AWESOME PERFORMANCE MANAGEMENT:
How to Implement Accountability at Your Firm

Most firms consider accountability an essential part of their leadership practices.  In the 2011 PCPS Top Issues survey, for firms with 11 to 20 professionals, partner accountability/unity landed in second place.  For firms with 21 or more professionals, this same issue ranked first in concerns to be addressed.  Yet in actual practice, real accountability can be an elusive target.  In this document we will explore actions you can implement to improve partner accountability in your firm.

Accountability—It Should Apply to Everyone

Accountability enables people who work together to trust the words, commitments, and actions of one another.  It allows team members to rely on one another to follow through on commitments and do what is necessary to ensure team success.  But, in our experience in the majority of situations, this is a word used by people to describe how others need to be treated.  For example, “it’s time we hold them accountable,” or “we need to put in a system that holds our people accountable for their work.”  In other words, it is an attitude of “What I am doing is fine;  it’s just that everyone else needs to be reined in, monitored, and punished when they don’t live up to my expectations.”

In his newest book, currently titled “The Overachiever's Guide to Getting Unstuck: Replan, Reprioritize, Reaffirm,” Bill Reeb talks about the inaccuracy of our perceptions.  Here is an excerpt from that book that will clarify what we mean about accountability and those perceptions dealing with it:

We give ourselves credit for everything we think, say and do.

We only give others credit for what we see them do.

This is a really important concept to embrace, so I am going to take you through a simple scenario.  Let’s say you had a project that had a deadline of last Friday.  And because you were not done by 5:30 pm (your normal quitting time on Friday), you decided to stay late (until 9:00 pm) and get it done before you left.  After leaving that evening, frustrated by this last minute requirement, you spent your drive time home and some time that evening pondering how this intense scrambling could have been avoided.  Over the weekend, you found yourself continuing this mental dialogue and were excited when you came up with a few ideas worth trying to minimize the chances of this situation repeating itself.  On a different track, earlier that same week, you noticed a co-worker who was clearly struggling to meet a different project deadline.  After noticing this, you extended an offer to stay and help if necessary.  Your co-worker thanked you for your generosity, but declined the need for assistance.  So, in this simplistic case study, you are likely to give yourself credit for the following:

•  3.5 hours of Friday evening work to get the project out on time,
• At least 1 hour of think time Friday night trying to come up with ideas as to how to avoid this situation in the future,
• A couple of hours of think time over the weekend to arrive at a couple of ideas worth trying to avoid this situation in the future,
• And bonus time for your willingness to stay and help out your co-worker, even though you did not actually stay.

 Let us be clear.  You deserve to give yourself credit for all of this effort and willingness.  And if you are like most of us, with each exceptional effort, we commonly make a quick deposit in our imaginary “I am Valuable” bank account.  The bottom line is … for the week in question, you probably felt like you put in a minimum of six extra hours with a willingness to do even more, with the value-add of some creative efficiency ideas to boot.  The problem comes when you compare your effort to that of, let’s say, your co-worker who was in a similar situation (whom you offered to help).  First, you probably assumed that he or she only stayed for an extra hour or two maximum.  Second, you might have diminished the effort made even further by thinking about how disorganized he or she was and had that been you with your superior skills, the late night effort would not have even been required.  Third, no one else was the kind of team player you were and offered to help you.  So, huge chasms are constantly being created when we compare ourselves to others because of our flawed and invalid perceptions.

 How can there ever really be equity in our business or personal life when we always give ourselves credit for everything we think, do and say and only give credit back for what we actually see others do?  And if this wasn’t bad enough, regarding the effort we see, we are likely to discount the effort of others with thoughts like 1) they didn’t put in the same level of caring or effort we did, or 2) they need to put in more time given their lesser abilities as it takes them longer to do the same work we do.  So, even with what we see, our egos get in the way of a reasonable self-report as we inflate our efforts and diminish the efforts of those around us.  What this adds up to is … if you actually think you are contributing equally, you are most likely taking advantage of whomever you are comparing yourself to because of this out-of-balance prism we view life through.

Setting Clear Expectations to Create Accountability

So with this flawed view of those around us, it becomes clear that accountability needs to be rooted in much more than a casual perception or it is destined to fail.  Therefore, the first step to accountability is to move this from an “I will watch you and tell you if I think you are doing a good job” approach to one that clearly defines what you expect of someone upfront.  Now this sounds fairly straight forward, and it is, but it is also loaded with plenty of traps that you can fall into.  One of the traps we want to avoid is ambiguity.  You can overcome this trap by taking time to describe the expectations you have of someone, like:

• What is the scope of work that you are expecting this person to do?
• What does the deliverable look like?
• How will we measure success along the way (and at what intervals)?
• What is the budget (time and/or dollars) for the work?
• When is it due?
• What resources are at his/her disposal to accomplish this project?

What we want to find is a situation with high accountability and low ambiguity.  Unfortunately, most people don’t spend the time to lay out this information, so they end up with just the reverse -- low accountability and high ambiguity.  The odds of success in this situation are best described by what we call the Dirty Harry Management Approach (based on Clint Eastwood’s famous movie character) of “Do You Feel Lucky Today?”  This is because when you have low accountability and high ambiguity, it will take a great deal of luck to obtain with any consistency the results you are looking for from anyone.

Commitment to Results

Another idea to consider in accountability is the commitment to ownership of the end results.  Accepting accountability is a commitment you make before the work is done, prior to knowledge of the end results.  Accountability is easy to embrace when a project goes well.  Even people who have nothing to do with a project will be glad to step in and be held accountable for good news – which unfortunately happens more often than anyone would care to admit.  But accountability really is about your willingness to take ownership of the future results, be they good or bad.  If the results are bad, then put together your plan to fix them and start fixing them.  Next, learn from your experience.  If the results are good, don’t just bask in the glory of your genius, look to see what worked and why so you can apply those pearls of wisdom to future projects.  In other words, make an effort to learn from your successes as well as your failures.

Delegation or Dumping?

Next, don’t dump -- manage!!  Just because you made clear what you are looking for, resulting in low ambiguity about expectations, and the person doing the work is taking ownership, you don’t get to walk away and then at some point in the future hold someone accountable for getting work done.  We need to set up monitoring systems, processes or specific checkpoints to force ourselves to get an understanding of what we are seeing and are not seeing to make sure the project stays on track.  Accountability requires management oversight.  We never get to walk away from our responsibility to monitor progress.

And monitoring does not mean to step in and micromanage.  It means exactly what the word implies – you need to stay informed at a high level.  That high level can easily be defined as “you know enough to know where the project is and that you wouldn’t be surprised to find out various macro actions needed to be taken to complete it.”  We recommend, depending on the kind of work or effort being performed, simple monitoring ideas such as 1) a scheduled quick meeting to provide an updated progress report, 2) a high level summary document journaling steps completed and steps remaining, 3) feedback mechanisms like surveys or 360 assessments, 4) Gantt charts or to-do lists that can be glanced at to verify progress, and more.

