Performance Mgmt in the Professions Study

PSF Sector Performance
Management Study 2016
Evolving performance management in the professions.
15 February 2016

© 2016 MPF, MHPR & SkillsScorecard: All rights reserved. 1/25
Contents
1. Executive Summary ......................................................................................... 2
2. About This Study.............................................................................................. 5
Why now? ................................................................................................. 5
2.2. Demographics and Methodology ......................................................... 6
3. Study Results .................................................................................................... 7
3.1. Ratings and forced rankings................................................................... 7
3.2. Frequency of formal and informal performance
feedback ................................................................................................... 8
3.3. Project-based feedback........................................................................10
3.4. Select Aspects of Performance Management:
Importance v Effectiveness and Skill ...................................................10
3.5. Leading priorities for improvement ....................................................12
3.6. Inputs into the Performance Management process..........................13
3.7. Link between Performance Management and
remuneration..........................................................................................15
3.8. Use of technology..................................................................................16
3.9. The role of Human Resources ..............................................................17
4. Evolving Performance Management in PSFs .............................................19
5. About the Authors .........................................................................................24
Appendix A: Respondents’ Profile .....................................................................25

PSF Sector Performance Management
Study 2016
Evolving performance management in the
professions.
1. Executive Summary
Deloitte’s article on performance management in the March 2015 of the
Harvard Business Review has sparked a much-needed debate about the
effectiveness of performance management processes in the professional
services sector. To validate our own consulting experience and technology
practices in this area, we carried out a survey in the autumn of 2015 and
uncovered some of the strong points and the shortcomings of current practices
as well as the future intentions with respect to performance management of
professionals in the professions.
The findings suggest that performance reviews today are viewed as an
administrative burden, detached from driving towards the firm’s strategic or
operational goals and as poorly linking personal behaviour and firm
performance to remuneration outcomes. Some of our headline findings
include:
Forced rankings and ratings are not an issue for PSFs. A loud polemic
around the abolishment of rankings and ratings appears less relevant: while
performance ratings are used frequently and are deemed useful if properly
applied, most PSFs we surveyed never adopted forced rankings in the first
instance.
There is a clear desire – and need – for more regular formal and informal
feedback. Most respondents agree that the old-school approach of providing
feedback (typically on historical achievements) and doing so once per year is
no longer fit for purpose. It lacks responsiveness, is inflexible and often
meaningless in causing changes in performance.
Project-based feedback is lacking, except in one PSF sector. ‘After action’
reviews are common only in the accounting sector. Yet they provide the
perfect opportunity to offer praise, promptly correct behaviours, identify and
eliminate any inefficiencies, and while doing so create a solid data set for
performance assessment. PSFs, and in particular law firms, are yet to make
them commonplace.
Professional Services Firms do not view themselves as managing in an
effective way the most important aspects of performance. Respondents
consider as crucial some singular aspects of performance management; these
include receiving honest feedback and having a shared understanding of
personal performance between the reviewer and reviewee – and these are seen

to be handled reasonably effectively. However other aspects are viewed as less
important than we might like, including achieving clarity about learning and
development needs and crucially understanding career choices for reviewees.
One particular element stands out: while fair remuneration outcomes are seen
to be quite important, the performance management process is considered
ineffective at delivering these.
Process simplification, skills development and the implementation of
online reviews are leading priorities for improvement. Respondents agree
that process simplification and improved training for partners and managers
are key to an overall improvement in performance management. Both aims can
be significantly aided by more frequent performance feedback discussions. A
performance management process that occurs more frequently than once per
year allows reviewers to hone their skills through “doing the job” more
regularly – at the same time more frequent conversations reduce the
bureaucratic weight of a huge formal process at year end.
Personal financials remain dominant inputs in partner reviews. The inputs
into partner performance reviews still tend to be unbalanced and overly reliant
on individual financial metrics. This individualistic approach may work well in a
cost-sharing arrangement, but is hardly appropriate for a modern PSF that is
looking to improve cross-selling, sharpen client focus, and drive innovation.
The link between the outputs of a firm’s performance management
process and remuneration outcomes is not as strong as we expected it to
be. We would never suggest that the two should be formulaically linked, yet,
we would hope to see a strong connection where the outcomes of
performance management are an input into decision-making on remuneration,
with subjective judgement applied.
Performance analytics and performance management technology are in
their infancy in professional services firms. Both could be an enabler of a
streamlined, less administratively burdensome, more efficient performance
management process. Yet, currently both remain underused in PSFs.
HR professionals are yet to defend the right to a seat at the partner
Performance Management table. HR professionals can bring invaluable
expertise to designing and implementing the review process for partners –
unfortunately, many owners of the process still do not recognise it.
How to transform burdensome performance management into a more efficient
and effective leadership tool?
There is no single “best practice” approach to performance management.
When evolving your firm’s performance management processes, it is important
to not jettison the good with the bad. Thus we recommend evolving current
performance management practice along the following lines:
– Adjust leadership approach. Make performance management important,
invest in skills development and engage senior HR professionals in partner
performance management.

