It’s that time of year many dread – when partner reviews, reward discussions and decisions loom large. In the second of three short posts, designed to help leadership teams improve process and outcomes, I provide some tips on how to put your financial data to best use.
“Essentially, all models are wrong – but some are useful.” George Box; Norman Draper (1987). Empirical Model-Building & Response Surfaces
Your firm’s financial data is an essential tool for evaluating partner contribution. But you need to take care in how you assess and apply it because your financial data:
- Provides more compelling and comprehensive evidence of contribution in some areas than others.
- Is a proxy for performance, providing an influential but fractured reflection of what a partner actually delivers to the business.
- Can shine so brightly that it blots out all other considerations – how often have you heard – “yes, all that other stuff they do is great – but just look at their numbers!”?
Consider, for each area of contribution, the extent to which the data is compelling and comprehensive.
Taking client facing activities as our example: the financial data in your practice management system on delivery of legal advice to clients, and getting paid for that work is far more compelling and comprehensive than the financial data available to evidence contribution to client relationship management. So, you can rely with confidence on the data in the former case but will need to look for additional sources of evaluatory input for the latter.
Treat your financial data as a starting point – a useful simplification of reality.
Think closely about what each individual piece of data is actually telling you and confine its influence to that field of contribution. For example, what does “matter partner billing” really provide evidence of, and what doesn’t it evidence.
You should also avoid overly fixating on one measure, especially if that measure is a combination of a number of data sets. I always tell my clients that they will get a more rounded and richer view of partner contributions if they consider a range of “raw” data, rather than an amalgamated single number.
And it is always wise to remember, Charles Goodhart’s adage from 1975 that, “When a measure becomes a target, it ceases to be a good measure.”
Be specific about what falls within your range of expected “broader contributions”.
And ascribe some explicit value to those contributions – maybe 20-30% – and apply it to all partners. Doing this has three key impacts:
- Partners generating significant levels of profitable revenue for themselves and others, whilst making strong broader contributions will, deservedly, come out on top of your evaluatory table.
- High revenue/profit generating partners, who otherwise make little or no broader contribution, will still be highly rated but will not sit at the top of your evaluatory table.
- The broader contribution of partners who struggle to perform against the firm’s key financial metrics will become obvious and have a specific value attached. Once specifically valued, somewhat counter-intuitively, this prevents it excusing below par partner performance against key financial metrics.
In my third and final short post on this topic I consider how to approach evaluating those “broader contributions” made by partners that have a profound effect on long-term and sustained business success, but which fall outside of short-term client service commitments, and don’t show up in your financial reporting.
 Also referred to in some systems as “supervising timekeeper billing”.