Revisiting the Notion of Accountability

When you consider the fact that for many, the default definition of accountability often is “for our people to take ownership of our expectations without any involvement from us,” it is easy to see why there are so many problems with achieving accountability:

• First, what do you mean when you say you want someone to “be accountable”?
• Second, what does “ownership” of work mean to you?
• Third, what are your specific expectations?
• And fourth, if you don’t need to be involved in the communication, setting expectations and oversight, just what role are you playing in this process? How can anyone ever be accountable when they are being judged based on performance requirements put together at the time of evaluation rather than at the time of project initiation?

Everyone wants accountability, but few people are willing to “Do the Work” to manage a system of this complexity.  We are confused by the function of Human Resources versus Human Development.  We think of evaluations as part of a compliance process rather than a key management tool to help improve those around us.  We think that the administrative and training time required to teach people is lost production.  And we think advancing our skills is a better use of our efforts than enhancing the skills of those who report to us.  Accountability is something we can all achieve in our organizations.  But it often has to start with changing the way we think about this subject, and usually, changing our culture so we will consistently spend a little time every day to make sure the organization we are building for tomorrow is better, faster and stronger than the one we have today.

Accountability for Partners

Let’s take a closer look at what accountability might look like.  Let’s start with the partner group and then work our way down to the staff.  For partners, accountability is best described as having a system in place that rewards partners for following processes and procedures, living up to their roles and responsibilities, and implementing the firm’s strategy.  And on the other side, it provides sanctions when partners don’t do the above.  Rewards usually take the form of public praise, financial stimulus (incentive pay), and promotions (from non-equity to equity partner, being appointed to coveted committee assignments, etc.).  Sanctions can include private reprimands, reductions in pay, greater reductions in pay, and can end in job demotion or termination.

The goal of accountability simply is to motivate everyone in an organization to work toward the goals and objectives established by the organization.  The hope is to be able to use positive reinforcement to reward those acting in accordance with and exceeding expectations.  However, experience dictates that it is equally important, even if only as a deterrent, to clearly identify sanctions for the lack of compliance or marginal performance.  These sanctions often take the form of income losses or reductions.

In our way of thinking, accountability has to be firmly entrenched in ideas and ideals such as:

• Each partner should know exactly what he or she is accountable to perform,

• Whenever practical, each partner’s accomplishments or progress should have some form of an objective component attached to help measure or monitor the results,

• Partners should be able to assess easily whether they are meeting or exceeding expectations,

• Expectations should remain constant and not shift to fit performance. There are circumstances where performance expectations can shift, but these drivers should be out of the control of the person being measured (major economic shift during the assessment period, major health issues, etc.), not just because management wants to avoid an uncomfortable discussion, an unhappy partner, or the stressful role of administering whatever sanction a partner earns.

• It is up to the individual partner, not the managing partner, to ensure that the proper levels of output are achieved.

• It is up to the managing partner to monitor performance, report to that partner (and at some point to the board) on perceived levels of accomplishment, offer resources to provide assistance, and enforce the agreement, but not to ensure performance. If the managing partner’s job is to ensure performance, then the partner is no longer accountable!  (It’s the managing partner’s fault that the partner did not perform as expected however).  In other words, the partner should be receiving exactly what he or she has chosen to earn based on the upfront agreement.

• While personal growth goals can be customized to stretch each individual’s capabilities, performance measures should be set at a level such that, in a normal year with a reasonable effort, they all will be met and exceeded. Therefore, by definition, performance goals should be established in a way that allows very good or exceptional effort to be classified and rewarded as over-achievement.

• Consistently achieving less than the organization’s minimum level of performance means that the partner won’t get to keep his or her job at some point. This is a good sanity check for performance expectations.  Just ask yourself this question when putting together a partner’s annual goals: “If the partner I am assessing falls short of these expectations regularly, would I be comfortable asking the board of partners (directors) to demote or fire this partner?”  If the answer is “yes,” then we believe you are approaching this correctly.  If the answer requires a longer response such as, “No, while the partner should do better, consistently falling short would never bring about that level of action,” then maybe you are setting your expectations too high.  That is why you can’t take action; while you would like to see the partner achieve the goals, falling short really doesn’t mean anything either.  Remember, under our concept of accountability, we expect everyone to meet their performance goals because they are hardworking, firm-focused, qualified partners.  And if they don’t have all of those qualities, then why are they partners?  Therefore, it is easy to see why we also expect the performance of many of them to significantly exceed the goals we are setting, which is how they earn even greater rewards.

Accountability Requires Action and Commitment

Accountability is not passive; it usually requires a change in the philosophy of most corporate and CPA firm cultures.  It demands that partners (and employees), not management, be and feel more empowered regarding their performance.  It is up to the partners to live up to the expectations of their jobs, impact how much they earn, determine how much work product they produce, and so on.  It is up to management to become the resource to help those who want to help themselves.  If a partner wants to perform at just the minimum standard or expectation, that's fine.  Don’t kid yourself … the “minimum expectation” level of accomplishment should be “satisfactory” and therefore represent a good level of performance.  This satisfactory level of performance should earn a base wage and maybe even some amount of incentive pay.  And from this point up, the more people accomplish, the more they earn.

Accountability and Performance Variability

An important point to keep in mind is that we, as human beings, have good months and bad ones, good years and bad ones.  What is going on in our personal lives has a lot to do with how we perform in our professional ones.  Therefore, if someone is going through a difficult time, such as a divorce, death in the family, major conflicts with extended family, etc., we can expect those events to spill over into our work life.  Good performance systems allow people to have good years and bad years, with the result simply being a change in pay.  And this is reasonable because in the good years, if the organization is doing better, it can share that gain with those who had the greatest hand in creating that success.  And even when the organization has achieved about the same or worse regarding its overall performance, when one person performs exceptionally, that effort is usually making up for someone else’s shortfall.   In essence, good performance systems allow and support the natural ebbs and flows of our productivity.