– Evolve ways of working. Link business planning, performance
management and remuneration processes, increase frequency of feedback
provision, balance inputs into the process by placing more weight on non-
financial measures – align these with what performance means at your firm.
– Increase the use of technology. Leverage required time by replacing
manual processes with technology, streamline and simplify supporting
technology, and build HR’s analytics capabilities.
We look forward to discussing the results of our study with you.

2. About This Study
Why now?
The debate about what “good” performance management looks like has raged
in the corporate sector for several years. Yet it was Deloitte’s self-proclaimed
performance rethink, announced in the March 2015 Harvard Business Review,
which sparked the debate in professional service firms (PSFs) around the world.
Many managing partners and HR directors have been inundated with questions
about whether their firm’s performance management methods are still fit for
purpose, should be modified or should be simply abandoned. This study
seeks to shed light on the status quo across professional services firms and
then seeks to help evolve what good performance management in PSFs should
and could look like.
The case for change – for better performance management – could not be
better timed; Increased competition and the growing influence of technology in
professional services means firms must be agile as they respond to the ever
changing dynamics of the market. Pressure from clients to reduce costs and fix
fees means that firms must find better ways to manage operating costs, and
especially the single largest expense item for firms: employment costs.
Performance-related pay – for both partners and staff – must be offset by
productivity improvements and must always recognise emerging competency
needs in areas such as innovation, entrepreneurship and creativity.
Performance management, if applied well, has the potential to be a key tool of
PSF leaders to help lead through and manage these seismic changes. This is
because performance management forms the link pin between leadership,
strategy, results and the personal behaviours – at partner, staff and
management level – to make these results happen.
However, today’s practices fall short of constituting that effective leadership
tool. In many firms, performance management means an annual review and an
objective-setting conversation – or a long, burdensome administrative box-
ticking exercise. The big, once a year exercise is not sufficiently responsive to
the changing PSF market, it is not state-of-the-art and it does not add value for
partners, associates or staff alike. Equally, an administrative / compliance-based
approach with processes that are poorly-understood and poorly applied as well
as systems that (as our study finds) are divorced from reward determination also
don’t do their part in moving the business forward. We urge PSFs to re-think
their approach to performance management and to therefore get true value
out of the effort they put into it.
From our consulting and technology practices, we know that performance
management can serve as an effective leadership and management tool, can
help ensure that the right people play to their strengths and are recognised as
such and can also be an effective link pin between the firm’s objectives,
behaviours, results and reward. We trust that some of the insights gained from

this study will help professional services firms evolve their approach to
2.2. Demographics and Methodology
Purpose. With the need for change becoming more and more obvious, we
sought to research the status quo in the professional services sector and to
contribute to rethinking performance management. We considered both the
current reality of performance management and PSFs’ future intentions, and
also aim to calm some of the hype present in the debate.
Demographics. In total, 227 people from 19 countries responded to our
survey, with the majority based in the UK (61%) and Australia (22%).
Respondents work for organisations of all sizes from a headcount of less than
250 employees to over 100,000. Nearly two thirds work in the legal sector, a
sixth in accounting and the rest are evenly split among the other professional
services sectors. The study was conducted online. Please refer to Appendix A
for more information on the sample profile.
Structure. The study results are structured according to nine key topics from
the research:
1. Ratings and forced rankings
2. Frequency of formal and informal feedback
3. Project-based feedback
4. Effectiveness of Performance Management
5. Leading priorities for improvement
6. Inputs into the Performance Management process
7. Link between Performance Management and remuneration
8. Use of technology
9. The role of Human Resources
Where appropriate, this report distinguishes between answers from partners,
employees (including fee-earning staff) and members of the management
team. We also highlight geographic and sector differences as well as where
reviewers and reviewees are of different points of view.
The final section of this paper considers the future of performance
management and offers a framework for firms rethinking their approach. While
some elements of this framework may be considered best practice, we strongly
favour the proposition that each firm needs to evolve its approach to
performance management in a way that will reflect its own strategy and culture.

