Welcome to series 3 of the Performance Leader podcast series.
In this episode, Ray D’Cruz and guest Patrick St John discuss Patrick’s recent white paper on Measuring and Rewarding Partner Collaboration.
Patrick, a former law firm leader, lays out a simple model for recognising and rewarding the best collaborators. He also reflects on this experience as a Remuneration Committee member and partner reviewing other partners.
Patrick St John advises professional firms on a range of strategic issues, from governance and financial reporting to performance and reward. His experience in the professional services sector spans 30 years, as a leading finance lawyer with Freehills and Clayton Utz, and as a law firm leader. Patrick was national head of the Freehills finance team. When the firm merged with Herbert Smith in 2012, he was appointed global head of practice for Finance, Real estate & Projects, and member of the firm's Global Executive Committee. Patrick had management responsibility for 120 partners. For 15 years he sat on the firm’s remuneration committee. Patrick also led the firms Alternative Legal Services and was in 2016 appointed Managing Partner, Strategic Implementation. He is author of the recent Performance Leader report Measuring & Rewarding Partner Collaboration.
Ray: [00:00:35] Patrick, thank you for joining us on the Performance Leaders' podcast.
Patrick: [00:00:40] Great to be here. Thank you for inviting me, Ray.
Ray: [00:00:44] Patrick, your report, Measuring and Rewarding Partner Collaboration, has recently been released by Performance Leader, and it's a report on the importance of measuring and rewarding collaboration in a partnership. Can you walk us through why it is important to properly measure collaboration in a partnership?
Patrick: [00:01:09] Yeah, sure, well, I guess the starting point is what sort of performance evaluation system the partnership has. But assuming you have a system of merit-based system and assuming that part of that is to look at how partners collaborate and work with each other, then you've really got a choice as to how you form your judgment about each partner's performance on those criteria. I think a lot of firms have the criteria sort of in their shopping list of things they'd like partners to do, but they're very subjective about how they evaluate. I think it's important to try and put some rigor around that and actually show that is something that can be measured and that some people are much better at it than others. So, coming up with some way to actually assess that in a more scientific way and get feedback from a wider group of partners, I think is important and gives a much better result in actually assessing the performance
Ray: [00:02:22] And the genesis for the system that you helped co-create at Herbert Smith Freehills was a conversation amongst the partners where one partner expressed that kind of frustration.
Patrick: [00:02:35] Yeah, that's right. We already had the performance criteria, which was each partner's contribution to the success of others. But for many years it had been basically done on a self-assessment basis that each partner would write their submission each year and say how great they were at helping each other. But we had a young partner who really turned it around on us and said, instead of asking all these old partners what they've done to contribute to my success, why don't you just ask me? I'll tell you who's actually helped me. It was such clearly correct way to view it that we set about designing a system that enabled partners to give that input into the review system. So, we do this survey every year just before the end of the financial year. And we'd say, who has helped you during the year? And we came up with a methodology to sort of collate that data and collect in a fair way.
Ray: [00:05:43] So walk us through the key points of the design that the firm came up with initially.
Patrick: [00:05:52] So it's a pretty simple system. Each partner is given 10 points, which they allocate to our other partners. They can allocate all 10 points to a single person, or they could allocate one point to 10 different partners. Certain partners who we're trying to kind of really give assistance to and help in the partnership, such as new partners, partners coming back from mat leave and partners who we've asked to transfer between offices or move into a new practice area, those people are actually given 20 points to allocate, because we actually want to weight the system in their favour. Basically, it's a point allocation system. And then we tally that up with a few subtleties about how we then report and use the data. I think the most important thing is to say we are trying to focus on the successes. So, in a system where everyone gives away 10 points, you would hope as a partner that you might get back 10 points at least. And what we what we did was to say we're only interested in the people who get back more than 10 points and we're really going to celebrate the success of our really good collaborators and tell stories about them and show the business impact and focus on the success rather than the other end of the scale.
Patrick: [00:07:19] There will be some partners who perform very poorly, who get very few points. Now, some of those just might be new partners who aren't in a position to help, they're the recipients of help. But some of them you will find will be very senior partners who think they're very good at this, and actually no one allocates to a single point. So, it's instructive for management. But in terms of how we promoted the system within the firm, the aim was to celebrate success and tell stories about success and promote that concept of a partnership where people help each other. And so, there are some subtleties in how we use the data and report it which go beyond the mathematics of allocating the points and tallying up the results.
Patrick: [00:08:50] The other thing that's interesting when I talk about this system with lawyers is that their mind always jumps to 'it wouldn't work in my firm because people would game the system'. People seem to go to that very quickly. But the good thing about the way we designed the system is that gaming got you nowhere, because if two partners wanted to just collude and swap, they get ten points and ten points got you no reward under our system. You had to get 20, 30, 40 points before you sort of held out as a great collaborator. So, a simple point swap didn't help.