Objective Performance Criteria

Objective, or quantitative, expectations are easy to process.  If you expected a partner to bring in $150,000 of new business (with the assumption that this number is based on a satisfactory performance level, not an outstanding one), then the question is simply, “How much business did the partner bring in and how does that compare to the goal.”  If the partner brought in $250,000, then clearly, over-performance occurred.  If a partner brought in $100,000 in new business, then the partner clearly under-performed.  We will get into how these two different actions might be treated under incentive pay systems later.  For now, the point is that, with objective criteria, it is fairly easy to assess the level of accomplishment.  A few common examples of objective criteria, both financial and non-financial, in addition to new business are:

• Additional services to existing clients
• Substantial increase in fees for the same project
• Profitability of client work
• Profitability of a department
• Billable/collectible hours
• Leverage of work being done (ratio of partner to staff work)
• Book of business managed
• Client satisfaction goals
• Total billings
• Write-offs
• Realization
• Collections
• Lunches or other meetings for staying up to date with clients
• Lunches or other meetings for staying up to date with referral sources
• Networking events attended
• Speaking engagements to promote the firm

While this list just scratches the surface of possible metrics, it shows that assessing whether any number of these is accomplished is fairly straight forward.

Subjective Performance Criteria

On the other hand, subjective, or qualitative, criteria can make the assessment of achievement much more difficult.  Training and development goals, delegation goals, and proper client transition goals are all examples of a more subjective expectation.  In cases such as these, we need to come up with some form of objective support tool to help us assess progress.  For example, with delegation, we might ask that person to keep a diary of projects or work tasks that they have performed in the past that the partner delegated to someone else.  We might then, on a monthly basis, sit with that partner and discuss the delegation experience, whether the proper monitoring was performed over the newly delegated task (in other words, was it actually delegated or “dumped”), etc.  With training, we might survey the employees being trained at the beginning of the year and then a couple of times throughout the year to see how they feel about their training experience.  We might ask for a development plan for each of the people the partner is responsible to improve and then discuss at specific intervals their assessment as to the success of the training implementation.

The point here is that, even with subjective criteria, we need to devise systems that allow us to catch people doing what they committed to do.  Performance management is about putting systems in place that support personal evolution and success.  It is about a structure that allows the people you are evaluating to demonstrate their progress over time, with ample opportunities along the way for you to provide insight, guidance and resources when necessary.  Unfortunately, most people implement performance systems that are only visited twice a year – when they are created, and when it is time for the final assessment.  These kinds of systems, while requiring less effort to implement, are often not even worth the time invested in them because they are not designed to help people meet and over-achieve their expectations, but are simply in place to allow someone the ability to subjectively -- with limited knowledge –judge others.

Establishing the Accountability Process

Setting up an “accountability and goal process” always sounds much easier than it actually is to implement.  So for those who already think this process would be painful, just know that you still are probably underestimating the amount of agony in store.  This leads us to the standard question, “If this is so awful, why would anyone do it?”  The answer is both simple and abstract.  The simple part of the answer is that, anytime you can get all of your key people working as a team toward the same objectives, your chances of getting where you want to go and achieving the success you desire are infinitely better.  The abstract view of this is usually alluded to by this sort of comment: “If all of my key people are conscientious, hard-working, and we share a common vision, shouldn’t we be able to get to the same place without all of this extra administrative hassle?”  Our answer to this question is “Generally speaking, no.”  To be clear, in our experience, you won’t get where you want to go consistently without this extra administrative hassle, especially as you grow larger.  Recognize that this change in required administration oversight is a function of success because sooner or later you will outgrow the honor system of performance self-assessment and self-alignment.

The most difficult piece of this process to buy into, (and for many it takes years of trying to improve performance every other way first), is that this is not about getting your people to work harder.  Nor is this an effort to find a way to clone all of the partners in the image of one or two of the founding owners.  This effort simply is about ensuring that all partners, and often senior managers, operate above a minimum performance expectation, that each has a self-development plan, and that the sum of all of these senior people’s efforts are tied together to culminate in the achievement of the firm’s strategy.  This is the quintessential process required to take a firm to a higher level of performance.

Benefits of the Implementing the Accountability Process

So, you ask, “If performance management produces such a positive change and success, why would anyone balk at committing the effort to do it?”  Most senior people in a firm are successful because they are self-motivated, self-driven and self-directed.  Please pay particular attention to the “self” part of this.  Having a set of goals and someone to report to who is assessing your realization of those goals is perceived by most as a loss of freedom, privilege, and flexibility.  And for many, this increased level of scrutiny is not worth the trade-off for greater accomplishment.  These self-driven people commonly respond with the same message we just covered above, “If we are all working hard, are conscientious, and our efforts are directed toward the same strategy, we will end up in the same place.”  No matter how many times someone states this, and no matter how emphatically this idea is expressed, please know that it is rarely true.  It is not even true for sole-proprietors.  Here is an organization run by one person, who does whatever he or she wants, and you would expect to see alignment with strategy in this scenario since the strategy is about sole owner.  And certainly you would anticipate the highest level of performance.  But again, it is rarely true.  That is why it is so beneficial for a sole proprietor to have an outside coach, or create an advisory group.  Why?  The sharing of expectations, and someone to report to, even when you are the sole decision maker, consistently creates a higher level of performance.

Life poses new challenges every day.  Our “to-do” lists get longer and longer.  And we often find ourselves getting to a point where we are spending all of our time just re-spinning plates on a stick to ensure they don’t fall rather than resolving anything or making progress.  Having well defined goals helps you stay focused and gives you a decision process to decide which plates should be allowed to fall off the stick and break.  This is a big benefit of the accountability and goal setting process – to help you decide what “Not” to do or what “To Walk Away From.”

Another significant benefit of the process is “clarity of the specific actions desired.”  For example, let’s say we have three owners and all three of them agree that is it essential to grow the business.  At a quick glance, it sounds as though we have synergy in strategy and everyone’s efforts should be in alignment.  Once again, this is not all that likely (based on experience by the way)!  We recall a case (actually there are many we can describe with similar disconnects) where the first owner wanted to grow to maximize his retirement pay, which was based on the revenues of the business.  To him, all business was good business because revenue was the driver of his benefit calculation.  The second owner wanted to grow the firm to make room for his family members.  In this case, he was interested in adding people to create opportunity for his kids (son and daughter) to work for the organization and then find a place in management.  His vision was for his kids to eventually take over the business.  The third owner just wanted to make more money.  He liked the high-life and growth to him was all about “take home pay.”

Each owner, based on the “business growth” objective would work hard, be conscientious and keep the firm strategy in mind, yet each would end up making significantly different decisions as to what was the best use of their time, effort and resources.  This doesn’t even consider the fact that one of the owners was dead set against family members working together in his business.  Now this example shows pretty clearly how the owners’ disconnect regarding strategy was destined to create confusion, expectation gaps, and eventually conflict.  But trust us when we tell you that even when a firm’s strategy is clearly articulated in detail, allowing everyone the luxury of interpreting for themselves the best use of their time, effort and resources has no chance of consistently producing the same high results as compared to establishing annual goals and frequently reviewing them one-on-one with partners.

Who’s in Charge?

