Chances are, your firm has a system in place for, at least once a year, evaluating the performance of your staff members. But how do you review the performance of managing partners and firm owners or founders?
The issue is complicated for several reasons. First, most performance reviews tend to be top-down; that is, a supervisor is evaluating the performance of a person lower on the organizational chart. Any performance review of founders and owners would require upstream evaluations—from subordinates, co-workers and, perhaps, other partners.
Second, how would you assign consequences to the performance reviews if a founder/owner’s performance is found to be lacking? Who will hold the founders/owners accountable? In a multi-partner firm, it would have to be the other partners, who are themselves being evaluated. But at the very least, any upstream or sideways evaluation creates some potentially difficult conversations that nobody is eager to engage in.
And finally, what criteria would the founder/owner be held to? How do you know if the founder/owners were successful in their roles?
This last issue is trickier than it looks. For members of your planning team, you can review the number of clients they serve, the number of client assets they’re responsible for and various marketing and client satisfaction metrics. But, in addition to these standardized metrics, the founder/owners are also required to contribute to the firm in ways that are not easily measured by the numbers.
Are they living and communicating the firm’s vision?
Are they helping to develop the capabilities of staff members?
Are they good at identifying and nurturing future leaders so there is a viable succession in place?
Do they collaborate on process improvements for the client experience and generally work on solving the problems of the firm?
Are they growing and getting better year by year?
Are they attending conferences and making a commitment to lifelong learning?
Recently, I watched Philip Palaveev, of The Ensemble Practice (www.theensemblepractice.com) host a discussion with a group of owners of multi-partner firms on this topic. The conversation offered some insight, but I don’t think it came close to providing any definitive advice on evaluating partners.
Let’s look at some of the things that Palaveev’s conversation uncovered.
1) Partnership evaluation criteria. Each firm should come up with a very thoughtful list of criteria for owner/founder/partner evaluation, and the list above might be a good place to start. Another soft measure: how does the owner/founder/partner interact with others? These company leaders might treat their senior staffers with respect, but an upstream evaluation might uncover a habit of treating the “underlings” somewhat less politely.
How good are the partners at helping to get, keep and build great people in the firm? Are they involving others in their marketing activities and including them in client meetings?
In general (perhaps this is a catchall criterion), are they consistently acting in the best interests of the firm?
The idea here is that the health of the firm should be more important than any of the individual careers of the partners; otherwise each partner is going to take actions and make decisions based on their own convenience, or to meet their own personal career goals. That would send a message to the employees that somehow the partners are allowed to have their own customized goals and act in their own interests rather than for the benefit of the firm as a whole.
You can also set specific goals for the founder or partners. For instance, one might have a goal to raise a certain amount of revenue for the firm from new clients, while another may be charged with changing the software suite to something more modern and compatible with what’s available today.
At the end of the year, did they achieve the goals that they were assigned (or self-assigned)?
How do you refine that list for your own firm? Have somebody create the initial set of criteria and circulate it among the senior staff for feedback. Is this what we want to measure? Are we leaving anything out?
You want to avoid the (probably common) situation where the founders/partners might leave off criteria that they don’t feel are their own personal strengths. Compile the feedback, and be as broad as possible about including suggested criteria.
2) The evaluation process. Once you’ve developed ten to 15 criteria that you believe are important, separate them into those that lend themselves to metrics and those that don’t. Part of a partner’s job will be similar to a senior advisor’s or chief operations person’s job function, and you know how to measure those. The other criteria specifically related to ownership, leadership and partnership will generally be softer and more subjective.
These more subjective evaluations can be made starkly numerical by conducting a confidential 360-degree evaluation from all staff members who interact with the partner. If ten out of 12 staff members say the owner/partner is condescending or rude to employees, chances are they’re right and the resultant low score is richly earned. By pooling and averaging evaluations, you take something that seems inherently unmeasurable and turn it into numbers that can be compared with other partners’ scores and last year’s metrics.
Confidentiality is key. You want to make sure nobody fears retribution if they give a senior partner or firm owner a low score in the evaluation. These evaluations can be conducted online with your own customized questionnaire or through HR software like Reflektive (http://www.reflektive.com), which costs $6 to $9 per year per employee.
3) Consequences. Palaveev’s discussion highlighted a process where a multi-partner firm assigned the chief HR person to compile all the 360-degree evaluations of partners and provide each partner with a composite score. The scores were then placed into quartiles: first, second, third and fourth.
Fourth-quartile partners are required to improve to at least the third quartile within the next two years, or they’ll be asked to move on.
This obviously only works with larger firms, but the concept is that you want all of the partners contributing at a high level—even if there’s only one firm owner. Conceptually, if a firm owner gets a 50 score out of a possible 100, he/she is going to want to know what has to happen to improve that score. There is, of course, a breakdown of the different components of the overall score, which will help this communication.
Most of the multi-partner firm partners who participated in Palaveev’s discussion seemed to believe that there is a lot of motivation for the fourth-quartile (or low-scoring) partner to want to move up—without any threat of expulsion. But a former CEO of a large multi-partner accounting firm said that there are times when a partner is burned out, and leaving the firm can be the very best thing that could happen to his career.
Are the scores shared with all the other partners? No. Each partner is allowed to see his/her scores, and which quartile they fall into, but the partnership team is not told that Joe fell into the 4th quartile this year, while Francis was in the first.
Do the scores have consequences for the partners’ compensation? As a practical matter, no—for several reasons. First, if you’re working at a firm where the ownership is concentrated in one person, or mostly one person, the compensation decision is also probably in that person’s hands.
Second, the amount of compensation at stake probably won’t be meaningful to the owner/partner.
And finally, if you put money on the evaluation, it might actually have the opposite effect than is intended. Suppose a partner scores badly on how he treats staff members, and there’s a $30,000 consequence to not improving. He may feel like it’s worth $30,000 not to have to be nice to the “little people” at the firm, and feel comfortable that he’s paying for his bad behavior in the form of a lost bonus, and is therefore entitled to it.
4. Enforcement. What do you do if the firm owner goes through this process, gets low scores and decides: you know what? There are probably better uses for our time than this foolish owner measurement process.
As a practical matter, enforcement probably requires one of two things: either an enlightened owner who sees the value in measuring his/her effectiveness (no matter how painful), or multiple partners who can hold each other accountable.
5. Value. Peter Drucker once said: what gets measured, gets done. If you start consistently measuring the performance of senior leaders of your firm, you may start to see better results at the individual and at the firm level.
Beyond that, one member of a multi-partner firm said that the evaluation process they instituted has led to uncomfortable conversations that the partnership team naturally tended to shy away from—and this was a good thing. Not everybody was performing as a leader at a high level, but everybody THOUGHT they were. Without the metrics in hand, it was difficult to pinpoint the shortcomings, and therefore nearly impossible to talk about them.
In a broader sense, these evaluations could be a valuable way for the owners/partners to “up their game” and become better stewards of the firm. Virtually all financial planning firms currently lack this feedback, so the managing partners or owners are really left in the dark regarding how well they’re performing their complex leadership roles, and whether they’re growing as a leader. This evaluation and feedback process addresses what may be the most significant management gap in today’s profession.
I’m open to feedback here. What do you think of this discussion? Do you have your own process for evaluating firm owners/partners/founders, and if so, what are you doing that’s the same or different from what’s outlined here?
Do you believe that partners and owners should be held accountable for these soft leadership skills that can be tough to measure? Is there value in this?
If you’re a partner or owner, would you feel threatened by this process?
Let me hear your views. I think this is a fascinating topic that is far from being fully explored in our emerging profession.