Human Resource Management in the Service Sector

1
Human Resource Management in the Service Sector

• Lectures 8 and 9 Law Firms

2
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

3
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)
4
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

5
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

6
Traditional organisational structure
Partners Finders
Associates Minders
Assistants Grinders
7
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

8
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)

9
Traditional HR practices Up or Out
High reward for equity partners
Partner in 6 years or leave the firm
Apprenticeship model
Elite recruitment
10
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)

11
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)
12
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

13

• 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

14
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)
15
The HR Wheel
Strategy
Resourcing
Structure
Job and Work Design
Involvement
Intellectual Capital
Training and Development
Performance Management
Pay and Reward
Delivery
16
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

17
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

18
Strategies for Reward job, person or performance?
JOB
job rate
job rate and performance pay
skill level in job
PERFORMANCE
commission piece-rate
skill-based and gainsharing
PERSON
Competence/skill-based
19
Fixed Pay Systems
20
Variable pay systems
21
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

22
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