Once the decision has been made to implement systemic changes to hold partners accountable to specific performance expectations rather just relying on everyone to put in a self-proclaimed “good day’s work,” then next battle ground is determining who will be holding whom accountable.  As we have said, everyone likes the idea that “I” will hold “me” accountable.  But few like the idea of “anyone else” holding “them” accountable.  So, the discussion always shifts to “let’s have a group of people, like a compensation committee, hold us accountable.”  The reason is simple … if I get crossways with one person, I will pay a penalty for that action.  As I add more people to the evaluation process, it is easier to find a friend or an ally who will be willing to overlook my infractions and fight for my benefit.  Just for the record, anytime we hear that performance assessment will be a group function, if we had a loud aggravating buzzer, we would be sure to set it off.

A group or compensation committees make a lot of sense for some firms with respect to some specific functions.  It is not a question of whether you should have a compensation committee; it is more the question of its charge.  First, remember that a compensation committee, if formed, is a committee of the Board of Directors (or Board of Partners, etc.).  It is not a committee that has unique dictatorial authority.  In our opinion, compensation committees should be charged with:

• Development of the firm’s compensation system philosophy or framework to be approved by the Board,
• If there are base salaries or guaranteed portions of salaries involved, the committee should recommend adjustments to those salaries to the Board,
• Establishment of objective metrics and firm-wide incentives that will support the accomplishment of the firm’s strategic plan,
• The review and evaluation of the overall performance of each partner and recommending the compensation for performance pay to the Board based on each partner’s achievement based on the approved compensation framework and metrics.

Notice that the compensation committee does the heavy lifting on determining base pay and general incentive pay based on the compensation framework and metrics, but the final recommendation still should be approved or ratified by the board.

Now, what is not clear in the description above is the managing partner’s role in this process.  The general compensation framework guides all partners.  However, because each partner has strengths and weaknesses, and each partner has different responsibilities and job duties, there needs to be a customizable set of goals assigned to each partner based on:

• Leveraging strengths,
• Improving weaknesses,
• Meeting minimum standards of performance across all competencies, and
• Accomplishing those tasks that are uniquely the responsibility of a particular partner.

For this, management by committee, yes – compensation committee – is a bad idea.  Why?  The most significant and success-driving job of the managing partner is to manage the partners.  If he or she directs a partner to accomplish something specific or change a behavior or attitude, without a material compensation stick to reward achievement or punish failure, there is virtually no way for the managing partner to consistently hold the directed partner accountable.  The most common argument posed here is that the managing partner can work through the compensation committee to affect the same outcome.  There are situations where this might work … not because the system is designed to work, but because the specific people on the compensation committee and the managing partner have such respect for each other that they can overcome the dysfunction of the system in place.

It is essential for the long term success of firms to put governance systems in place designed to succeed, regardless of who occupies the various roles, rather than to build systems around specific people that quickly fail when there is a shift in talent filling those roles. To put this in very clear terms:

The managing partner needs a compensation stick that he or she alone determines for each partner regarding the specific, individualized goals set out for each partner.

Please recognize the difference between governance rights and privileges, and common sense.  For example, a managing partner should:

• Set clear goals for each partner,
• Outline the goals at the beginning of the year,
• Meet with each partner to discuss those goals, provide a current assessment of accomplishment and offer guidance as to where to focus additional attention to achieve the goals, and
• Meet regularly enough to provide the partner with insight as to their performance with time to make course corrections so they can achieve those goals, which would be at a minimum quarterly, often every other month, and sometimes even monthly.

The managing partner’s job is to help the partner achieve his/her goals, not just sit in judgment of the partner.  And a managing partner shouldn’t do what we sometimes find, which is:

• Use their power for personal gain instead of what is best for the firm,
• Use compensation to manipulate partners to vote a certain way, drive a wedge between certain partners or fragment the firm into factions

When a managing partner is not following common sense values and objectives such as outlined above, it does not mean that you should dilute the power of the managing partner’s position.  Do not turn over the powers a managing partner requires to be effective to a compensation committee just because you have an incompetent managing partner.  Rather, install a managing partner who will do the job as outlined.

It is one thing for a compensation committee to evaluate performance regarding objective criteria -- those metrics that are approved as part of the overall compensation plan each year.  It is entirely another to have a compensation committee assess a partner’s individual performance against customized goals which are often qualitative in nature.  It is not the job of the compensation committee to meet with each partner quarterly and assess progress.  That function belongs solely to the managing partner.  It is not the job of the compensation committee to regularly coach partners in behavior and developmental transitions; that function also belongs to the managing partner.

Performance Pay for the Managing Partner’s Allocation

Therefore, it should clearly NOT be the job of the compensation committee to control all performance funding because some amount needs to be reserved for the managing partner to make clear that his/her assessment of individual performance throughout the year has enough meaning for partners to pay attention to those communications.  And it follows that a reasonable amount (which means an amount that would be perceived as a motivational amount) of performance pay be reserved for discretionary allocation solely by the managing partner based on partner goal accomplishment.  We believe that this is not only reasonable but critical to the success of your accountability and performance management system.

However, most firms are against such reserves.  There are two predominant reasons.  The first and foremost is that someone in the past, usually a previous managing partner, had too much control over owner compensation.  And that power was perceived to be abused.  For this reason, partner groups fight the idea of going back to a system that includes any discretionary components.

To be clear here, we are not advocating that the managing partner have control over all of the compensation.  We believe that would be an example of excess power for that position.  But we do believe, since the job of the managing partner is to manage the partners, that he/she should have some kind of compensation stick to hold each partner accountable to their individualized goals.

The second reason most firms don’t like this type of system is that partners simply don’t want ANYONE telling them what to do.  You might say it is the “So who died and crowned you King?” perspective.  Most partners believe that since they have proven themselves over 10 to 20 years of performance before being named a partner, they have earned the right to do things their way and people need to trust that the choices they are making are for the best for the firm.

The problem is that this perspective is riddled with flaws.  For example, while we would agree that partners generally prove themselves over long periods of time through their performance, during all of that time, someone or some group was managing them.  So why, just because an individual is named a partner, should they move from a managed environment to one with total autonomy?  That doesn’t make sense.  If we have 20 years of good performance being managed, why would we stop doing something that has been working so well?  Another flaw is the assumption that partners will make the best use of the resources of the firm.  Our compensation systems prove that idea wrong all of the time.  For example, assume that a partner compensation system focuses on the two of the most common variables for CPA firms; 1) book of business and 2) personal charge hours.  Now consider that a partner has an opportunity to bring in new clients, although the work is at a very marginal rate.  This work, from the firm’s perspective, will tie up scarce resources and provide minimal profitability, if any.  From the perspective of the partner bringing in the work, he or she will have increased the size of their book of business, which is one of the two main performance metrics.  Clearly, in this example, the partner would be motivated to accept work that is not in the best interest of the firm.

