and profit share in the firm.”
Jordan added that 100 per cent of the partners were in favour of the system, while 97 per cent plumped for the new fixed-share status, with 3 per cent opting for counsel.
“The point was to try to create more consistency across the firm,” he added. “In effect it’s betting on us having a more cohesive, focused business if we have one business model across the world.”
No doubt it is also a handy way of raising revenue. But at least in terms of Reed Smith’s partner remuneration system, which was keeping Jordan busy last week, there appear to be no secrets.
“The compensation system’s open - every partner sees what other partners get,” he stated. “The relevant metrics are open too.”
The current year is already giving Jordan some grounds for optimism - not least in London, where the firm is still getting used to its new City offices. Further afield, Jordan believes the firm might be ready to enter at least one new market this year.
“Texas is the eleventh-largest economy in the world, and certainly from an energy and natural resources perspective it could make sense for us to be there,” he revealed.
Elsewhere, Reed Smith has already applied for a licence to open in Shanghai, although a new office is unlikely this year.
Any new outposts would only add to the relatively punishing travel schedule Jordan already commits to each year. He has long been one of that group of managing partners who see the benefit of ’face time’ across the network. As a result Jordan tends to spend around 200 days a year on the road.
As an example to the troops, at least in terms of engendering a familiarity to foster cross-selling between partners in a firm that has largely grown off the back of mergers, it seems to be working. Last year around $65m (£38.48m) was generated in total between the US and Europe by cross-referrals.
“In part that’s attributable to people’s efforts at cross-selling,” said Jordan, adding that the firm’s business from its top 250 clients rose by $25m. As far as he is concerned, this means clients are moving from more expensive law firms to the perceived ’value play’ that is Reed Smith.
“In prior years we didn’t get this work,” admits Jordan. “This year we did. So our market share from some big clients went up. In some ways the recession has played to our strengths.”