eight criteria for partnership

bonus: a basic partner evaluation form.

by august j. aquila
what makes a great partnership

one major result of the great recession is that firms can no longer afford to keep partners who are unable to pay their own way and help the firm grow. i say this because firms have already cut staff to maintain their level of profitability and there is no additional fat to cut. competition and fee pressure from larger firms in every market continues to put a squeeze on profits. in addition, employment opportunities are surfacing again for the employees in your firms.

more: how to achieve partner unity | five questions to ask your partners about accountability | how you can get partners to change | the seven building blocks of a great partnership
exclusively for pro members. log in here or 2022世界杯足球排名 today.

there is only one area left that should be considered for possible cuts, or better yet, for improvements – the partners. as a professional services firm, you are a business. and like any other business, you need to be profitable in order to continue to exist.

remember, no business has ever cut its way to success! firm leaders must take a hard look at their partners and determine if the firm can continue to carry all of them.

in any professional services firm, profitability is the result of the firm’s combined human capital talents, business management skills, marketing knowhow, internal systems and value proposition to its core clients. small firms cannot justify having a partner be solely an administrative or human resource partner. larger firms have the ability to hire dedicated marketing, operational and human resource professionals. this frees the partners to spend more time doing the things partners should be doing – serving clients and bringing in new business.

“alone we can do so little; together we can do so much.” – helen keller

while the lifeblood of any organization is its ability to bring in new business, this is not to say that business development is the be all and end all, but it does need to be a critical element in reviewing your partners.

there are many factors that must be considered in determining the value of a partner to the firm. some are skill-based. for example:

• what are the technical competencies of the partner?
• are the partner’s technical competencies up to date?
• are these the competencies that the current client base needs?
• does the partner have the ability to bring in new business or identify business opportunities with existing clients?
• does the partner add intangible value in other areas, such as leadership, mentoring, etc.?

we know that technical skills alone do not make a good partner. partners also need to live certain behaviors. hence, we have to look at the character of the partner. for example:

• does the partner live the firm’s core values?
• do staff members want to work with the partner?
• is the partner ethical in his or her dealings with the staff and the clients?
• is the partner a team player?

finally, partners need to increase and enhance the economic value of the firm. this is accomplished by improving the firm’s name recognition, types of clients served and employees hired. for example, mary was a partner in a large local firm. over the years she developed an expertise in marital disputes and was sought after by family lawyers. while she generated a lot of current income for the firm, she also enhanced the firm’s value year-over-year. she attracted several new hires who had heard about her. she was able to position the firm as the go-to in her area of expertise.

partner evaluation

the main reason firms do not conduct formal partner evaluations is because they do not require the partners to set specific goals. partners say, “how can you evaluate my performance, when you never told me what i needed to do?” i personally believe that the lack of setting partner goals is the number one reason for creating unproductive partners.

when evaluating partners, i recommend the following eight criteria. some of these determining factors may seem harsh, but difficult times call for difficult measures:

1. can the firm support another partner? if the answer is “no,” then you have to explore the reason why. is it because you currently have underperforming partners (i.e., partners who are unable to pay their own way and help the firm grow)? is it because you have partners in administrative positions? a good chief operating officer will cost the firm a lot less than having a partner perform that role. the same holds true for hiring human resource, marketing and information technology professionals. partners who have gravitated to these positions have done so because they lack business origination skills, client retention skills or current technical talents. would you pay a professional administrator the same amount of money that you are paying a partner to perform the identical role?
2. measures for admission to the partnership. if you require certain performance levels for new partners, shouldn’t those criteria apply to your existing partners, as well? if you do not have written measures for admission for new partners and old partners, it is time to develop them.
3. performance evaluation. the majority of firms do not have formal partner evaluation programs. if you may have been lax in the past about evaluating partner performance, you cannot continue that practice any longer. partners must be given goals and be held accountable for meeting and even surpassing them.
4. business development. the lifeblood of any organization is its ability to bring in new, profitable clients for the firm or expand work to existing clients. while all partners will not have the same talents in this area, it is necessary for all partners to have some business development talent. it is up to you to determine the minimum level of performance. even a quality control partner should be able to identify potential areas of additional business to existing clients.

many firms believe that business development is an individual effort. the fact is, firms become more successful when business development is a team effort. having more than one partner meet with potential or existing clients has proven to be the best way to identify and close opportunities. also, bringing a tax or consulting partner along can provide an additional perspective to the business development meeting.

5. economic contribution. all partners (with the exception of the managing partner) need to focus the majority of their time on bringing in dollars to the firm today. without current cash flow, there will be no tomorrow. the metrics of cash collected, client profitability and origination are more telling than the standard metrics of hours worked, billable hours or charged hours. write-downs and write-offs should also be closely watched.

client retention/turnover is another indication of a partner’s economic contribution. partners who can handle a large quantity of profitable clients or who can feed clients to other partners are extremely valuable to a firm.

6. non-billable time. what the partner is doing with his or her non-billable time will tell you a lot about the partner’s interest in the success of the firm. some partners may need a wakeup call. they are owners of the business and they need to constantly do things that enhance the future value of the practice (e.g., marketing, networking or doing pro bono work in the community). playing golf or having lunch with other partners is not normally a valuable non-billable time activity. a partner may get some work while on the golf course, but it is work he or she would have gotten anyway.

a better use of non-billable time would be to develop a new niche for the firm, help a senior manager along the partner track, or look for potential firm mergers or lateral partner transfers from other firms. non-billable time should be used for creating future capacity in the firm.

7. intangible contributions. partners who have developed a persona within or outside the firm can bring value to the firm. these partners may attract business to the firm because of their reputation in the community, either as a professional or because of their leadership roles in civic, charitable or religious organizations. if these partners are known and respected in the community, they can have a positive effect on attracting and retaining associates.
8. good citizenship. partners need to be team players. if they are not, you have to think about their effect on the firm. no matter how important a partner thinks he or she is, if they do not get along with the other partners or associates in the firm, they are usually not adding to the economic viability of the practice. if partners are not willing to feed their clients to other partners in the firm (i.e., cross servicing) or pitch in and assist on other client work, then they are not good citizens.

partners who cannot achieve minimum performance standards over a two-year period should be given two choices:

• move from an equity to a non-equity status and no longer share in the profitability of the practice; or
• leave the firm or be asked to leave the firm.

if a firm has to ask a partner to leave, it should help the partner find a home that is more suitable for his or her talents, or allow the partner to purchase a portion of his or her client base. this decision is not about punishing the individual partner. it is about ensuring the future of the enterprise.

remember, demands on the firm change over time and if you do not change your firm’s partner performance expectations, you will not meet the new demands. it is not about working harder. it is about working smarter. it is about making partners aware of the changes and what they have to do in order to remain on the productive side of the ledger. it is about producing more value for the firm.

basic partner evaluation form

there are five areas in which partners need to perform. what you need to do is set targets for each area for each person in your firm. for example, partner a is a strong rainmaker. hence, he would have a higher target in this area than partner b, who is strong at developing people.

 

area	sample	targets	results	what went well	areas for improvement
winning	revenue at x
business	gross margin
	%
	new clients in
	core markets
developing	developing
people	staff to take
	over your
	clients
leading and	number of
managing	strategic
the firm	initiatives
	completed
	with excellence
	firm
	profitability
	goals
improving technical knowledge	new areas learned and implemented
managing	timely
matters with	delivery of engagements
efficiency
and	gross
profitability	margin
	% of x

posted on january 20, 2023