Another common scenario pertains to charge hours.  If a partner is compensated for charge hours, he or she is being motivated to do a certain amount of chargeable work personally.  Now consider that a partner has work queued up that he or she is about to do.  And in this case, let’s also assume that one of the managers with plenty of excess capacity, who also has the skills to do that work, is sitting idle.  When partners, in cases such as these, have not overachieved their charge hour goals, they will be motivated to do the work themselves in order to meet their performance requirements.  So, instead of doing the right thing, in our view, of always passing down the work to the lowest possible levels to create leverage and free up partner time, they will choose to misuse firm resources.  The compensation system in this scenario is motivating the partners to make the wrong decision – to ignore idle resources and do the work themselves rather than passing the work down and freeing up time to do those tasks or functions that only partners can do.

The problem with using examples is that life isn’t just black or white.  So it actually might be a good idea, in very specific circumstances, for a partner to bring in a deeply discounted project.  And for many firms, their survival rests on the partner group generating a certain amount of money.  So, with every example, the odds are extremely high that we can give you a positive and negative consequence for any action taken.  Therefore, the real message we are trying to convey is that often our own systems and processes provide counterproductive motivation and unintended consequences to the firm’s overarching strategies and values.  This, in turn, means that we can’t just rely on each partner to make the right decisions in a vacuum with respect to what is best for the firm.  As past success and personal development continuously demonstrate, organizations operate more effectively when people are managed.  And since partners are people, rather than gods or superheroes, it makes sense that we put something in place to manage them as well.

The Managing Partner Goal-Setting Process

With this general background in mind, let’s dive a little deeper into how a managing partner goal setting process might work.

Strategy:  First, the firm needs to identify a vision.  That vision, based on the market conditions and the specific situation within the firm, might be strategic (long-term focus—such as three years or so) or tactical (12- to 18-month focus).  Regardless, the partner group needs to decide on where the firm needs to be going in order to drill down to the next level.  Notice that we clearly said the partner group needs to determine strategy—not the managing partner.  While the managing partner can come to the strategic planning meeting with research, ideas, and even a draft of a plan, it is up to the partner group to determine the firm’s direction.  A managing partner who is setting direction is another example of someone wielding too much power in that position.  Now, if the managing partner is also the majority shareholder or owner in the firm, then as managing partner, although he or she alone shouldn’t be permitted to determine the firm’s strategy, as controlling shareholder, he or she can do it.  So, situations like these muck up best practice discussions because in these cases, one person is filling two roles (what should be accomplished through the attainment of a majority vote of the partners versus reasonable managing partner powers and duties).  And the result is often excessive powers extended to the managing partner role which we have seen continue long after the managing partner has lost voting control.

Objectives: The next step is to break down the firm’s strategies into specific objectives for departments, committees or task forces, partners, etc.  This is the managing partner’s job: to operationalize the firm’s strategy.  It is important, based on this last broad statement, to digress a bit here.

The managing partner does not dictate where to go, but he or she needs to identify the logical steps to get there as well as how to utilize the various resources of the firm to make it happen.  The controls the partner group has over the managing partner are the firm’s budget, processes, policies and strategy.  The partner group decides where to go, the powers and constraints for the managing partner to operate within, and the goals the managing partner will be held accountable to achieve.  Then, the managing partner determines how to get there, operating within the boundaries established by the partner group.  As you can see, there should be a nice separation of duties there with some checks and balances.  If the managing partner is deemed to be exercising greater autonomy than expected, then the partner group should create policy or process changes to generate additional boundaries (rather than stepping in and making decisions, the partner group should put a framework in place for the managing partner to operate within).  To be clear, anytime the partner group steps in to manage the day-to-day operations, they are, in effect, taking over the managing partner function, which no longer allows them to hold the managing partner accountable.  The hierarchy is simple.  The managing partner is accountable to the entire partner group (or board).  Each individual partner is accountable to the managing partner.

Now, let’s continue our dive into the managing partner’s act of operationalizing the strategy within the policies, process and budget set forth by the partner group.  To keep this simple, because it can get very complex extremely fast, let’s say that the firm has three strategies the partner group has mandated:

1. For every partner to spend quality time with their top clients on a routine basis.
2. To close the competency gaps between partners and managers by better developing the firm’s managers.
3. To generate greater leverage for each partner so that they can manage more work and increase the bottom line.

These are examples of very common goals set by firms today.  So, where does the managing partner go from here?

Guidance Phase: Continuing to keep our example simple, the managing partner would create goals for each partner in each of these three areas.  Because all partners are different, not only in their aptitudes and attitudes, but also due to their specific job duties, current book of clients they manage, current skills of the people they work with, etc., the actual goals for each partner will differ.  To be clear, while the goals of the firm are the same for everyone, how they are operationalized can differ dramatically from partner to partner.

As we coach our managing partners in this area, we suggest that their first step should be to create a document that paints the strategies for change with a broad brush perspective and then suggest some customized ideas that they believe can help each partner play their part in achieving the firm’s strategic plan.  We call this first round “guidance.”  We want the managing partner to point each partner in the best direction for them to focus.  For example, regarding the goal of “improving partner leverage,” for a partner who has poor delegation skills, the managing partner might provide guidance such as, “I would like for you, over the next seven months, to push down the responsibility of managing $200,000 of your current workload to our managers John and Becky.  Please put together a plan for how this can be accomplished, clients you plan on transitioning, timeframes for the transition, and how you suggest that I monitor this to make sure it happens.”

This instruction might be followed with, “As this change is being made, estimate how much of your time will be freed up, as well as how you would like to use that excess time to either fulfill this goal or help you better accomplish one of your other two goals.”  The point we are trying to make here is that, during the guidance phase, we are guiding the partner as to where the managing partner would like to see change, but still giving the partner the ability to develop a plan that is comfortable to him/her.  As well, this allows the partner to build expectations around efforts already being made but possibly being overlooked.

Consider this same goal now for a different partner who is already highly leveraged but with a number of marginal clients.  The managing partner’s guidance might be totally different, such as “Identify $120,000 of the least profitable and least desirable work you manage and put together a plan as to what you can do to change the overall profitability of this work.  This could include raising fees, turning over client management of some clients to others, firing clients, developing missing skills needed to do the work economically, etc.”  This instruction might be followed with, “Please put together your plan to approach this, covering when I can expect the process to be complete and how you suggest I monitor this to make sure it is done.”  So, clearly, we have the same firm strategy, but when applied to each individual, the direction is customized to the particular strengths or weaknesses of each partner.