3. Study Results
3.1. Ratings and forced rankings
Ratings are here to stay, yet forced rankings are much less frequent in the
PSFs we surveyed.
Much of the current public debate about performance management, especially
emanating from the US, centres on the future of ratings (numeric scoring of
employees) and forced rankings (the process by which employees are plotted
on a bell curve from best performing to worst, based on an overall rating). Our
research reveals two highly relevant findings in this context.
The first is that the use of forced rankings is quite rare in our sample of the
professional services sector. Only around 5% of firms adopt the practice (3.5%
of firms for partners, 8% for employees and 5% for senior management). In the
legal sector, forced rankings are barely used, and even in accounting firms with
over 1,000 employees only 10% of firms use forced rankings for the assessment
of partners and other management team members. With respect to employee
assessment, organisations with over 1,000 employees appear to use forced
rankings more often – ca. 17% of them do so, with up to 22% of those with a
headcount of between 1,000 and 2,500.
The second finding is that performance ratings (numeric or alpha scores) are
regularly used by firms, and there is no clamour for their removal. Over 55% of
respondents say their firms use ratings for employees, while 44% use them for
management and 38% for partners. (The lower rate for partners may simply
reflect the number of firms still operating a form of lock-step model in the firms
we surveyed.) The use of ratings increases noticeably with the size of the firm.
Thus, over 80% of organisations with a headcount of above 1,000 use ratings
for the assessment of employees, while 50% and ca. 70% of them rate their
partners and senior management respectively.
The scarce use of forced rankings appears to indicate that a significant part of
the current debate is simply less relevant to most PSFs. While companies such
as Accenture and GE trumpet change, they are dismantling aspects of a
performance management process that the PSFs (we have sampled) never
adopted in the first place. With respect to ratings, despite the popular call to
“kill performance scores”, only 7% of firms consider axing ratings a priority.
Moreover, just as many firms 18% are considering introducing ratings. Please
see
Figure 3 in section 3.5 for more detail.
Our take is that forced rankings are a blunt instrument, inappropriate for most
PSFs – or indeed in any business where talent is scarce. This is simply because a
forced rankings process focuses on individual deeds and results and thus
reinforces behaviours that are highly competitive from within; at the same time,
forced rankings discourage the type of collaboration that is focused on
increasing the competitiveness of the firm as a whole. From our consulting

experience, we know that a performance category labelled “collaboration”
does not mitigate individualistic behaviour.
As the same time, ratings and rating scales do serve a worthwhile purpose as
they enable a degree of quantification – but only if they are well-designed. This
means they need to operate across a variety of factors that go beyond personal
financial results, be used in a judicious manner and not seek to blindly
“objectivise” or replace human judgment about an individual’s performance
when they support promotion, remuneration or other management decisions.
3.2. Frequency of formal and informal performance feedback
There is a clear desire – and need – for more regular formal and informal
performance feedback discussions.
We first reviewed the degree to which formal and informal feedback on
performance or progress is communicated to partners, employees and
management team members alike. We define formal feedback as planned,
structured and documented conversations; we deem informal feedback as
unstructured, ad hoc conversations without documentation. The research
demonstrates that there is a clear desire for more regular formal and informal
feedback across all roles.
Currently, over 50% of firms only provide formal feedback to partners once a
year or less (5% of respondents say there are no partner reviews at their firm).
For managers and employees, feedback is provided either annually 48% or
semi-annually 41%.
In the legal sector, both employees and management team members see less
frequent reviews, typically annual. Firms of 500 – 1,000 employees in size, the
category mostly represented by law firms in our sample, report no quarterly
formal feedback at any level and around 82% of them provide feedback to
partners once a year or less often. Outside of the legal sector, feedback to
partners is more frequent; up to 20% of respondents indicate that partner
formal reviews are done on a quarterly basis.

Figure 1: Formal feedback - Current and Desired Frequency
When asked about the
desired frequency,
around 70% of
respondents suggested
that formal feedback for
all roles1
should be
given on a quarterly or
six monthly basis, with
the majority giving
preference to quarterly
feedback. However,
partners, CEOs and MPs
continue to prefer
annual feedback;
perhaps this reflects the
onerous workload
associated with partner
reviews that tie-in to
annual remuneration
decisions. Figure 1
makes graphically
visible the gap between
the current low frequency of formal feedback provision and the desired higher
frequency.
The desire for more frequent formal and informal feedback highlights some of
the challenges facing PSFs. Gone are the times when professional services firms
could plan for years ahead; market conditions today require ever increasing
agility and flexibility. Goals set at the beginning of the year may, and likely will,
become obsolete before the year is out.
The ability to respond quickly to any changes in the competitive environment is
essential, and a process that allows more frequent performance management
discussions can serve as an effective leadership tool to retain agility. A fast,
fluid and, importantly, forward-looking performance management process that
encourages regular conversations about the business is one key supporting
element allowing firms to achieve such a rapid response to changing
circumstances.
1
Partner, employee, and management team members

