Thought leader

Are law firms measuring what matters?

IF A law firm is to build competitive advantage, then every aspect of the firm must be aligned with achieving this objective and function to the highest level. This will require optimum performance by everyone.
One of the perennial questions that arises in relation to introducing a performance-based culture is: 'Yes - but how can we measure performance?'
To try to answer this question will require a firm to first look at what its clients require and to then set performance standards and agree performance evaluation criteria aligned with ensuring client service and gaining competitive advantage.
Thus, key determinants to success may include, for example, winning new clients, building new practice areas, developing new services, and managing client relationships to increase revenue and manage working capital.
Even though many firms will say they do this, when partners are asked: 'What is really valued in your firm?', the response more often than not is, 'The only thing that counts is individual billing', which may be easy to measure but can lead to 'silo cultures' where each partner is an island. However, things may be changing, with more firms beginning instead to measure team billings.
On the other hand, measuring performance can be more problematic when considering other areas of contribution such as, for example, delegating work appropriately, building teams, developing client relationships, sharing knowledge and providing leadership, to mention just a few.
How can the contribution these make to a firm be evaluated in ways that are seen to be objective and transparent, and also build and retain trust and confidence in those carrying out the evaluation? Much may depend upon the evaluation techniques developed to measure performance and their application in practice. Key techniques may include, in addition to financial metrics, self evaluation, performance-development reviews (appraisals), 360-degree appraisals, feedback from other partners and colleagues, and staff exit interviews.

Perhaps most importantly, do firms reward what matters?
If a firm is measuring performance, which it considers matters, how then should it apply such metrics to managing partner performance, including rewarding that performance? For example, whether metrics relate to personal billings, chargeable hours, working capital management, delegation of work, building of teams, developing client relationships, bringing in business, providing leadership or any other area of contribution that a firm has declared it values, how will those metrics be used to manage and enhance performance: financial rewards? Career/lockstep progression? Career/lockstep demotion? Remedial action to enhance performance?

Finally, do firms really practice what they preach?
Firms may on the face of it, have well developed systems in place to measure and manage performance, but in practice do they apply and implement such metrics in an effective way to manage and enhance partner performance? And do firms’ performance metrics accurately reflect actual performance, whether of individual partners or of the firm as a whole? If not, then partners’ trust and confidence in the system is likely to erode.

Peter Scott runs Peter Scott Consulting. He can be contacted at pscott@peterscottconsult.co.uk