Evaluating leaders: Getting the most value out of managing partners

In a recent issue of Managing Partner, Brian Schwartz laid out a complete roadmap for evaluating and compensating managing partners.¹ He dealt with many challenges that confront managing partners on a day-to-day basis. In particular, the article identified issues that firms generally fail to recognise, such as the importance of motivating a managing partner towards certain behaviours.

Today's law firms need strong, dedicated leadership. To ensure that type of leadership, firms must decide what is important and, more importantly, ensure they communicate those priorities to the managing partner. Schwartz talked about goals, evaluations and compensations. Surprisingly, the most difficult part of implementing his plan may be convincing firms to evaluate the performance of their managing partner.

Most firms have no formal method of evaluating their managing partner. It just does not exist. Some of the absence can be explained by a lack of process. The managing partner generally drives lawyer evaluations, but no one has that role when it comes to him. Couple that with a lack of understanding of what makes a successful managing partner and you have another victory for inertia.

Rarely does a managing partner ask 'how am I doing?' Even more rarely does he get an answer. Traditionally, law firms embraced all evaluations of lawyers and staff with benign neglect. That has
changed dramatically.

Today, the modern, well-run firm conducts full-scale evaluations at almost every level of employment. It spends untold hours evaluating and compensating partners. Associates go through multi-tiered evaluations ranging from mentors to practice group leaders to management committees. Paralegals and staff receive at least annual reviews and often hear even more frequently from the human resources department.

In most cases, firms do an excellent job of identifying strengths and weaknesses, creating goals and monitoring performance. But what about the managing partner? In regard to his performance, most firms still reside somewhere between the ostrich and kicking the can down the road of neglect. So why, in a culture that now revolves around evaluations, do most firms shy away from telling the managing partner how he is doing in the firm's most important job?

First, such an evaluation falls outside of the law firm's natural course of events. Hierarchy reigns supreme in most firms. Things flow downhill; evaluations follow that course. Personnel directors evaluate staff and paralegals. Partners evaluate associates. Practice group leaders evaluate partners. Managing partners evaluate practice group leaders. The process ends there. The managing partner occupies the top rung of the ladder.

Second, lawyers by nature do not embrace an evaluation of their leader. It is just too difficult. Lawyers tend to operate better behind closed doors. If things get too unbearable, they vote with their feet. On a firm management basis, the end of a year generates a collective sigh of relief and a begrudging turn of the eye towards a new year. Taking the time to look back and evaluate the managing partner's job performance is not a priority.

Finally, there is an absence of criteria. Most firms set concrete goals at every level of the firm except the top. The managing partner generally sets nebulous goals for himself regarding firm finances, with a few 'soft' goals thrown in to salute firm culture. None of these goals contain the specificity necessary to assess failure or success.

At this point, one might say 'so what?' The evaluation process already takes too much time. Why add another one? Of course, those comments could apply to every evaluation the firm does.

In reality, the managing partner evaluation means more to the success or failure of the firm than any of the other evaluations the firm conducts. A good managing partner sets a direction, both strategically and operationally, for the firm. He then makes sure the firm follows that direction. Without feedback, not only will he not know how he is guiding the firm, he will not know if it is headed in the right direction. In short, not evaluating him is both unfair to him and the firm.

Schwartz does an excellent job of enumerating things that should be important to a law firm. His article sets a balance between soft and hard goals and explains why all are important. Unfortunately, none of these goals matter, unless the managing partner knows them and is judged by his success in obtaining them. It sounds simple but, like most worthwhile ventures, it must be accompanied with planning and execution.

Evaluation process

To begin the evaluation process, the firm must answer three questions:

1. How will they do it?

2. Who will do the evaluation?

3. What will be evaluated?

As noted above, you cannot measure success without specific goals. The evaluation process must start at the beginning of the year, not at the end.
The managing partner must have concrete measurable goals that he hopes to achieve during the year. Those goals should
begin with the managing partner, but be shaped and refined by the group that will evaluate him.

