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Practice Tips - appraising your partners: the difficult bit

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15th Jul 2005
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Last time I looked at 10 issues a practice should assess as part of a partner’s appraisal. All related to their relationships outside the firm. That was the easy part. Internal issues are much more difficult. That does not, however, mean the issue should be ducked. So I now offer my list of those issues relating to performance within the firm on which partners should be appraised:

Profits generated
I don't believe in partners sharing a profit pool. I've always felt performance related pay had some benefits and equality of outcome irrespective of effort was a notion from another age. Which is why the survival of egalitarian profit sharing in professional firms baffles me. I know generating a figure for profit per partner takes effort (and I'm going to discuss methods of determining what it might be in a cost effective way in another article) but for now, let's assume we can determine who contributes what to profit. In that case, this is the first, and one of the most important measures of assessment inside any firm.

Staff utilisation effectiveness
I'm aware that this issue is related to profit, but it's an important one none the less. The use a partner makes of the firm's staff in generating its profits is a vital component of the success of the firm, and its internal relationships. A partner who appears profitable but uses all the key staff of the firm at one time of the year, leaving them and other partners  looking for other possible outlets for their endeavours at other times of the year is not managing on a portfolio basis. In fact, they've probably failed to understand many of the most important issues of both partnership and business success. So a careful analysis of which partner uses which staff and when could be a valuable measure of how they contribute to the overall balance of the firm's success.

Compliance with systems
A firm without systems is not a firm. It’s a loose economic union (at best). That means everyone within the partnership must champion them or the synergies that can be realised from working in a team fail. Your managers and secretaries will be able to tell you in seconds who does, and does not, comply with systems. Partners are usually the worst at doing so.

Staff management
In a professional services firm people are the biggest asset, the biggest cost and the biggest pain. A partner who cannot manage staff can only justify that position if they are so good personally that they really don't need staff to earn their profit share and status. For the rest (and that will be most) the ability to manage staff is vital. There are no simple rules, but the ability to listen all the time - and especially whilst near the coffee machine (by which all partners should loiter with intent, frequently) is vital because that way you know what's happening before it becomes a problem. So the question to ask is if a partner is constantly surprised by the staff, are they really doing their job properly?

Continuing Professional Education (CPE)
I have in my time run a professional training company. OK, it was small one, but it provided a comprehensive programme in a dedicated area. It always astonished me that a) so few firms used our service; b) how many of those firms who did sent their staff but not their partners; c) how many partners came just to "get some points". CPE isn't about getting points. It's about having cutting edge knowledge to give you competitive advantage. The partner who has lost the will to do CPE has lost the right to that status.

Managing the "crap"
All firms have crap that needs to be managed. The accounts are crap. So is being money laundering compliance officer. But someone has to do these jobs, and do them well. And everyone has to take their share of the burden. If someone doesn't pull their weight here they're not earning their profit.

Working capital management
Partners who don't a) get their bills out; b) get the cash in; c) balance the work flow of the firm to keep these going don't deserve their drawings. So why pay them if they don't?

IT savvy
If you aren't IT savvy then I don't see how you can be a partner. I don't mean you need to know all the latest software fixes, or can write code. But you must be able to use IT really well if you're a partner because you have to know what's happening in the world, you have to know the issues people are facing in their businesses, and you have to know what solutions are available. Most of these involve IT in some way. You just aren't serious if you can't use, understand and discuss this most important of issues internally and externally.

Technical competence
Doing the CPE and being able to use the Internet is one thing, but making sure a person is competent is vital too. You might appraise your staff quite often because you review their work, but how often is the partner’s work reviewed? If it's not frequently and over the whole range of what they do then it's not being done often enough. The reason is simple – your partners are the biggest threat to your financial well being that exists (and vice versa of course). So blow being nice, start hot and cold reviews now and make them part of an appraisal system.

The Bullshit Quota
What am I talking about? Simply the fact that some people will say they'll do something to get you out of their office/meeting/mind, and will then do nothing about it. If it happens to you it will happen to clients. So you need to rate it. Clients will, and will quickly be alienated by it (just as you are).

Then act on it
And so what do you do with all this when you’ve assessed it? Well act on it, of course. But the first thing to do is collect the data and share it with at least one colleague and then work out a plan before presenting it to the partner being appraised. And when doing that presentation be careful. If you think things are going to be tense, get in a third party to ensure things stay on an even keel. Which brings me to a final point. The need for the non executives from outside the firm to help with this process is yet another lesson our profession preaches, but has not learned. How many professional firms engage such people? A bet it’s precious few, but when appraisal of partner performance is going on think they have a massive role to play.

Richard Murphy
AccountingWEB contributing editor Richard Murphy is a sole practitioner chartered accountant but was previously senior partner of a firm for 11 years. He has also been chairman, chief executive or finance director of 10 SMEs. A collection of previous articles by Richard on practice management themes is available in Practice Management Zone

 

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