What’s new on the law firms’ agendas? Issues regarding partner performance and rewards
In a law firm, the partners’ objectives must be deeply rooted in the firm’s values and culture. Therefore, there have been set in place processes of planned evolution in which the roles of the partners can be developed at the same time as progressing the linking of partner targets to their ultimate compensation or profit share.
And five basic principles should stand at the very core of this evolution:
- Admitting that there are a number of factors, both external (market consolidation, age discrimination legislation (in Europe) etc.) and internal (firm’s size, culture, values, accepted behaviors etc.), that influence the way in which partners feel their efforts should be rewarded and the partnership profits divided;
- Breaking down the firm’s strategies to all levels by identifying the Key Performance Areas, which underpin partner development and compensation discussions;
- Defining the firm’s performance expectations at all levels;
- Reviewing the partners’ individual progress and performance on a regular basis;
- When determining the profit allocation, the partners’ contribution to the firm progress should be taken into account.
Every firm should carefully determine its objectives. Introducing a performance management system for partners can lead to goal and target setting, which can be further on linked to profit sharing. Four factors have to be kept in mind, as they impact whether and how fast a firm reaches its strategic objective:
- Work volume;
- Work efficiency;
- Collaboration level between lawyers;
- Contribution to the success of the law firm.
While the first criterion is clearly limited by the number of hours in the day, the other three can be extended almost without limit. The firm needs to help each partner achieving absolute excellence in terms of value and collaboration level; but, to get there, the partner must be aware that he has to make a substantial contribution on volume. And this leads to another important point: the personal contribution plan.
The personal contribution plan
Working on client assignments is at the heart of any professional service firm’s purpose and reason for existence. But client work can become a comfort blanket for partners because it can provide an excuse to resist change; also, it and can be an impediment for team-building and collaboration. Partner contribution plans can help in this matter in three ways:
- Partners become more ambitious and goal-oriented;
- If the individual plans harmonize with the team and firm plan, it can create a feeling of unity and synergy;
- It can provide a form of self-assessment which can turn out to be quite helpful in allocating compensation.
When designing the plan, bear in mind the fact that it has to be simple and brief. Also, it needs to summarize critical business objectives which are relevant to the individual partner across the firm’s scorecard or key performance areas. It needs to be written in such a way that it will help the partner make decisions about priorities and time allocation. Moreover, it has to help clarifying how success in achieving objectives will be identified and measured. It further needs to set a compelling agenda for every partner to develop strengths, build skills and neutralize weaknesses.
Reviewing partner development
Every partner should conduct a review of his performance with the head of the department or the managing partner, at least once a year. The main purpose would be to discuss and clarify the partner’s development and to set helpful objectives.
First, the partner in question should prepare a self-assessment, based on his personal contribution plan. It should be included a summary of his chargeable work and also the major activities on non-billable work (pre-agreed and own initiative). Moreover, it should include feedback received from clients or from internal sources. Next, the actual assessment. This is meant to determine the areas of focus for improving performance in the next period (six months, for instance) and to identify the support that the partner can provide. Afterwards, the partner will then integrate this into his personal contribution plan that he will develop for himself and discuss with the head of the department that he works in.
To see what objectives a law firm should set, check out tomorrow’s post.
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