Ray: [00:09:38] Was there a risk of a more subtle pressure from some of those higher profile partners, for example? Was there an invisible pressure at times, do you think?
Patrick: [00:09:56] Yeah, I think that was a potential risk. We deliberately kept the results confidential so a partner couldn't see. They might be told by got 15 points, but they didn't know who they came from. So by keeping that side of it confidential, we would hoping that they wouldn't be that pressure of 'why did you give me some of your points last year? That was anonymous.
Ray: [00:10:24] So initially this was implemented at Freehills in Australia, and then when the firm merged with Herbert Smith and formed the global firm Herbert Smith Freehills, this system was transmitted into that global environment. Just going back to the initial set up and iteration of the system, did it change materially over time, or did you essentially get it right in terms of design from the get go?
Patrick: [00:10:56] I think the design was pretty stable. We automated over time. First year we just did it by email and someone tallied up the results. So, we automated it. The basic design stayed the same. But I think how we used it and promoted it was what changed. So, our managing partner, when he reported the results, would talk about the results of the survey. We would tell stories about the real business impact that the collaboration had. And sometimes the partners who received a bonus in the rem system, specifically because they topped the scores. And I think that storytelling and embedding is really what makes the system either succeed or fail within the firm. One thing to have the to do the process, it's another to then use the results and talk about them and make it something that people talk about within the firm. And it sort of becomes a bit of the firm's culture that you celebrate the success of collaboration, and you talk about the real business impact that collaboration can have.
Ray: [00:12:18] And from a practical point of view, did the firm leaders do a roadshow? Did they hold presentations? How did they communicate these stories and these results?
Patrick: [00:12:32] Yes. So, under our rem system at HSF, at the end of the financial year when the process was all done, the managing partner would always give a series of presentations at every office to the partners. And we presented information about the spread of units and the spread of bonuses - it was to give transparency to the whole system. But certainly, part of those presentations was to talk about the collaboration survey and the results and who had done the best. And, also, you can produce some nice data and graphs around the way the points flowed, like the people in Sydney gave their points to people in Melbourne or the people in Litigation gave a lot of points to people in Corporate. And those flows are quite instructive and interesting.
Ray: [00:13:39] And so the really strong collaborators were celebrated, were acknowledged. You made the point in your report that some of the lesser-known partners or less high-profile partners were often recognised through this as some of the best collaborators in the firm. Can you expand on that a little bit?
Patrick: [00:14:02] As I said, we had the criteria before we had the system and there were reputations, I guess. People were perceived as great rainmakers and collaborators and so on and others who probably just weren't on our radar, talking is one of the management team. And so when we first did the survey, I said in the report there were some people who had their bubble burst and there were some hidden gems who were discovered, people who just did a great job of connecting and networking and being very generous with their time. Some of them were people who were just highly regarded black letter lawyers or specialists in a particular field, and they were so generous with their time and helpful to other partners who often needed that specialty, you know, late on a Sunday night or something. They popped up in the survey and perhaps we wouldn't have recognized that that was a role they were playing in the firm until we had that at the data.
Ray: [00:15:09] That has to be a real boon for a global firm that's trying to leverage diversity.
Patrick: [00:15:16] Yeah, it is, and in a big firm, you can't rely on folklore. And after the merger, I was head of a practice group that had 120 partners across 16 offices, and, I couldn't know what everyone was doing all the time. So, you do need to have some other ways to get some good data.
Ray: [00:15:49] There are also those partners who were shown to not be so good at collaborating, and what was your response in relation to those partners? Now, you mentioned that that list wasn't published from start to finish, top to bottom, but you in your management role would have understood who was down the bottom of that list. How did you as a management team respond to that group?
Patrick: [00:16:14] Yeah, we had the information. We kept it confidential. And as I said, we didn't tell people their score if it was less than 10, but you could still introduce it into performance conversations and you could discuss the fact that that partner had received less than 10 points. And what did they think about it and why? Why did they think that was the result? And what ways might they look to improve it in the future. So, you could certainly use it in the discussions. And there were clear examples of partners who were disappointed in the results they got from the survey and did make it more of an effort and change their behaviour.
Ray: [00:17:14] Having looked back over that system, reflected through the course of writing the report, one of the questions you sought to answer was how would you now improve on that system or build on it? What conclusions did you come to?