Suggestion Phase: Following the “guidance” phase is the partner’s suggested approach or the “suggestion” phase.  During this phase, the partner responds to the broad direction of the managing partner and puts together their recommended detailed approach for accomplishing that directive, while simultaneously suggesting metrics to be held accountable to, as well as identifying monitoring steps to ensure that the managing partner is kept abreast of the partner’s actual performance.

Discussion Phase: The next round is the “discussion” phase.  During this stage, the partner will sit with the managing partner and defend why his or her suggestions from the “suggestion” phase are reasonable, comprehensive, fair and in line with firm strategy.  Often during this phase, because of the open dialogue, the managing partner gains new insight into the problems or issues as well as a better understanding of the effort being requested.

Directive Phase: The final phase is the “directive” phase.  This is when the managing partner, at his or her sole discretion, locks in a partner’s goals, their relative priority to each other (among the several goals identified for each partner), and the allocation of performance incentives towards each of those goals.

Remember, the first cut at the partner goals is based on the firm’s strategic plan.  When we set goals for the managing partner to implement the strategic plan and hold him or her accountable for achieving those identified objectives, know that those same expectations will then be broken down and cascaded to the partners, and ultimately, to staff.

An Example of the Process

Following is an example of this process, providing more detail to show how it might look in actual practice.  Let’s assume that one of the goals of a partner is to increase the Most Trusted Business Advisor Activity for his or her top clients.  In the initial goal sheet, for this one goal from the managing partner, that might look like this:

Guidance:
______________________________________________________________________________________________________________________
Most Trusted Business Advisor                                                 Value of Incentive: 30%
______________________________________________________________________________________________________________________
Partner Expectations

1. Continuously updating his/her understanding of key client’s current and future priorities and the personal and business needs of its management
2. Develops relationships with A and high B key clients and referral sources of the firm that go beyond the services rendered
3. Maintains regular contact with key clients
4. Finds opportunity to assist the client outside of the partner’s specific competency areas

Actions Identified to Obtain or Improve Attributes or Achieve Expectations

1. Schedule Quarterly meeting with these “A” clients and semi-annual meetings with high B clients. Prepare a list or schedule to review during your meetings with MP
2. During those meetings update your understanding of these clients and looks for ways to develop relationships with clients that go beyond the service we render.
3. Look for cross-selling opportunities, introduction to other firm personnel and opportunities to refer other professionals from your network. During your meetings with MP review the context of some of those meetings.
4. Some of the information which would indicate that your understanding of the A & B clients is expanding beyond merely attest and tax would be having an understanding/knowledge of the following:
   • Revenue goals of clients for 20XX
   • Strategic initiatives for each client for the next years
   • Tactical priorities for each client for the next 18 months
   • Opportunities clients are hoping to be able to leverage
   • Product or service offering changes, etc.

Note to partner from managing partner:  The items identified above are for your consideration.  Please review the expectation, and then look through the actions identified.  The actions listed above are ideas.  Please consider how you think you should best approach the objective of improving as your clients’ Most Trusted Business Advisor and list an approach you are comfortable with to achieve this objective.

_____________________________________________________________________________________________________________________

 The first round was imitated by the managing partner with the information delivered above.  In some cases the managing partner might simply suggest that the partner create an action plan and metrics based on 360° assessments for this competency area, such as are provided by the Succession Institute Performance Assessment™.  Also note here that we are only focusing on one goal to keep this simple.  In a normal situation, several goals would be identified during this process and they would total up to 100% of the managing partner incentive offering.  In this case, the managing partner has suggested that this one goal should represent 30% of this partner’s incentive.

Next, it is time for the partner to respond, which triggers the “Suggestion” round.

Suggestion:
______________________________________________________________________________________________________________________
Most Trusted Business Advisor                                                 Value of Incentive: 35%
______________________________________________________________________________________________________________________
Partner Attributes or Expectations

1. Continuously updating his/her understanding of key client’s current and future priorities and the personal and business needs of its management
2. Develops relationships with A and high B key clients and referral sources of the firm that go beyond the services rendered
3. Maintains regular contact with key clients
4. Finds opportunity to assist the client outside of the partner’s specific competency areas

Actions Identified to Obtain or Improve Attributes or Achieve Expectations

1. I will deliver a list of my “A” and “high B” clients and referral sources to you (the managing partner). That list will identify the people in those companies that I plan on contacting.
2. I will create a calendar identifying the month I plan on visiting each of my “A” clients. I intend to see each of them during tax season, and I will schedule 3 other visits during the year on the calendar
3. I will create a calendar identifying the month I plan on visiting each of my “high B” clients. I intend to see each of them during tax season, and I will schedule one other visit during the year on the calendar
4. I will sit with you and do a high-level review the visits I made as well as review my plan for the near-term visits
5. After I have met with one of my identified “A” or “high B” clients, I will update our salesforce.com customer relationship management system (CRM system) with the information I gathered during my meeting with my clients
6. I will also keep a running ledger of new work scheduled by each of the clients I visit.

Note to managing partner:  I am suggesting increasing this goal from 30% to 35% because of the time this process will take, and because of the benefit I think it will provide to the firm.

______________________________________________________________________________________________________________________

After the managing partner receives the updated goals from the partner, the managing partner should review them, verify whether they are reasonable and in line with the work effort expected from the other partners (this does not mean that each goal should have a comparable work effort from partner to partner, but rather that the overall goals for each partner would require a similar work effort to complete them).

The “Discussion” phase could happen through an iteration of notes on the goal sheets, but normally the best approach is for the partner and the managing partner to sit down, go over them and have a discussion about them.

There is an important overarching theme that occurs in all of the many discussions we have facilitated between partners and the managing partner.  That theme is for the managing partner to ask this question, regarding every action item outlined for a goal:

“What can we do to make sure I catch you doing this?”

In other words, the intent of the goal process is for the partner to know clearly what is expected, and then to do it, and even exceed performance expectations.  And the best way to accomplish this is to build in specific monitoring activities, date expectations, meetings, performance metrics, or any other techniques to ensure that the partner can regularly and efficiently communicate his or her progress and accomplishment.  So, let’s take what came out of the “Suggestion” and look at some notes the managing partner would likely write on this and use for his/her discussion of those ideas with the partner).

Again, for the sake of simplicity, let’s just focus on the “Action” section for now:

Discussion:
______________________________________________________________________________________________________________________
Most Trusted Business Advisor                                                 Value of Incentive: 35%
______________________________________________________________________________________________________________________

Actions Identified to Obtain or Improve Attributes or Achieve Expectations

1. I will deliver a list of my “A” and “high B” clients and referral sources to you (the managing partner). That list will identify the people in those companies that I plan on contacting.

Note from the MP: By when will you complete this?