3.3. Project-based feedback
Project-based feedback remains the domain of the accounting sector.
Professional services firms are yet to fully embrace ‘after action’ reviews, or
project-based feedback that is provided at the end of every engagement. Only
in the accounting sector is project-based feedback routine. Over 50% of
respondents report that after action reviews take place regularly, and 20%
report that providing project-based feedback is “part of how they work” -
compared to only 3% of law firm respondents. On average, around 70% of
participants across all other sectors, geographies and firm sizes indicate that
after-action reviews only happen occasionally or rarely.
The poor utilisation of after action reviews is something that PSFs should
address. Project-based feedback provides one of the most reliable data series
for performance management purposes, and it is likely to encourage more
contemporaneous and insightful feedback. Furthermore, ‘after action’ reviews
are essential for professional services firms that are serious about identifying
process efficiencies and creating more productive and profitable firms. In the
“more for less” age where clients expect greater value, more certainty and less
expense, project-based feedback should be an indispensable part of any
performance management process.
For those who are rethinking performance management, there is an
interdependency between the regularity of after-action reviews and the
perceived effectiveness of the performance management process.
Respondents that reported doing after-action reviews ‘always’ or at least
‘regularly’ perceive the overall periodic review process to be effective. On the
contrary, participants that reported having after-action reviews ‘rarely’ or ‘never’
tend to assess the overall periodic review process as at best neither effective
nor ineffective.
3.4. Select Aspects of Performance Management: Importance v
Effectiveness and Skill
Professional Services Firms do not view themselves as managing the most
important aspects of performance in an effective way.
We tested for which aspects of performance management respondents
deemed most important, and then compared these most important aspects to
perceived effectiveness and skilfulness. As we expected and as shown in
Figure 2, there remains a substantial gap between importance, effectiveness
and skill.

Figure 2: Importance, Effectiveness and Reviewer Skills
We highlight the following three issues:
Honest feedback and a shared understanding of individual performance
are of the highest importance. Respondents deem receiving honest
feedback and having a shared understanding of personal performance
between the reviewer and reviewee as the most important aspects of
performance management. This holds true across all demographic groups; it
applies particularly to the accounting sector where 93% and 85% of
respondents respectively rank the two as the most important aspects of
performance management. There is room for improvement: one of the top
three priorities for change is developing the skills of participants in the
performance management process.
While performance management’s impact on fair remuneration outcomes
is deemed important, performance management processes as currently
applied don’t tie to remuneration effectively– and reviewers lack skills in
providing clarity around remuneration. While 59% of participants see fair
remuneration decisions as an essential precondition of performance
management, the majority of respondents report the performance
management process to be ineffective in materially contributing to fair
remuneration outcomes. Respondents also believe that reviewers are not skilful
at providing clarity around these outcomes.
Having clarity about learning and development needs and understanding
career choices for reviewees is viewed as a less important part of
performance management. As a result, the majority of respondents agree
that reviewers tend to lack skills in identifying learning and development needs
and discussing options and choices for career development, including choices
and options. The relatively low score of importance for career development

could be attributed to the fact that this topic often sits outside the performance
management process in PSFs. Alternatively, the relatively linear career structure
within most PSFs may contribute to making this aspect of performance
management less important.
In our view, an effective performance management process needs to enable all
of the above factors. We are surprised, for example, that only 60% of
respondents deem the performance management process as being vital in
delivering sound remuneration outcomes and clarity around career choices. It
could well be that the opportunity of an effective performance management
process remains less well understood among our respondent firms.
3.5. Leading priorities for improvement
Process simplification, skills development and the implementation of
online reviews are leading priorities for improvement.
Our respondents broadly agree that simplifying the performance management
process, developing partner and manager skills and implementing an online
appraisal system are the top three priorities for improving the periodic review
process in the next 1-2 years.
Figure 3 illustrates:
Figure 3: Priorities for the Future
We consider these three priorities in turn:
Process simplification. Throughout our study, respondents showed a strong
desire to simplify performance management processes. Over 70% of
participants indicate that simplification is one of key priorities, with over 50% of
respondents ranking simplification as the key priority.
Simplification is also supported by the primary purpose of performance
management: to be a leadership tool ensuring the alignment of individual

