KPIs & Metrics in Partner Contribution & Compensation - Roundtable Report

Ray D'Cruz
,
CEO
,
Performance Leader

Finding and using the right key performance indicators (KPIs) and metrics for equity partners is a significant challenge for most firms.

 

Our recent 2020 Equity Partner Contribution & Compensation Survey showed disconnect between commonly used KPIs and metrics, and the strategic issues facing firms.

 

Production metrics dominate in firms today, with 75% of the five most important metrics used by firms are production related. The next two most common metrics relate to business development and leadership.

 

The problem is what’s missing, specifically KPIs and metrics that relate to:

  • Long-term financial stability
  • Innovation, technology, automation
  • Client experience
  • Collaboration, alliances, platforms
  • People experience
  • Diversity and inclusion (D&I)
  • Partner and staff well-being

 

Our roundtable asked, ‘how can a firm tackle these issues while 75% of the KPIs and metrics used for equity partner contribution and compensation management are production-related?’

 

Break out groups identified KPIs for three of these challenges:

  • Collaboration
  • Innovation/client experience
  • Diversity & inclusion

 

The roundtable also considered common problems in the application of KPIs and metrics, and potential solutions.

We presented the following summary table on this point.

Common problems in the application of KPIs & metrics

KPI & metrics health-check

In helping our roundtable participants to consider their firm’s approach to these issues, we asked them to self-assess the following statements on a five-point strongly disagree to strongly agree scale. We won’t disclose the responses for confidentiality reasons, but we share these questions with you in case you might like to ask them of yourself or your equity partners.

In our firm:

  • Partner KPIs align with firm strategy and firm wide KPIs.
  • Partner KPIs are balanced across our strategic priorities (not dominated by production KPIs).
  • Partner KPIs reflect the role and contribution of the individual partner (not a one-size-fits-all model).
  • Partners have a small number of KPIs and related objectives to focus on at any one time(i.e. 3-7 KPIs)
  • Partner KPIs flow into an objective setting process that is empowering and motivating for partners.
  • Partner KPIs and related objectives are the basis of regular, ongoing conversations between line partners and leaders.

 

The roundtable offered a framework for developing partner-level KPIs and metrics:

  1. Choosing firm-wide KPIs that focus on the firm’s strategic and operational priorities. A balanced approach is best to avoid the problem of one area (like production) dominating. Models such as the Balanced Scorecard or Intellectual Capital model can work well.  
  2. Cascading these firm-wide KPIs to group or individual level. Some KPIs cascade easily to partner-level (e.g. production), many do not – and needn’t to, so long as they support firm-wide strategic and operational goals.  
  3. Making sense of KPIs: quantifying KPIs where possible, describing their attributes and giving examples of their application.
  4. Turning KPIs into individual equity partner objectives or goals. These are concrete actions that can be the focus of ongoing conversation, assessment and accountability.

Our thanks to our roundtable participants for a stimulating conversation.

Please talk to us if you’d like to discuss any part of this article, and read on to see how Performance Leader can help your firm with KPIs and metrics.

 

Four ways PerformanceLeader helps firms with KPIs and metrics

  1. Developing contribution frameworks and KPIs for equity partners that are balanced, strategic and play to strengths.
  2. Identifying KPIs that address current strategic challenges (D&I, collaboration, innovation, well-being etc).
  3. Using our software to support equity partners to create KPIs and objectives that are aligned with the firm’s strategy and capable of ongoing progression.
  4. Using our software to help firm leaders monitor progress, create accountability and develop meaningful inputs for partner compensation determinations.

Authors

Ray D'Cruz

Ray D’Cruz is the CEO of Performance Leader. Ray advises clients on partner and employee contribution frameworks, contribution management practices and the design and implementation of technology. He has worked with over 100 PSFs internationally. Ray is a former lawyer and senior HR practitioner. He is co-authoring the second edition of Partner Remuneration in Law Firms (Globe Publishing) with Michael Roch.

Michael Roch

Michael Roch is Managing Director of MHPR Advisors and Head of Consulting for Performance Leader. For over 20 years Michael has advised global professional partnerships, international PSF networks and founder-led firms on partner remuneration, profit sharing, funding, governance, succession, business model design and other strategic issues. Having earned his spurs in Big 4 accounting (USA) and Big Law (UK), as an entrepreneur Michael has co-founded and led a global strategy boutique and served as Co-CEO Europe of a 4,000-member consulting platform. Michael is author of Partner Remuneration in Law Firms (Globe Publishing).

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