Driving up partner performance
Partners in smaller practices may feel that they are fully aware of the increasing demands placed on them to run the business and at the same time ensure that profitability keeps climbing north rather than south. What tends to be forgotten in the hurly burly, however, is how to focus and use each individual’s time effectively so that progress really is on-going and constant by playing to people’s strengths. Profit shares must not only be commensurate with the efforts put in but reward partners (who after all are owner managers!) for working in a highly regulated environment with all the attendant risks that this presents.
The benefits of a partner appraisal system to provide the impetus to partners’ efforts have been discovered by many of the larger practices, but small firms can find this approach even more valuable. Partners in small firms may see each other frequently, but this does not mean that they spend more time discussing practice and personal development issues: indeed, such is the pressure of client work that they may well manage to avoid the subject entirely! Hence the need to think carefully about what would be most helpful to them.
A healthy and profitable practice must have a business plan that allows partners to play to their individual abilities whilst taking into account both their personal aspirations and their perception of the firm’s future. Partners should not delude themselves about being seen as a trusted advisor when in reality their strengths are primarily technical. It is better to use colleagues who are more capable for this role to fulfil it, and to use the technical skills in a stronger support role.
Many small firms have a development plan, but fail to spend sufficient time reviewing its progress or analysing the contribution made by each partner. Partner appraisal should be linked to performance plans and targets covering key areas:
- Managing and enhancing the firm’s reputation
- Developing market share
- Developing client service
- Developing profitability
- Developing people
Each partner will need their own plan - this is where they can play to their strengths (which will vary from individual to individual) and will include benchmarks for, inter alia:
- Chargeable hours
- Productive use of non-chargeable hours (on clients, contacts, prospects, etc.)
- Total lock up of WIP and Debtors
- Billing levels per month/per quarter
- Write off levels
- New instructions received
For small firms the objectives of partner appraisal should be to discover exactly how they spend their time and assess their contribution to the profitability of the business. Key questions are:
- Do partners spend too much time on chargeable work and not enough on practice development?
- Do partners with specialist skills spend enough time on specialist work or is a significant percentage of their time spent dealing with more mundane matters?
The spin off is building a practice of real value, one that is attractive to potential partners, merger prospects, good quality people in general, and to better quality clients.
Naturally there will be a significant element of self-assessment for partners in very small firms, but this should be the basis of dialogue between the partners to establish the best way forward for the business. This is vital in firms where all are of a similar age, but may have vastly different career aspirations. One of the most common reasons for small firms to find themselves forced into a merger is the succession problem caused by a partner who wishes to retire early or leave the firm to pursue other interests, but whose ambitions had not been incorporated into the firm’s development strategy.