behaviour and contribution with the firm’s overall goals. More frequent
conversations, along the lines we discuss above in section 3, could reduce the
administrative burden associated with performance management – a central
challenge for the Managing Partner and HR team when designing the process.
Partner and manager skills development. Improving training in performance
management skills for partners and managers is a leading priority for ca. 80%
of respondents’ firms, across most demographic groups. In fact, on average,
over 40% of respondents ranked reviewer skills as the top priority; the
percentage rises to 48% in smaller firms with headcount under 500 employees
and 41% in law firms.
Without doubt, one of the challenges when performance management “is
done” only once a year is that relevant skills (gaining consensus around
objectives, giving and receiving feedback, performance decision-making etc.)
cannot be regularly practised. Making performance management a more
regular, ongoing process – with regular formal and informal interactions – will
allow participants to develop and hone their skills. We posit that with skills will
come confidence, and many of the ‘human’ barriers to regular performance
management would slowly disappear.
Implementation of an online appraisal system. Just over 50% of
respondents suggest that implementation or an update of their online review
systems is a key improvement priority for the next couple of years. We address
technology in section 4.8.
3.6. Inputs into the Performance Management process
Personal financial results remain the dominant inputs in partner reviews;
behaviour and job-based capabilities matter more for those who aren’t
partners.
Figure 4 illustrates the relative importance respondents place on individual
inputs into the performance management process.

Figure 4: Inputs for Periodic Reviews
For partners, our study shows that inputs for partner reviews remain heavily
financially-based, with a particular focus on individual financial performance.
Fewer than 50% of respondents report that their firms use at least four different
inputs for reviews, and only 20% report using six or more inputs. The focus on
personal financials is stronger in Australia than it is in the UK, and law and
accounting place more importance on personal financials than does any other
sector within professional services. Job-based capabilities is one of the least
used inputs for partner reviews, with only ca. 20% participants indicating this to
be a key input.
For non-partner employees individual financial performance is also deemed an
important input, yet it is seen of much less relevance for management team
members where team-based financial performance is of slightly higher
importance2
. For both employees and management, previously set objectives,
personal behaviour and job-based capabilities are the top three inputs in
periodic reviews.
Owners of the process and HR professionals in particular stress the importance
of financial performance metrics3
ahead of other inputs. For example, 86% and
70% of respondents who are process owners and HR professionals see
individual financials as the key input for partner and employee reviews,
respectively; this compares to 54% and 45% for the entire respondent base.
From our consulting experience, we know that PSFs continue to struggle with
inputs to their performance management process. In our view, good personal
2
Still, team-based financial performance is not seen as important for management teams as it is
for partners: it is used as an input by 27% and 43% of firms for the two groups respectively.
3
“Financial performance” likely means different things (billings, hours, realisation, profitability,
etc.) in different firms, which may colour the importance that respondents place on it.

financial performance is primarily a result of a number of factors. Some of
these factors are behavioural and thus are in a partner’s control. Yet to deliver
“high numbers” a partner requires a number of collective aspects to work
effectively, including the behaviour and results of his/her partner peers and the
quality of his/her firm’s strategic platform and operating model. In short, good
financials are a result of the collective (firm, partnership, individual partner)
having done the right things over an extended period of time. Perhaps
respondents continue to see a PSF as a collective of individual partners, with
each partner being his/her own business unit. We posit that a more balanced
approach, and a healthy emphasis to team performance, would make for more
client-centric and innovative, and all out even more successful professional
services firm.
3.7. Link between Performance Management and remuneration
The link between the outputs of a firm’s performance management
process and remuneration-related outcomes is not nearly strong as we
expected it to be.
Figure 5 summarises our respondents’ perception of the link between
performance management and remuneration in their firms.
Figure 5: Link of performance management to remuneration
Around 60% of respondents
report a strong or a very
strong link between their
firm’s performance
management process and
decision-making on
remuneration. The link is
strongest as applied to
partners (60%), and at its
lowest (barely 50%) for
management team
members. While it is still the
majority, it means that
participants from almost half
of the firms do not perceive the two processes to be strongly linked.
Respondents from smaller firms tend to report a weaker link to remuneration
across all roles. For example, in the firms with headcount of 250 and less, ca.
15% of respondents see a very week to partner remuneration. For comparison,
this percentage drops to ca. 2% for the firms with a headcount of over 1,000
employees. On this issue, we also see certain geographical peculiarities. The
link to partner remuneration in Australia is seen as weaker than it is in the UK,
with as much as 15% of participants suggesting that it is very weak. This
relationship, however, reverses for employees and management team
members where UK firms are seen to have a weaker link.

