Partner reward – a help or a hindrance to effective business development?Peter ScottPeter Scott Consultingwww.peterscottconsult.co.uk

For law firms now and in the future ....

Achieving high performance will matter as never before if they are to gain competitive advantage over their rivals

Competitive advantage?

‘an advantage that a firm has over its competitors, allowing it to generate greater sales or margins and / or retain more customers than its competitors.’

Why does competitive advantage matter?- because it is the part or parts of your firm which place you ahead of the competition. It means you have to do things differently and keep innovating to stay ahead

Competing as a law firm is a requirement for long term success

To compete, a firm has to outperform its rivals in the ways specified by clients

The primary task of law firm managements is to understand what it is that will improve a firm’s competitiveness and then organise all of a firm’s resources to achieve that improvement

All a firm’s structures, systems and support processes need to be directed at improving its competitiveness – including reward

An appropriate reward system is strategic and should be seen as a component part of achieving competitive advantage over rivals

To become more competitive than rivals a law firm will need to consistently deliver what clients require – and do so better than rivals.

To do this will mean ensuring a firm’s people perform at higher levels than rivals

Ensuring that a firm’s people are highly trained, skilled and motivated should be a critical objective if a firm is to achieve a competitive advantage over its rivals

Essential to get the best out of people to maximise their potential and performance -but how skilled are firms in getting the best out of their people?

What does it presently take to succeed at your firm?

Are business development skills really valued?

Are they measured;

Are they appropriately rewarded?

Unlike in this firm

“The only thing this firm values (and rewards) is personal billing!”

“Why should I share clients with my partners? What good will it do me?”

Responses to a confidential questionnaire from 29 out of 30 partners in a firm

A silo culture

No sharing of work and clients

No co-selling / cross-selling No efforts made to

- enhance the entire firm’s profile and reputation - build long term profitabilityNo effective business

development to a planRisk issues

Compare with this firm

“Which other partner or partners has passed you the most work over the last 12 months?”

A question designed to ascertain the level of work / client sharing in a US law firm.

Those partners in that firm who develop work / build and maintain client relationships AND who share work and clients with others are some of the most highly rewarded.

What does it take to succeed at your firm?

if effective business development is a priority for a firm then that should be one of the determining factors in what it takes to succeed at the firm

A firm should invest in and reward what it says it values if it is to get the best out of its people

Is EFFECTIVE business development a priority for you?

If so, how do you define ‘effective’ business development?

Do you measure it?

Do you measure INPUT or OUTCOMES?

Do you reward it?

A firm’s people will need to know what it will take for them to succeed in relation to business development

the key areas in which their business development performance will be measured;

their performance goals pertaining to business development; how their performance rates in relation to those goals; and

how their performance will be rewarded if those goals are achieved

What do you do?

Objectives of reward system to encourage more effective business development?

Be consistent with and advance the strategic and business development goals of the firm

Determine the relative contribution of each partner with respect to other partners

Help to create a culture of high performance and sharing

Encourage and develop new and more effective business development skills and behaviours within the firm

Elements of performance-based reward?

Should establish individual goals and plans

Attempt to move individuals to strengths and away from weaknesses

Can be ‘weighted’ to help a firm achieve its needs from time to time

Should involve sustained performance over say three years

Developing performance criteria

Appropriate performance criteria are fundamental to developing a successful reward strategy in relation to effective business development and should be designed to advance a firm’s competitive goals by helping to develop, for example -

How would regard as successful business development outcomes in your firm which should be rewarded?

Developing reward criteria

Involve partners in clarifying criteria to define ‘high performance’

Partners will then feel they ‘own’ the processWill provide greater transparency for future partnersFocus on what will help the firm to achieve its goals

“What will it take to succeed at our firm in the future?”

For example, start with a client relationships, business development & marketing online self analysis

Excellent client service is a top priority for me and I have built effective working relationships with clients and external contacts

I take time to question clients to fully understand their needs

I actively look for opportunities to contribute value for clients

I manage client expectations effectively

I am able to demonstrate value to clients, as a basis for value pricing

I regularly refer work to other parts of the firm

I maintain an up to date contact database

self analysis, continued

I positively contribute to marketing, including contributing to seminars, pitches, presentations, media liaison, articles, etc.

I actively network to develop contacts

I make a special effort to stay in touch with clients and contacts

I set aside time to get feedback from clients

I am a good rainmaker for the firm

I have a full awareness of the firm’s services and actively promote them

How can you evaluate effective business development?

Do you have performance development reviews? Do you measure effective business development?Effectiveness of different types of performance

development reviews? - downward only once a year? - on – going / informal? - 360 degree (all round) feedback?

360 degree (all round) feedback

May involve - • Feedback from those you report to• Feedback from your peers• Feedback from staff who report to you

to provide an all-round perspective of performance.

Online questionnaire on client relationships, business development & marketing

Please comment on particular strengths:

Please provide constructive suggestions for improvement:

“Those who contribute the most to the overall success of the office are the most highly rewarded. Notice that this does not suggest what the pay scheme should be. The determining factor is just whether the people think it rewards the right people.”

David Maister

360 degree (all round) feedback

Needs to be part of an on - going performance management process and reward cycle

Can be used to support a particular development programme such as a business development project

Should aim to provide each partner with an agreed and actionable performance development plan and serve as a basis for reward

A typical 360° performance development review process

Set objectives

Obtain feedback

Appraisal meeting

Development plan

Monitor & support

Report to partners

Process

Obtaining feedback from colleagues can be an

essential stage…

• to build on peoples’ strengths and to reinforce what they are already doing well

• to identify what they could do better

• To form the basis for reward

Advantages of 360 degree (all round) feedback to evaluate performance

Who better to give feedback on peoples’ performance than their peers and the people with whom they work closely?

Compared with downward feedback - - More constructive - Better received - More effective to enhance performance or change behaviour

How to introduce a 360° feedback performance development review process

No single best way to do this – whatever way best suits your firm

Must be a process to which partners are willing to commit - do not seek to impose it on partners

Partners must fully support the process if they are to accept the feedback and change as a result

The process must not be seen as threatening

Evaluation of performance and deciding on rewards - who decides?

trust is essential

management must have significant representation and

influence

involve non-management trusted individuals for checks

and balances

Reward – methods of decision making and allocation?

Arithmetical formula?

Discretionary bonuses?

Moves up and down?

Transparency of the process is vital

A final thought …

Whichever form of reward system you use, you should never lose sight of the guiding principle that a reward system should always work to improve your firm’s competitive edge.

Any questions?