Patrick: [00:17:33] Yeah, so, I mean, we did ask partners to write something about why they allocated their points to someone else. And that was very good because it gave you some context. And as a member of the management team, you could certainly read through all of the report. But what we didn't do, which I think your system now does, is to categorise the different types of assistance and try and put some sort of order to understand why a point being awarded. And that's really easy to do in an automated system. So, you can kind of give people the option to which category the point allocation falls. So, I think that that would produce some useful data. The other thing I've sort of postured in that article, and I'm not exactly sure how you do it, but really it would be great if we could ask people at the beginning of the year, what help do you need? And then try and encourage partners to be right on target. And so rather than just saying at the end of the year, who helped you, you know, everyone will have something that they think would be of particular assistance to them at that time in their career. It would be great if we could get one step ahead of it and start to ask that question.
Ray: [00:21:04] My sense, Patrick, is that that this was more around just a constant nudging of a large group of people in a certain direction.
Patrick: [00:21:19] Yes, I think that's right. I also think it's one of the values of the system is around the messaging. Within the context of the whole rem system. I said in the article that most partner rem systems have a series of criteria. Some of them are financial, some of them are non-financial. There's a real risk the non-financials are kind of seen as soft and not really mattering and that everyone focuses on the numbers and says that revenue and profit are the only things that really count, you know. And there's a scepticism that, yes, we've got those other things around being nice to your staff and so on. But it's really about the revenue. So having a system to really measure the collaboration or the contribution to the success of others, it's a way of signalling to the firm that we are genuine about this and we are going to put some effort into getting to the bottom of it and measuring it and working out who's really good at it. And so it signals to the firm that those other criteria are real and you are being judged on them. And your performance there really does matter. And you just try billing the most and ignoring all those other things. That's not going to get you to the top rewards within a performance-based rem system.
Ray: [00:22:57] And I think that's why we found collaborating with you so appealing is because we were having all of these conversations or are having all of these conversations with firms that say, look, we've got this strategy, but the measures or metrics that we're using essentially relate to just one part of that strategy. They're not helping us address collaboration or innovation or diversity, equity and inclusion. And we are really keen and motivated to find some complementary measures to the financial measures that we use in order to have a properly rounded approach to assessment.
Patrick: [00:23:36] There's lots of ways that you subtly signal to your partners that these other criteria are important. When I conducted performance reviews with partners, just the order of things you discussed, you know, you didn't just turn to the financial reports as the first topic of the meeting. You might discuss collaboration first or you might discuss staff and if you had some real data there about the turnover - if a partner had a problem with keeping staff - you'd have the list there of the people had burned through in that year and how much we'd spent on recruitment and how much we spent on finding new members for their team. And if you spent half the meeting talking about that topic and really just dealt with financials in the last five minutes, you were subtly sending the message, you know, perhaps not so subtly sometimes, but, you know, unless you fix this problem with keeping staff, I'm not going to put you up. In fact, I'm going to bring you down.
Ray: [00:24:47] As a head of a global practice group, you were, I understand, directly involved in the performance conversations of all the partners that were in your group, is that correct?
Patrick: [00:25:05] Well, before the merger and I had about 60 partners, all in Australia, the answer was yes. After the merger, when I was the global head, it was impractical to be in every review and you had to delegate to the local practice leaders. But, you know, the balance sheet of the group said under me and the pyramid of how we did the rem decisions came up to me and then I said on the global executive, and we did the moderation across the whole firm.
Ray: [00:25:35] So as you reflect back on the hundreds of performance conversations you must have had over your time as a firm leader, what advice do you have for other partners who are about to go through those compensation rounds?
Patrick: [00:25:56] Well, I mean, I think what I used to try and tell myself was, although I might have 60 performance reviews to do, and that was a rather daunting task over a couple of months. Although it was one of 60 for me, it was one of one for the partner I was going into the room with, you know, so you really had to give it a time, prepare, make sure you'd read their assessment, you knew that you knew the issues, you'd looked at their performance and set aside a good amount of time. Hopefully be there in person if you could Involve others. We used to try and have two reviewers, so if it was someone you weren't particularly close with, maybe a partner in Perth or something, I'd have the Perth managing partner come in and do the review with me, you know. So you kind of just had to give it the time and attention and thought and make it as much as you could, a good experience for that partner. And they felt they'd been listened to and given their opportunity to, you know, to explain their position. I mean, also, hopefully it's not just two hours in the year. You want to have a relationship. And this just to be the end of the process, not the whole process.
Ray: [00:27:39] We use the expression ‘high performing firm’ a lot. Does that expression have a meaning for you, having worked in, you know what I guess many would regard as a high performing firm at a global level?
Patrick: [00:27:55] Yes, it does, but interestingly, as now a consultant to law firms, I see firms of all different sizes and for me, high performance is around a firm that knows what it wants to do. It has a strategy, it knows its market position, it knows its product. And it doesn't really matter what that product is. It might be global M&A or it might be the best conveyancing firm in western Sydney. To me high performance is about nailing that strategy and being on point and high quality, good service, good lawyers. And I don't think it really matters whether you at the very top of the global food chain or you're a smaller firm with different ambitions, you can still be high performance, either way. To me it's around having standards of quality that you insist on and not tolerating bad performance or things that divert you from your core strategy.
