Why are partner performance evaluations so difficult for accounting firms? We know that in small and midsized firms, many times partners don’t like to be evaluated — that would make them accountable!
Proper accountability requires clarified expectations. You can’t have one without the other. So, what is the best way to evaluate partners?
He said: When conducting the partner performance evaluation, partners should not be surprised by the feedback. I often suggest that firms follow these guidelines when it comes to delivering the annual (or semiannual) evaluation:
- Agree together at the beginning of the evaluation period those competencies the partner should improve upon throughout the year. You may even wish to create an individual development plan that specifies those competencies and the activities in which the partner will engage to develop them.
- Approximately two weeks prior to the evaluation session, provide the evaluation form to the partner, and ask the partner to complete it based on his or her paradigms about his or her level of competency or performance.
- Identify a time and place that will be private and conducive to no interruptions.
- Engage in two-way conversation using empathic listening skills.
- Agree on needed actions for improvement, and document them in writing with a deadline for completion.
She said: When evaluating current and potential partners, I like to recommend the following criteria, which are generally more stringent than the criteria of past years:
- Can the firm support all the current partners or another partner? If the answer is “No,” then you must explore the reasons. Is it because you currently have underperforming partners (that is, partners who are unable to pay their own way and help the firm grow)?
- What are your measures for admission to partnership and remaining a partner? If you require certain performance levels for new partners, shouldn’t that criteria apply to existing partners as well?
- Does the potential partner and existing partner have adequate business development skills? The lifeblood of an organization includes acquiring profitable clients and expanding the scale and scope of its work with existing clients. All partners will not have the same talents in this area, but it is necessary for all partners to have core business development skills and talents.
- What will be the potential partner’s and existing partners’ economic contribution? All partners (with the exception of the managing partner, in large firms) need to focus more time on bringing in dollars to the firm today. Without cash flow, there may be no tomorrow.
The metrics of cash collected, client profitability, and origination are more telling than the standard metrics of hours worked, billable hours or charged hours. Write-downs and write-offs should be closely monitored.
He said: That is a great list. I really like it. There are a few more items I would add.
- What accounts for the potential partner’s and existing partners’ non-billable time? Partner non-billable time can tell you a lot about the partner’s interest in the success of the firm. Some partners may, in fact, need a wake-up call. As partners of the business, each must regularly perform activities (for example, marketing, networking or doing pro-bono work in the community) that enhance the future value of the practice. Golf or lunch with partners and each other, without a clear client-related or performance objective, is not normally a valuable, non-billable time activity.
- What are the potential partner’s and the existing partners’ intangible contributions? Partners who have developed a valuable “brand” within or outside the firm can bring benefit(s) to the firm. These partners may attract business to the firm because of their professional reputation in the community or because of their leadership roles in civic, charitable or religious organizations.
- Does the partner practice good firm citizenship? Partners need to be team players. If not, consider the effect on the firm.
No matter how capable or financially productive a partner has been in the past or present, you must face the reality and consider data that suggests they are negatively affecting retention, partner development, fairness and so on.
They said: Regular communication on expectations and performance will make all of the difference. Discussions on performance should not only occur on a quarterly or semiannual basis. This should be an ongoing discussion.
We recommend that partners ascertain satisfaction with one another, team members and clients on a regular basis by asking two questions:
- “What is working?” and;
- “What can I do to improve?”
Sometimes situations occur when partners retire in place or just simply can no longer cut it in an organization. This happens due to complacency, entitlement and sometimes lack of effort.
Partners who cannot achieve minimum performance standards over a two-year period should be given two choices:
1. Move from an equity to a non-equity status and no longer share in the profitability of the practice.
2. Leave the firm.
If a firm finds itself in the position of asking a partner to leave, remaining partners should consider helping the partner find a place more suitable for his or her talents, or allowing the partner to purchase a portion of his or her client base.
This decision to ask someone to leave is not about punishing the individual partner. It is about ensuring the future of the enterprise.
If the firm has a culture dedicated to excellence and high-performing partners, everyone wins.