While it did not surprise us that there is a connectivity gap between
performance management and remuneration outcomes, the size of gap did.
From our consulting experience, we know that the weak link between
performance management and remuneration is primarily due to fact that most
PSFs deem performance management just as “something that has to be done”
– in addition to budgeting and the annual remuneration round – because it’s
deemed “good practice” to do. Performance management often simply isn’t
seen as a leadership tool to align reward to behaviour and contributions that
further the firm’s objectives. Another possible explanation is the lack of
transparency in many firms about how performance links to reward.
The link between the two processes needs to be a strong one. It is best
practice for performance management to be part of the business planning
process and to feed into remuneration decisions. Firms would run much more
efficiently if these three were not seen as separate processes but as part of one
and the same – this would allow them to simplify performance management
(simplification being one of top 3 priorities for change as our study indicates).
3.8. Use of technology
Performance analytics and performance management technology in
professional services firms are in their infancy.
The use of technology for performance management remains low and
underused for partners, employees and management team members alike.
Among the five tools and methods of periodic reviews that we tested for,
technology scores last. Only 40% of respondents suggest that online reviews
are used for the assessment of employees; the number falls to below 30% for
both partners and management.
Figure 6: Use of Performance Management Technology by Firm Size
However, there is a strong link
between the use of
performance management
technology and the size of firm.
The larger the firm, the more
likely it is to have implemented
online reviews, as can be seen
in Figure 6.
Technology could and should
be the enabler for more
frequent, briefer performance
conversations and thus a more efficient performance management process.
Technology should not dictate the design of the process but reflect and enable
the new approach. By moving beyond paper-based procedures, firms can
streamline the process for both participants and administrators.

Another prominent issue for HR specialists across all industries is the
emergence of HR Analytics (the application and analysis of data to produce
actionable insights about people and performance). While some PSFs,
particularly larger ones, have joined the HR Analytics journey, many are yet to
embark on it. Just over 15% of respondents suggest that using performance
analytics is “part of how we work” on the firm-wide basis. This falls to 10% when
looking at the use of analytics at a department, business unit, team or individual
level. Even when they are used, most often performance analytics are used with
respect to business units and teams rather than individuals.
Analytics represents a sea change for the HR discipline: a shift towards
evidence-based decision making that will require improved competence in
areas such as statistics and data visualisation - However, the potential benefit to
firms is enormous, with decisions in areas such as recruitment, promotion,
reward, and learning and development all within the HR Analytics frame.
3.9. The role of Human Resources
HR professionals are yet to defend their right to a seat at the performance
management table for partners.
While a progressive people business agenda implores that “human resources”
has a seat at the management table, the reality still suggests a gap when it
comes to partner performance management. Only 40% of respondents
reported that HR professionals are highly involved in the process; a staggering
25% suggested that they are not involved at all.
Our study also suggests that there is a difference in perception between the
process owners (CEOs, MPs) and HR professionals. Thus, ca. 80% of HR
respondents see themselves as at least somewhat involved in the design and
implementation of partner reviews, whereas only 66% of process owners (i.e.
Managing Partners) see HR as somewhat involved. Moreover, while 83% of HR
professionals believe they should be highly involved in the process, only 41%
of process owners want their HR team highly involved.
Broken down by respondent group, it is worth pointing out that HR
professionals are least involved in the partner performance review process in
the accounting sector and in smaller firms of less than 500 headcount. Also, as
expected, HR is heavily involved in the design and implementation of periodic
reviews of employees – over 80% of respondents report ‘high involvement’.
This is particularly true for larger firms of above 500 employees. Yet, HR appear
to be less involved in senior management reviews with just under 60% of
respondents suggesting ‘high involvement’. The difference in perception
between HR professionals and process owners exists here as well – with 69% of
HR representatives reporting that they are highly involved and only 46% of
process owners agreeing with them.

Figure 7: HR Current and Desired Involvement Partner Reviews
We encourage HR
professionals to
continue seeking a seat
at the management
table for partner
performance. It is
regrettable that many
owners of the process
still do not see a place
for HR professionals in
the design and
implementation of the
review process for
partners. Given how
partner performance
management
incentivises leadership
and culture, excluding
HR – the firm’s
custodians of leadership
and culture – makes little
sense. Simplifying how
performance management is done in PSFs represents an unrivalled opportunity
for every HR leader to engage with partners and staff to rethink their firm’s
approach to performance management. It is our strong impression that HR is
going through a transformation today that finance went through decades ago
in establishing itself as an area of expertise deserving a seat at Board level.