Ray: [00:29:28] Patrick, you were involved in remuneration committees for 15 years. What sort of lessons learned do reflect on from that time?
Patrick: [00:29:48] Well, first of all, I should say, I am a big supporter, that the people who should be doing the rem discussions are the people who have got the management responsibility. I know some firms separate those two, I've never worked in a firm that that had that model. I can't imagine how it works efficiently. I mean, I can't imagine how you would give me responsibility for the management of a division of the firm, balance sheet responsibility, responsibility for performance of partners, behavioural issues You've given me full responsibility, but then taken away one of the major tools, which is rem, you know. To me, they're just integrally linked. So that's my first observation that you if you're trying to manage someone and reward good behaviour, then encourage changes in behaviours, you have to be able to link that back to a rem outcome. Not saying rem is the only motivating factor. It's not, but it's an important one.
Patrick: [00:31:11] And then, I mean, just putting some work into the process, I guess All of the people who are going to be doing the review, sitting down, perhaps doing some training. We used to do that at Freehills. Get someone in and talk to us about having tough conversations and being consistent So putting some effort into the process, getting people on the same page, particularly in a big firm where you've got, you know, a number of different people doing reviews and you have to kind of be fair and bring it back together and have So the partner is performing at the same level, even though they might be different, offices and different divisions, receive a consistent outcome. So, all of the people who are in the process need to get their head together beforehand and then do the reviews and then come back together and be as fair as you can at setting those relativities.
Patrick: [00:32:32] The partnership has designed this system and entrusted a few people to administer it. And if you were one of those people, you've got to take the job seriously and do it fairly and, you know, test yourself what your biases are, and work through that process as best you can. It'll never be perfect. But I think at the end of each year, you know, I was satisfied that as a management team, we had absolutely done our best.
Ray: [00:34:06] So for the global firm of around 400, 500 partners, what was the size of the remuneration committee?
Patrick: [00:34:26] It was the practice group heads, it was our executive committee, and so there would be the CEO and it varied over time, but five or six.
Ray: [00:34:41] And did you spread out your meetings over the course of weeks and months, or did you have a concentrated time together?
Patrick: [00:34:49] We had a concentrated time at the end of the year where we would do all the reviews and then have the moderation and then have it all approved by the end of the financial year so that the units were allocated for the following year.
Ray: [00:35:01] And how did you ensure that consistency of communication? So is, you know, when you're in a global firm, in your practice group and you can't necessarily be at all of the meetings, how do you how do you make sure that there is a consistent message getting from the remuneration committee through the direct leader to the partner.
Patrick: [00:35:31] There's a whole messaging piece that the managing partner would do each year as to how the reviews would be conducted and what the focus was from year to year. And then, you know, as a global head of practice, I had regional heads who reported into me so I would sort of cascade down the messaging. It's not easy when you get to a firm that size. It is important that you get down to a level of management where people really do know the partners and have a feel for performance. And you sort of always in a really big global firm, there's a mixture of both practice group. but also local management. So we might have two or three finance partners in Paris. I didn't have hands on dealings with them all the time, but I would speak with the Paris managing partner to get some of the local flavour. So you just have to connect to the right people to gather all the data and then be as fair as you can be. It's a complex system when you're across a global network.
Ray: [00:38:36] Patrick, the report that you've prepared has received some fantastic feedback, a large number of downloads and a lot of interest on social media. If a firm leader reading the report or listening to this podcast wants to take the next step in exploring this idea, what can they do?
Patrick: [00:39:05] Well, they can obviously ring me, that's a good starting point. I would say the firms I deal with every firm is at a different point in the journey. Some firms are really only just moving into assessing partner's performance across a suite of performance criteria. They're only just at the very first step of introducing a performance-based rem system. Other firms may have a system but are looking at better ways to measure and implement it. And other firms may be further down the track. But I still think there's more you can do about the storytelling and the embedding in the culture and really making sure that the firm takes it seriously. So, firms are across a wide spectrum of still being fully lockstep and just putting their toe in the water and being afraid of the idea of running performance reviews, to being fully down the road, but, you know, tweaking it to do a better job at measuring performance. So, I see firms across that whole spectrum, always happy to help and have a chat with someone who in firm a leadership position as to the ideas that come from other firms and how they could do it better.
Ray: [00:40:36] Patrick, it's been a pleasure. Thank you for joining us.
Patrick: [00:40:40] Thanks very much, Ray.
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