2. I will create a calendar identifying the month I plan on visiting each of my “A” clients. I intend to see each of them during tax season, and I will schedule 3 other visits during the year on the calendar

Note from the MP:  By when will you complete this?  Additionally, I would like to know the nature and circumstances of the meeting, such as whether it was a lunch meeting, did you visit at the client’s workplace, etc.

3. I will create a calendar identifying the month I plan on visiting each of my “high B” clients. I intend to see each of them during tax season, and I will schedule one other visit during the year on the calendar

Note from the MP:  By when will you complete this? Additionally, I would like to know the nature and circumstances of the meeting, such as whether it was a lunch meeting, did you visit at the client’s workplace, etc.

4. I will sit with you and do a high level review the visits I made as well as review my plan for the near-term visits

Note from the MP:  How often will we sit down and meet?  Who is responsible for setting these meetings?  What does the phase “near-term visits” mean?

5. After I have met with one of my identified “A” or “high B” clients, I will update our salesforce.com customer relationship management system (CRM system) with the information I gathered during my meeting with my clients

Note from the MP:  When will you update our CRM system (the day after the meetings or when)?  What level of information will you commit to updating in the system?

6. I will also keep a running ledger of new work scheduled by each of the clients I visit.

Note from the MP:  I think this is a great idea.  When will we review this ledger (will you just forward it to me monthly or will we sit down and discuss it as some interval)?  In addition, new work scheduled is only one of the benefits these visits are likely to accrue to our firm.  And I want to make sure you get full credit for the effort you are putting in.  How about keeping track of substantial price increases or change orders for the annuity work we perform, new work scheduled, or new clients referred to you by these clients?

Note to managing partner.  I am suggesting increasing this goal from 30% to 35% because of the time this process will take, and because of the benefit I think it will provide to the firm.

Note from the MP:  Based on what you have laid out above, I don’t have a problem agreeing to this effort being raised to 35%

______________________________________________________________________________________________________________________

From this discussion, the partner modifies his/her partner goal action section as follows and resubmits it to the managing partner:

Discussion Response:
______________________________________________________________________________________________________________________
Most Trusted Business Advisor                                                 Value of Incentive: 35%
______________________________________________________________________________________________________________________

Actions Identified to Obtain or Improve Attributes or Achieve Expectations

1. Before January 31st, I will deliver a list of my “A” and “high B” clients and referral sources to you (the managing partner). That list will identify the people in those companies that I plan on contacting.

2. Before January 31^st, I will create a calendar identifying the month I plan on visiting each of my “A” clients. I intend to see each of them during tax season, and I will schedule 3 other visits during the year on the calendar (which I will identify as a breakfast meeting, lunch meeting, dinner meeting, entertainment outing, or on-site company visit)

3. Before January 31^st, I will create a calendar identifying the month I plan on visiting each of my “high B” clients. I intend to see each of them during tax season, and I will schedule one other visit during the year on the calendar (which I will identify as a breakfast meeting, lunch meeting, dinner meeting, entertainment outing, or on-site company visit)

4. Quarterly, at a meeting you schedule, I will sit with you and do a high-level review the visits I made during that quarter as well as review my plan for the upcoming quarter.

5. My objective is that by the end of each week during a week when I have meeting with one of my identified “A” or “high B” clients (but I want to be held accountable for a two week compliance period), I will update our salesforce.com customer relationship management system (CRM system) with the information I gathered during my meeting with my clients. I will include in that update that client’s expected revenues for the coming year, what we are currently doing for them, scheduled work we have in the backlog, services I think they need over the next 18 months, and the client’s current priorities during that same 18 month time frame.  4 times a year, at your discretion, you should check the CRM system after an appointment you know I have made to verify whether I am updating the system on a timely basis.

6. I will also keep a running ledger of new business referred by each of these clients, new work scheduled for each of these clients, and price increases of more than 4% or $1,000 (whichever is more) for existing recurring work for each of these clients, and change orders for existing work for each of these clients, and report that to you during our quarterly meetings you schedule per item 4 above.

______________________________________________________________________________________________________________________

In this case, because the partner addressed each of the issues very well, the managing partner simply would send back the goal sheet as approved.  The “Directive” phase of this simply involves communicating back to the partner what is expected.  Had the partner left something out, or not specified a way for the managing partner to catch the partner achieving each action of his or her goals, that information would have been included in the final version sent to the partner.

The important point to make here is that the managing partner should be setting goals that are based on the normal expectations of a partner.  The goals, as mentioned earlier in this document, shouldn’t be established assuming exceptional performance.  When exceptional performance is achieved, some reward calculated at something greater than100% for that goal incentive should be given.

Conclusion of the Goal Process--Monitoring

Evaluation of performance and goal achievement is something done that should be performed multiple times during the year.  Unfortunately, many CPAs tend to think of management as a waste of time, and evaluations as purely a Human Resources (HR) requirement created by the government to protect employees to the disadvantage of the organization.  Well, that is one way to look at it.  But we think it’s the wrong way.  We think that the higher you rise in your firm’s organizational chart, the more time you need to dedicate to the development of others and providing them with thoughtful and constructive feedback.  So, this is not something you should be doing for five minutes every few months, but a normal, recurring part of every work week.  That is, you should be thinking about and monitoring those who report to you, as well as monitoring your own progress and checking in with your boss routinely.

While it is normal protocol to monitor those who report to you, why would we suggest that you monitor yourself as well?  Because, it is your job, as management, to provide appropriate feedback and coaching to your people; and it is your job as a direct report to keep your boss informed about progress, resource requirements and problems as you tackle your own work assignments.

If we approach this phase from an HR perspective, many partners will default to giving one appraisal per year (or one formal feedback session), and that simply is not enough.  It could be enough to have one formal appraisal or feedback session as long as there are several informal feedback sessions (clearly set up for that purpose) in the interim.  For higher level personnel, the importance of making sure they are focusing on the priorities of the organization and working toward the organization’s goals is critical.  The absurd thing is that in most companies, the lower the hierarchical level of the employee, the more often the feedback is given.  But at the higher levels in the organization, the more we find people talking about expectations, but never actually holding anyone accountable to their commitments or their actions.

The theory behind this is simple.  When you are a lower level of employee, you don’t know anything.  So, we need to regularly tell you how you are falling short of expectations so you will try harder.  With higher level people, since they have already proved themselves, we just need to get out of their way.  In our opinion, this is misguided thinking.  For example, partners should be the best at knowing what is expected of them, making commitments to the firm, and being expected to perform based on those expectations and commitments.  Partners should be the role models to every other employee.  And we all know that is not the case.  Partners regularly violate various operational policies by claiming some “client service” exceptions.  They teach the following simple message to all of the employees watching:

“Policies and procedures are for everyone else to follow.  I will follow them as long as it suits me, but as soon as I don’t like a policy, I will simply ignore it and do things my way.  This is appropriate because when you get to be a partner with my level of accomplishment, my judgment as to what is appropriate supersedes what we have agreed to follow as a firm.  And while we all know that at times I violate policy because it is just inconvenient for me to follow it, and while my violation of policy can make it extra difficult for staff to support me, because of my position, I have earned that right to place the firm and its employees secondary to my personal preferences."