4. Evolving Performance Management in PSFs
A one-size-fits-all answer to “How should we undertake performance
management at my firm?” does not exist – and we do not seek to propose here
a single “best practice” approach to performance management in professional
services firms. The reality is, best practice in performance management is not
prescriptive: each firm needs to work out the right approach, which will largely
depend on the firm’s
– Goals and ambitions
– Partnership structure
– Market positioning, size and organisational culture
– Geographical context of market practice
That said, there are certain practices that form a solid foundation of an efficient
and effective performance management process in professional services firms.
Adjust leadership approach. Make it important: establish good performance
management “ways of working“– and related partner skills and positive partner
behaviour – as part of your firm‘s cultural DNA. Improving reviewers’ skills in
areas such as coaching, feedback, objective-consensus and decision-making is
essential. As is the engagement of senior HR professionals in partner
Make Performance Management and Remuneration part of business
planning process. In our view, performance management should form part of
the firm’s business planning and budgeting processes. At the same time, the
firm’s performance management process should feed into and be the primary
source for the firm’s compensation / remuneration process. These three
processes are closely interlinked and are best not considered as stand-alone as
remains common practice at many firms today. We question how a stand-alone
performance management process can be in any way supportive of an
organisation achieving its strategic and operational goals. Figure 8 illustrates:
Figure 8: Relationship between Business Planning, Performance Management and Remuneration

We do not advocate a big annual process at or after year-end, which is
inefficient, puts a big strain on the firm for a couple of months, and tends to
focus on past performance rather than being forward-looking. Instead, we
would suggest keeping a constant time horizon and conducting business
planning and performance management on a rolling basis, i.e. planning out for
12 – 18 months irrespective of whether the planning horizon coincides with a
financial year end or not.
Increase frequency of formal and informal feedback for a more efficient
process. The desired frequency as indicated by the survey respondents, in our
view, very closely represents best practice. It also raises an important point:
formal feedback does not need to take the same form at every interval. It is
possible to design a quarterly process that has a comprehensive annual
component (and supports remuneration decisions), while implementing briefer
“check-in” style discussions through the remaining quarters of the financial
year.
The actual cadence of formal reviews and informal conversations has to be a
function of the firm’s size and its business model. As discussed above, for
professional staff it is also very important to provide project contribution
indications at the end of every project / engagement, and this preferably
should be forward-looking.
In our experience, three key elements can help ensure that both formal and
informal feedback provision happens more frequently in the future:
– Clean process design,
– IT support, and
– Leadership coaching for the reviewers (including partners)
Evolve the use of tools and methods. We recommend that:
– Self-assessment form. Should not be used as the only means of assessment.
Instead, should be used to ensure reviewees can tell their contribution story,
and be one of many inputs into the assessment process.
– Ratings. Should not be used to “reduce” a person to a number or a letter,
but can be used as a way of assessing contributions across a set of agreed
areas and results. If these are used as a tool for input on decision-making
across a variety of balanced factors, with subjective judgment applied to the
results, they can be successfully used.
– Moderation meetings. These are great for understanding properly used
ratings and should be a general best practice. But they need to be done
regularly, consistently and to a firm-standard that has been developed and
in that reviewers have been trained.
– Forced rankings. These should not be used as a basic formula with little to
no judgment applied. Forced rankings may be detrimental to morale,
emphasise individual performance at the expense of team performance, and
entrench inequities and bias in the assessment process.
– Performance management technology. Increasingly an essential tool, but
only to support well-implemented process and system – in fact, IT
implementation can be used as a platform to streamline these. It is important

to note that there have been challenges for PSFs wanting to introduce
performance management technology, with some corporate solutions not
easily adapted for law firm use or too highly priced. The emergence of
industry-specific providers now means that performance management
technology is more affordable for mid-sized and smaller firms. Accordingly,
we would expect use of technology figures to rise dramatically in the next 5
years.
– 360-degree feedback. Traditional 360-degree tools are better used as
development tools given their behavioural focus. Simplified tools that can
broaden the feedback base by seeking input from others could enhance the
performance management process; however, we would argue against
“adjusting” this personal development tool so as to become a direct input
into remuneration, especially if its use for this purpose is not transparent.
– Project-based feedback. An underused tool. Contemporaneous, valulable
feedback that can support both individual development as well as process
improvement.
– Client input / Net Promoter’s Score. In our view should only be used as a
development tool, not as a primary, individual performance management /
remuneration determination tool.
Create a tight link between performance management and remuneration.
We suggest that the remuneration determination process cannot be “divorced”
from performance management. Yet, the two should not be considered as one
and the same. The outcomes of the performance management process should
be treated as an input into a separate, independent remuneration
determination process. We would not advocate that performance management
information is a direct, “hard” input – rather one of many inputs, and one that
requires subjective judgement. It is important, in our view, that the two
processes are aligned in that each considers the same set of metrics, to the
degree it is possible.
Furthermore, we would suggest that for partners and senior management:
– Impact on remuneration depends on the system in place;
– All inputs required for running the business should also form an input for
partner performance management;
– Subjective judgment is applied when a decision on the remuneration
outcome is being made, based on relativities.
Beyond individual financials: inputs into the performance management
process. While individual financials are an important outcome of ‘doing things
right’, we would hope to see a more balanced approach. Besides personal
financial performance, we suggest firms should adopt a scorecard across other
categories, such as talent, service delivery (mostly assessing the quality),
relational capital, team success, and strategic impact.

