As the new year begins, many law firms are looking at their performance evaluation standards and procedures for associates. This is more than just another "HR exercise."
Our firm has identified a clear, direct, and positive correlation between the quality of performance standards for associates and the overall financial performance of a law firm. As profitability and competition become more challenging for most law firms, many are concluding that it is time to get serious about associate performance.
The good news is that a law firm does not need to hire outside human resources consultants to make substantial permanent improvements in how they manage and evaluate the performance of associates. Instead, we recommend that you begin by asking three questions about how you evaluate your associates.They apply to law firms of all sizes and practice specialties, everywhere in the world.
1. Is performance evaluation in your firm defined by, and focused on, observable behaviors, not values or attitudes?
This is important for at least two reasons. Behaviours are what produce business results, provide channel markers for the development of skills, and advance the firm's reputation with clients and referral sources. As a practical matter, it is easier to be clear about whether a lawyer has displayed a behaviour rather than an attitude.
For example, the quality of "shows initiative" is too open to interpretation to be a meaningful indicator of performance. If an associate were to be told, "You lack initiative," he or she would not know what to do to improve. Better results would be achieved by setting clear behavioral standards such as "Documents current problems and identifies potential solutions for the future" (beyond simply fixing an error or problem without thought to potential future improvements). These types of standards can also be tailored to reflect evolving priorities in the firm, such as "Uses time records to identify opportunities to delegate work to trainees." Behavioural standards reduce misunderstandings and ensure meaningful goal achievement and performance improvement.
2. Do your performance standards directly support your firm's business plan?
The most effective associate performance management systems include, as a major element if not the most important one, the production of billable client work. There are a variety of ways to measure this. Some of our clients set standards for approved "billable hours" recorded, i.e., hours of work that are approved by the partner and could be charged to the client if the matter is billed on an hourly rate. Other firms also calculate the value of the fees collected, apportioned to each associate's participation in the matter. Still other firms also develop a simple system of "internal billing rates" to measure the value of the work actually performed by an associate, rather than actual collections, which usually are beyond the control of influence of associates. These internal billing rates can also be applied to activities that add value to the firm but do not generate fees, such as marketing and business development,research and writing, continuing legal education, and important management projects.
3. Do your performance standards support the development of knowledge, skills, and experience that an associate will need to become a successful partner?
These standards are often expressed in terms of goals that are specific, measurable, agreed, realistic, and time-defined (SMART). For example, a goal that requires an associate to simply "develop knowledge and experience in transfer pricing" would be inadequate. However, a goal that is defined in terms of participation in a specific number of matters involving transfer pricing during a year, and perhaps describing the specific services or products that the associate would perform with regard to those matters, would be better.
Associate performance management should include a strong emphasis on developing and demonstrating defined skills and behaviors that can be observed and measured, and that also are critical to the sustainable success of the firm. When associates know what is expected of them and why that is important, they are much more likely to achieve positive results. Partners are also more likely both to emulate and provide feedback to associates – key factors in building a performance- based culture - when performance standards are expressed in terms of expected behaviors, as opposed to abstract or overly-generalized desired qualities.
Lisa M. Walker Johnson