Wow … when you read that, it sounds pretty ugly doesn’t it?  Well, if you are like most firms, when you watch the behavior of a number of your partners, doesn’t this statement actually match up pretty well?  It is why accountability continues year after year to be a top issue that firms need to address.

If we can get our top performers and key people acting as a group supporting the firm, then getting everyone else, at each layer down in the organizational chart to respond accordingly gets much easier.  However, with most firms, they focus on making the lowest levels accountable first when the fact is that the higher level people in the firm keep mucking up the system.  Every leadership and management book will have some statement that the top people in any organization need to “walk the walk” for the talk they talk.  That is all accountability is--walking the talk—setting the example that you want others to follow.

Therefore, it should not be surprising that we believe that the managing partner should be conducting frequent, informal, feedback sessions on how he/she feels the partner is performing.  Whether this is every month, every other month, five or six scheduled times a year dropping out the busiest of deadline months, or whatever schedule works for your firm.  Once a quarter should be a minimum, once again, adjusting the timing for busy seasons.  But to be clear, this isn’t about an HR function, but rather about aligning the most powerful and talented assets you have in your business.

Tips for Providing Performance Feedback

Once you decide on the schedule of these meetings, publish the schedule early so people can make appointments around them.  And consider the following tips, based on what we’ve seen in practice:

• Focus on the goals everyone agreed to that were established at the beginning of the year

• Make sure, as the managing partner, you are prepared for the meeting. If the managing partner just wants to use this forum to remind everyone that they work for him/her, then fire this managing partner.

• The managing partner needs to have reviewed evidence, and have talked with people if appropriate, reviewed logs or other monitoring devices, and made an effort to observe the areas of focus in the goals. This takes time.  This is not something the managing partner should be doing the morning of the feedback session.  If the managing partner does not want to make the continual effort to understand how his or her partners are performing as part of this feedback process, then find a managing partner who does.

• We feel it is best if the managing partner starts the process off by asking the partner being evaluated how he/she thinks they have performed against the listed goals.

• We believe it is important for the managing partner to also understand what other forces or factors have been unusually occupying the partner’s time outside of those goals.

• Based on the advance preparation done by the managing partner, the assessment of the partner being evaluated and any additional, unusual factors that have surfaced though this conversation, the managing partner should provide feedback on his/her assessment of goal attainment at that time.

Where a lot of people get off track, in our view, is at this point.  There are several key issues to keep in mind once the managing partner starts to share his or her feedback.  Some important points that immediately come to mind are:

• Tell the truth. If you don’t know something, say it.  If something is simply hearsay, introduce it as such and ask for commentary.  And realize that as managing partner, your opinion is not fact … just your opinion.  So, state your assumptions within your feedback as such.

• You don’t have to find something to criticize. It is common management protocol to think that all employees need to improve.  So, management should always give someone something to work on to be better.  Don’t confuse performance management commentary with the conversation you might have with someone about where you see them in a few years.  The latter is about personal aspiration and while the conversation is important, it has nothing to do with performance.  Performance is only about what we expect from you now and how we believe you are performing against those expectations now!

• If someone has not performed up to expectation, simply, clearly and concisely state your opinion regarding their performance, and if appropriate, what you are basing that conclusion on. Once you are done sharing that fact, stop talking.  The most common mistake is that you keep on talking trying to justify yourself and the more you talk, either the weaker you start making the conclusion, or the more you interject new hearsay and assumptions which put in question the validity of the initial position.

• Don’t make a big deal about someone falling short on a specific goal. The reason you have feedback sessions is to help them see where they are falling short so they have time to correct it.  This is not a final assessment; it is an interim feedback session.  Use it as such.

• A very common misuse of power in the goal setting process is that managing partners believe this is their time to try to fix every little idiosyncrasy or irritating habit of each partner. This process is not about perfection, because if it was, no one could live up to being the managing partner.  It is about focusing the attention of the partner group on the strategic issues of the firm, and how those strategic issues get layered into the various partner goals.  So, don’t bring up or don’t harp on insignificant issues.  It doesn’t matter that a partner’s little habits bother you, unless they truly are impacting that person’s ability to perform their job.  These issues are low priority and should stay out of the feedback sessions.  If you can’t help yourself, and try to micromanage every little thing, then as we have suggested many times in this article, it is time for a new managing partner to be appointed.

• Rate each goal independently. Consider what you know, consider what you have heard from the partner, consider the evidence in front of you, consider what you have observed, consider the time of year (meaning, if we are only half way through the year performing half of expectation would be 100%, not 50%), and make a judgment.  In the end, this process is full of judgment no matter how many objective monitoring tools we include.

• Rate using a scale from 0% to infinity, not 0 to 100%. In reality, you will probably never give someone less than 25% (as it is hard to perform at a zero level, but on rare occasions, people can surprise you), and rarely greater than 300-400%.  The upside numbers are possible just because you might have a goal for a partner to bring in $75,000 of new work and instead the partner brings in $300,000.  Obviously, just a straight calculation on this would be 400%, if that was the method you decided to use.

• Then, multiply your rating of each goal, times its value (the amount of the bonus allocated to that goal). Add all of the goal calculations together to estimate what the bonus might be if it had to be determined today.

By going through all of this, you can help your partners know what is expected, but more important, how they are doing.  It gives you a chance to clarify the importance of certain high profile behavior, either good or bad.  It gives you the opportunity to point out for someone the areas where they are doing very well, and give them some guidance early enough to adjust what they’re doing for the areas where they are falling short.

Make no mistake about it.  This is a lot of work.  And the reward will very likely quickly show up in the bottom line because you are getting the most powerful and talented people to focus on what is best for the firm.  The managing partner’s job in this process is to help the partners, provide them resources when needed, remind them of what is expected, and provide them feedback as to how you are viewing their performance.

As the managing partner, you are not your partners’ babysitter.  If a partner is falling short on something, it is his or her responsibility to take care of it, assuming they have done that work before and have a successful track record doing it.  If they need additional resources to reach their objectives, it needs to be clear that each partner has a responsibility to come to you for help and assistance.  That doesn’t take away the managing partner’s requirement to monitor and provide a higher level of oversight for any activities for which a partner has little experience handling.  In some cases, you may need to provide more direction to help a partner get over a hump.  In the end, though, firms need good managing partners; they don’t need managing parents.