Figure 9 illustrates:
Figure 9: Balanced Approach – Inputs to Consider
Additionally, the ‘how’ is also of importance: one can look at financial output in
abstract or consider it jointly with ‘soft goals’ such as willingness, effort, result,
consistency, and flexibility. These overriding values will help to (a) ensure that a
partner’s performance is assessed against the spirit of what is intended and to
(b) reduce the potential of system manipulation.
Use technology / HR analytics. For firms operating paper-based processes,
HR Analytics will remain elusive: the sheer data entry requirements will be
prohibitive. However, firms with technology in place will more easily be able to
structure and interrogate data to produce these insights. Tech-savvy,
numerically literate HR teams will also be able to present this data in ways that
have the capacity to transform how partners and managers think about
performance management. By using performance management data to report
firm issues and trends and by producing actionable insights, HR will be able to
demonstrate that performance management is not simply about inputs
(compliance). They will be able to show that the collected data is valuable, and
thus performance management, with its business intelligence, is a critical
business tool.
Consider evolving performance management step-by-step. Performance
management is in transition. Like the firm it serves, performance management
is becoming more agile and flexible in order to respond to an increasingly
dynamic business environment. The table in Figure 10 provides some
concluding examples.

Figure 10: Today and Tomorrow of Performance Management
Traditional approach Future approaches
Annual formal reviews Quarterly / six monthly formal reviews
Assessment focused Dialogue-focused
Periodic collection of feedback Just-in-time project-based feedback
Annually updated objectives Ongoing objectives updates
Single source feedback Multi source feedback
Paper-based, bureaucratic form-filling Online, simple and intuitive systems
Personal financial metrics Personal and team financial metrics
Personal competency focus Team competency focus
Narrow focus on outputs Balancing inputs and outputs
Opaque remuneration process Transparent remuneration process
Compliance focused Business intelligence, analytics focus
HR driven Supervisor, employee and HR driven

5. About the Authors
Ray D’Cruz, CEO, SkillsScorecard
As a former lawyer and head of L&D, Ray designs solutions that meet the
complex needs of firms while ensuring a simple user experience. Over the past
15 years Ray has worked with legal, accounting and engineering firms in
Australia, North America, Asia and Europe. He is a member of the judging
panel for the Annual MPF Awards.
Maria Georgakopoulou, Analyst, KermaPartners
Maria advises professional services firms on their strategy, organisation and key
client account management. She has worked on a number of projects with
clients across the UK, Europe and Australia.
Polina Pavlova, Consultant, KermaPartners
Polina advises professional partnerships on all aspects of their organisation, in
particular partner remuneration and profit sharing, governance and succession
planning. Polina has been involved in a number of partnership structure and
remuneration projects in the UK, Eastern Europe and elsewhere.
Michael Roch, Managing Director, MHPR Advisory Services
Michael has brought commercial success to strategic alliances, corporate joint
ventures and professional partnerships for his entire professional career. A
substantial aspect of his work relates to partner remuneration and performance
management systems as key requirements for successful strategy execution. He
has worked with domestic and international professional firms inside and
outside the professional services sector across Europe, North America, Africa
and Asia. He’s an MPF Annual Awards judge and Co-Chair of the IBA’s Law Firm
Management Committee’s Structure and Governance Division. He also leads
the Partner Performance and Compensation Think Tank of
SkillsScorecard. Until the end of 2015, Michael was a Partner and the CEO of
KermaPartners.
The authors are deeply grateful to Rupprecht Graf von Pfeil, Partner,
KermaPartners for his superb early input on the design of the survey and on the
results analysis. We are also grateful to the whole Managing Partners’ Forum
team, in particular to Richard Chaplin and Paul Lemon for organising and
promoting the survey through MPF’s membership.

Appendix A: Respondents’ Profile
The survey was open for participation for representatives of professional
services firms. In total, 227 people responded to our survey:
– Coming from 19 countries, with the majority based in the UK (61%) and
Australia (22%);
– Coming from firms of different sizes – from very small founder-led business
to some of the largest organisations in the world;
– For performance management process designers and owners, reviewers at
different levels as well as those being reviewed;
– In sectors such as law, accounting, consulting and some other.
Figure 11 below illustrates the mix of respondents’ backgrounds.
Figure 11: Respondents' Profile

Performance Mgmt in the Professions Study

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (13)

Similar a Performance Mgmt in the Professions Study

Similar a Performance Mgmt in the Professions Study (20)

Performance Mgmt in the Professions Study