DLA Piper last week unveiled its long-awaited plans to move over to an all-equity partnership model in the non-US side of its business.
Market speculation immediately centred on the amount of extra money DLA Piper is likely to generate from what the firm’s official sources stoutly maintain is not a revenue-raising exercise.
At the end of the 2010-11 financial year DLA Piper had a total of 647 partners, of whom just 201 were full-equity. The firm is refusing to divulge how much new capital current fixed-share partners will have to inject, but assuming an average of £50,000 each, the contributions from 446 partners would generate £22.3m.
Market sources have suggested the final total could be closer to £50m.
DLA Piper International currently has a mixture of full-equity, senior fixed-share equity members and fixed-share equity members, with approximately a third of all partners in each grouping.
The firm is now set to launch a consultation process aimed at moving all partners onto a single class.
UK regional managing partner David Bradley denied the move was aimed at raising revenue.
“The firm is well-funded,” said Bradley. “If we’d done this while our profitability was going down some of our partners would have understandably questioned our motives, but we’re planning for enhanced profitability this year. This move is about looking to align the interests of all the partners in the firm.”
He added that there would be “safeguards” for partners’ remuneration at the lower levels, with a degree of remuneration guarantee for partners up to certain thresholds.
“We’re not just going to have a free-floating system for every partner,” argued Bradley. “There’ll also need to be transition arrangements as we move from one system to the other.”
There is speculation that the new remuneration system, if it is introduced, will contain performance-related gateways for the new partners to pass through before they can reach the upper echelons of profit share.
Bradley confirmed that one positive aspect of the current system is that a move to senior fixed-share status was usually interpreted as a signpost that the partner involved had been pegged for a move to full-equity status.
This fixed gate in the current system will be removed under the new system, a change that will lead DLA Piper to introduce a process of continuing learning and development for partners.
“We intend to roll out a major new HR initiative on an ongoing basis over the next three years,” added Bradley.
The new partner assessment model will be a performance management system that includes a balanced scorecard taking into account a range of factors such as client development and people skills. It will be spearheaded by HR director Carol Ashton.
PricewaterhouseCoopers, which was involved in the preliminary stages of DLA Piper’s partnership overhaul two years ago, is not assisting with the new HR programme.
Bradley said he is confident the move to all-equity will have the desired effect of helping DLA Piper achieve its growth targets, a sentiment echoed by legal market recruitment consultant Nick Root of Taylor Root.
“My gut feeling is that this is a good thing from a recruitment point of view, as long as they don’t ask for too much money from partners to buy in,” said Root. “Generally people want to be in the equity.”
As part of the planned changes DLA Piper will also even out voting rights among all partners.
“If this goes through every partner will have a vote on every issue on which there’s a vote,” explained Bradley. “Currently there’s a complex system under the partnership agreement whereby some partners vote on some matters but not all.”
The consultation is expected to complete by the end of this calendar year, with a vote on the proposals expected in early 2012.
The changes, which will also require a revised members’ agreement, are expected to take effect from 1 May 2012.