Like horse’s hooves, partnerships have to deal with different conditions throughout a year. There is a well-known equestrian saying: ‘no foot, no horse‘ which means keep the hooves in order or you don’t have a fit, usable mount.

No foot, no horse – like horses’ hooves, partnerships need maintenance and the fundamental building blocks for success need to be carefully thought through and put in place. One of these is clear performance and contribution criteria.

Similarly, successful law firm partnerships need to get the basics in order and thereafter ensure that they are functioning well. It still surprises me how many firms adopt a fairly laissez faire approach to these things and don’t address some of the basics around key partnership functions. In some cases I suspect it is simply that leadership do not wish to ruffle partner feathers and so allow some of them to slip into the ‘too hard for now’ basket. In other cases the firm is doing well so some of these essentials fall off the radar.

One of these is setting partnership performance criteria. When asked to advise firms on performance and growth one of the first things I ask to see is the criteria or key performance indicators (‘KPIs’) that the partnership uses to guide, encourage and measure partner behaviour, thinking, contributions and performance.

Frequently there isn’t one or it is a hotch-potch of half finished lists which have never been fully debated, agreed and not implemented or communicated in any meaningful way. In other cases, there is a list, but that is all there is. Partners do not react to lists of things to do – it takes a lot more. Sometimes new partners come into a partnership blissfully unaware of their existence. As a result performance and contributions can be variable and overall, not delivering what the firm is after.

What then are some considerations to bear in mind when putting together performance criteria or KPIs?

  • ideally these criteria should not be determined in isolation, but in the context of the firm’s core purpose (vision, values, cultural attributes), strategy and guiding principles. This stands to reason as the criteria should be one of the key ways in which the vision and strategy is achieved;
  • you need to get all partners involved in the debate. Communicate and explain. Ask them for input. Encourage their involvement and thinking. Make a genuine effort to do this. Get to the bottom of what truly makes the partnership tick. Done well, you will find a number of the criteria and other strategic key objectives for the partnership drop out of this process. It will also be owned by the partners which will make implementation that much more effective;
  • you are going to come across some opposition, some of it very subtle, but if you don’t anticipate it and are not prepared it can undo all your good efforts;
  • you usually only get one good shot at this – make it count by getting it right first time – if necessary get experienced external counsel, especially to deal with any ‘curved ball’ queries you may encounter in meetings;
  • be patient. Introducing such processes means a lot of change for a lot of partners and thus can cause fear and demotivation;
  • don’t however be patient at the price of inaction or unnecessary vacillation and delay. It is important to commence the process and maintain momentum. Partners need to know leadership is determined to see this through to a successful conclusion for the long term benefit of the partnership. This is everything;
  • don’t do this over a long time-frame – partners get bored, there is too much opportunity for other ‘important matters’ to get in the way, and the focus can be lost. I recommend a tight time-frame of a couple of months – done well, this is sufficient;
  • use this as an opportunity to introduce some new thinking into the partnership. Standard partnership criteria usually incorporate the ‘usual suspects‘ but I like to surprise firms and partnerships with some new angles that they hadn’t perhaps thought about previously. This challenges thinking, can create a sense of excitement and properly implemented, undoubtedly achieves a measure of differentiation over time. For example I often introduce the concept of building Capital Fabric™. This is something I evolved over many years of running firms after I realised that one had to encourage more long term, fundamental thinking amongst partners. We had to encourage them to not only work hard but to do things that contributed in meaningful ways to the long term, fundamental strength of the firm. This takes some explaining and convincing but it is worth it. As I have written elsewhere it is arguably the most important contribution a partner can make;
  • remember that what you are doing is not simply finding a way to measure performance and provide a possible basis for future adjustments to profit shares and earnings (which some partners will suspect, no matter how you dress it up). What you are really doing is starting a process of changing partner behaviours and thinking and making it clear that in future certain things will not be tolerated and that also there will be some consequences for performance or non-performance. Quite what that is, is up to the partnership and leadership team;
  • these systems do not need to be ‘tough and ruthless’ to be effective. Having said this, they do require strong, trusted leadership and a determination and persistence to get the job done. Under-performing or long standing partners have long learned to ‘work the partnership system’ and block change where it suits them, and allowed to continue un-challenged, they can thwart efforts to change. This can have the unfortunate but not uncommon outcome of reducing key partnership systems to meet the lowest common denominator;
  • what you do in this area also establishes an important foundation for whatever compensation or remuneration system you decide to implement in the firm;
  • setting performance criteria or KPIs is but one step of many that must be given attention. Partners don’t change their thinking and their behaviours because you agree and then publish a one or two-page list of what you expect of them. It takes a great deal more. I will touch on some of the other things in future posts.

Like fingernails, hooves grow continuously and require regular trimming to retain the correct shape and balance of the hooves. Similarly, all partnerships systems should be subjected to regular review, stress-testing and updating to ensure that these fundamental building blocks are solidly in place and working well to support the partnership achieve its vision and key objectives. It is one thing to have partnership systems in place, but are they the right ones and are they doing their job of helping the firm realise its vision?

all the best, Sean Larkan, Partner, Edge International.