Ten human capital trends shaping partner remuneration in 2023

Author: Michael Roch,Lead author, The Partner Remuneration Handbook (2022)

As we step into 2023, it’s the perfect time to reflect, review and re-energise, personally and professionally.

Uncertainty and economic instability were 2022’s unwelcome buzzwords that look certain to carry into this year. Most notably, these include the continuing effects of the global Covid-19 pandemic, Russia’s war on Ukraine, an energy crisis and consequent cost-of-living implications.

All of this has had a profound effect on how we work – and by implication on the expectations that partners bring to their firms, their partners and their partnership. I’d like to offer ten human capital trends that will shape 2023 along with some questions for reflection as you think about your year ahead.

1. Certainty and financial security

While uncertainty can bring opportunity, 2022 has shown that most professionals value certainty and financial security over unsustainable profit shares. And in economically uncertain times, your partners will look to you and the partnership to deliver stable profits and sustainable growth.

How sustainable is your partnership’s financial strategy?

2. Trust, empowerment, purpose

Remote working has changed how managing partners lead professionals and their partnerships. Trust in partners and staff is essential irrespective of physical presence, and partners and staff in turn require space to work on personal values and their unique professional purpose.

How does do your partnership’s business objectives and partner reward system support this empowerment?

3. Recognition 

Many studies show again and again that financial reward only has limited long-term motivational effect. While also an extrinsic motivator, high-achieving knowledge workers respond to recognition and feedback on efforts, results and a job well done. The effect is compounded if coupled with a sound financial reward structure.

How does your partner reward system and its processes incorporate recognition in all its forms, creating a culture of motivation to spur partner development and an impact on your bottom line?

4. Flexibility in engagement and reward

Flexible working arrangements for partners, as well as a choice in how they are rewarded, will be key in 2023 and beyond – flexibility is now a ‘must have’.

How does your partner reward system accommodate flexible work arrangements while maintaining utilisation (assuming the work to go around is there)?

5. Diversity, inclusivity, and sustainability

Actions speak louder than words if you want your partnership as a serious contender when competing for talent.

How does your partnership structure support a diverse and inclusive partnership?

6. Well-being

A key lesson from the past three years is that we don’t need unnecessary stress in our lives. A partnership that doesn’t prioritise the physical and mental health of its partners and staff will suffer low retention rates.

When did you last audit your partner reward system ensuring it safeguards your partners’ well-being alongside their financial security?

7. Fairness and equity

Any partner’s expectation is that their remuneration outcome will be both fair and equitable in relation to their peers. And only if this condition is met will your reward system support a cohesive partnership.

How does your partner remuneration policy achieve results that are both fair in substance and are perceived as fair by a substantial majority of the partners?

8. The right degree of subjectivity in profit allocation

Entirely objective partner remuneration systems are rare. Partners know how to game formulas, and some partners’ contributions to the business are neither planned nor immaterial. Yet many firms struggle balancing predictability with the right amount of recognition for the extraordinary.

How does your partner reward system balance objective inputs and subjective recognition – and is your RemCom equipped with the best information available to make difficult judgment calls?

9. Manage current-year profits alongside long-term innovation

The best partner remuneration systems balance traditional financial metrics with measures that help understand a partner’s non-financial contributions to the firm’s long-term success.

How does your partner reward system balance a partner’s short-term and long-term results?

10. Reward both individual and collaborative results

Sustainable and competitive partnerships require partners working and innovating together. 

How does your partner remuneration system recognize highly networked collaborators in your firm?

Before you dive headfirst into 2023, take a few minutes to reflect on the systems and processes you have in place to manage your partnership.

Taking a step beyond these ten questions, I’d like to leave you with a final question as a great new year will kick-off:

How do you communicate – through the firm’s reward policy and beyond – what it means to be a good partner?

Thank you for your trust over this past year. I look forward to seeing you in 2023.