Robert Camp, Managing Partner, Stephens Scown LLP

The ones we’ve really impressed are our professional indemnity insurers. They see it this way: having employees more engaged in the business and having a stake in the outcome means that they will take risk more seriously.

Based in South West England, Stephens Scown provides legal services to companies and high net worth individuals. The firm specializes in areas important to the South West region, such as mining & minerals, renewable energy and tourism. The firm obtained an ABS license in 2016 in order to be able to implement a limited employee share ownership scheme.

Stephens Scown was founded in 1935 on the back of the China Clay industry, which was and remains a key industry for the region. This led us to develop an expertise in mining & mineral work, and we remain one of the top mining & mineral firms in the country. Our service sectors have grown to also include, most notably, renewable energy and tourism, and international divorce. We serve mainly small and medium-sized companies as well as high net worth individuals, predominately based in the South West but we also act nationally and internationally. In the past five years we’ve nearly doubled in size, from just under £10 million to nearly £18 million annual revenue. In the past three years we doubled headcount — we now have 250 employees and about 50 partners.

We are not a classic ABS in that we have not brought in external capital, nor have we made an individual non-lawyer (such as a finance director) partner. In addition, we have retained our structure as a limited liability partnership (LLP) — we have not converted to a corporation.

What we have done is this: we have created a limited company which has become a partner in the LLP, holding one share. The limited company has no voting rights, but it does have a right to share in the profits. One share of the limited company is owned by an employee benefit trust, with all eligible members of staff being entitled to become a member of the employee benefit trust. This structure allows the members of our staff to become very small — and I appreciate that it is very small — owners in the business.

Our model operates this way: the management board sets an annual profit target for the business. The target is set at an amount that the board considers to reflect a fair and proper reward (based on a number of factors including return on capital invested in the business, the local market, the growth plans for the firm, etc) for the partners of the business, whilst at the same time providing the opportunity for a sizeable bonus pot going back to the staff based on the success of the firm as a whole. The profit target is published to the staff. Once that profit target is achieved, 50% of the firm’s profits above that amount are paid to the newly created limited company, which then distributes it to the employees via the employee benefit trust.

Most of our employees — over 90% — are eligible to participate in our scheme. Essentially, all employees who have passed their probation period and are not being performance-managed are eligible.

We would have liked to have to put in place a true staff ownership scheme, but it wasn’t possible in our case. This is because we are a partnership and not a corporation. With a partnership, a true share ownership scheme would mean having 250 additional partners — under the SRA’s rules, this would be unmanageable because the SRA would need to understand who each of those 250 people are and, especially, be able to ascertain where control of the firm lies. We were strongly advised not to go down that route, as under the current rules it would be an administrative nightmare and the SRA would look unfavorably on it.

If we had converted to a corporation, we would not have had this issue as it would be easier to determine control, regardless of the number of shareholders. Yes, we could have chosen to convert to a corporation but we decided not to because we are more comfortable with a partnership. In addition, while there are certain tax advantages with a corporation, there are also tax disadvantages that we would like to avoid.

For the past five years, we’ve been focused on client service, and we’ve won several awards for client service. We’ve recognized that client service is dependent upon staff engagement, and we want our staff to feel part of our firm, and not just a cog in a bigger wheel. This is the context in which we decided to become an ABS — in order to increase staff engagement. Research shows that if you can engage your entire staff so that they are all working for the same common goal and not just for rewards for those at the top, then the quality of service will go up. So you get happy clients who recommend you to others, and you get a virtuous circle.

Providing excellent client service is about exceeding expectations and creating magic moments for clients. It can be as simple as returning a phone call quickly, giving the client reassurance or personally delivering a contract. I wanted Stephens Scown to be unlike any other law firm, so for inspiration I looked outside the sector and drew on the experience of Nordstrom, the US department store. Nordstrom has created one of the most powerful word of mouth marketing successes through its ‘Nordie stories’ — examples of excellent client service, which are celebrated and shared. Having client service at the heart of our strategy was something that everyone in the firm could get behind and be passionate about. So we have our own ‘Scownie stories’ of staff who have gone the extra mile, as well as other initiatives which look to improve service and therefore ensure our clients are happy to recommend us to others.

Our employee ownership model is inspired by the John Lewis model, even if we were not able to put in place John Lewis’s exact model for the reasons I’ve just explained (we can’t add 250 partners to the firm). John Lewis is a UK-based department store that, in a manner comparable to Nordstrom in the US, has built its brand on exceptional customer service. Their ability to do this has been attributed to (i) its partnership form; and (ii) its employee ownership scheme. John Lewis sets a profit target and pays its employees a substantial bonus based the company’s profits over that target.

The reaction of our employees to our scheme has been very positive. We see this reflected in a number of ways, large and small. For example, when we opened our search for trustees for the employee trust, we had 20 volunteers step forward when we only needed three. As a result, we’ve decided to increase the number of trustees and hold elections for their selection. Another example: I saw a post-it on the computer of a member of support staff reminding her to post mail second class because it could “help the bonus.” It’s a small thing, but multiplied across the business, it has an impact. People are aware that if they can save money, if they can get money in quicker, if they can bill quicker, if they can do a little bit more, then a reasonable percentage of that savings or earnings will go into the bonus pot. What the employees appreciate is that they can see how helping the company succeed will help them individually.

It’s important that the staff all know from day one how the bonus will be calculated. Traditionally, bonuses are entirely discretionary and no one knows if they are going to get one or not at the end of the year. With our scheme, there is certainty that if we hit the number, everyone will get a bonus.

Our scheme has also made a big impact on recruitment. It is one of the things candidates mention when they apply for a job with us.

We’ve also had a positive reaction from clients. Several have complimented us, and a few have asked us in detail about how we’ve done it, as we got them thinking about doing it themselves.

The ones we’ve really impressed are our professional indemnity insurers. They see it this way: having employees more engaged in the business and having a stake in the outcome means that they will take risk more seriously.

In the UK, there is a strong movement towards granting employees shares in businesses. It’s a way to give employees more control over their future. To support this movement there are a number of tax advantages in place, such as dividends paid to employees are tax-free up to a certain threshold. Unfortunately, those advantages apply to corporations rather than partnerships, so Stephens Scown isn’t able to benefit from them (and it made it more difficult for us to put our scheme into place).

At Stephens Scown we put people at the heart of everything we do. This means we are very focused on our staff. You see this reflected in our Sunday Times ranking as the 12th best medium-sized company to work for in Britain – the highest ranking law firm. We see our scheme as a further demonstration of our focus on our staff, and it sets us apart from our competitors.

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