The structure and culture of the firm will go a long way in determining who does the evaluation. In a firm with a corporate structure, the board, executive committee or whoever has authority over the managing partner should do the evaluation. Evaluation does not lend itself to the entire firm but, depending upon the size and culture
of the firm, input from other partners
may be desirable.

After year-end, progress towards the goals should be evaluated by the entire management committee. They would appoint one or two of their members to have a face-to-face meeting with the managing partner to review his performance for the previous year.

A better practice would be to have rolling 90-day evaluations. Waiting until the end of the year allows the goals to become 'old and cold'. Often, what was important in January is less so in December. Regular quarterly updates present a much more timely and effective opportunity to discuss successes and failures and what can be done to remedy the latter.

Measuring success

Setting goals and scheduling evaluations can be daunting, but not as challenging as measuring a managing partner's success. Schwartz advocates a mixed list of criteria that couple short-term successes with
long-term goals. When those goals break down into their constituent parts, they include strategic plan progress, attraction of laterals and retention of lawyers. Add to these tangible goals the general leadership criteria of responsiveness and decision-making ability. No leader can excel without those talents. These skills often mean the difference between the success and failure of a law firm.

Ultimately, however, a law firm leader must be judged on the financial success of the firm. Many firms look upon that statement as heresy. "Practicing law is about more than money," they say. No doubt that is the case. Judging the financial progress of a law firm is not about making more money; it is about showing growth and stability. Financial health attracts and retains good lawyers; financial malaise causes the loss of partners and makes it virtually impossible to attract young, successful lawyers.

Schwartz talks about the 'stock market evaluations', where a firm judges its leader on its increase in net profits. He sets out a strong argument against that single-shot evaluation. He identifies the short-term approach such an emphasis creates and
the long-term problems that it causes.
More importantly, a firm can manage
itself to profitability.

The managing partner can create short-term success by cutting people and services, but those decisions can impact the firm negatively in the long term. That is not the case with top-line growth. Financial success should be measured in top-line growth. Increased gross revenue shows more lawyers and clients. It carries with
it the aura of success. Increasing profits requires management; top-line growth requires leadership. There is a difference.

As is often the case, athletics offer a great analogy to the importance of top-line growth to a law firm. When a team hires
a new coach who then fails but is not replaced, the fan base goes through
various stages. Much like the stages of
grief, they are very predictable.

First, there is the excitement of something new. Then, as on-the-field performance wanes and success does not follow, there is anger about the choice of coach and his retention. Finally, if nothing is done to rectify the problem, apathy sets in. Fans demonstrate apathy by losing interest in the programme and failing to attend the games. Attendance goes down until finally the general manager or athletic director has to change the coach. That change is not predicated on that coach's character, treatment of his players, or his interaction with the fans; it is based solely on his success or failure on the field.

Law firms are similar. Declining revenues create doubt among partners and associates about the direction of the firm. A great strategic plan and many ideas about change and invigoration of the firm that do not
come to fruition cause a firm to go through similar stages.

Initially, partners are angry and disappointed when great plans produce meagre results. Then an 'I have heard all this before' attitude from the partners rises to the surface when the failures continue. Unlike the athletic team, there are no fans to stop coming to the games, but there are lawyers who can begin to look elsewhere.

Rarely do partners leave for more money. Rather, a lack of financial growth sends a message regarding the firm's future and their own. It creates doubt and, ultimately, motivates people to look elsewhere.
Great plans and systems enhance a financially successful firm, but they do
not make a firm financially successful.

Managing performance

But, back to the managing partner evaluation. What should be its result? As is often the case, it is simple to state and difficult to implement. The evaluator must identify areas of strengths and weaknesses. In the case of weaknesses, the managing partner needs to know what things have to be changed or achieved before the next evaluation. He must be given a reasonable time to correct his shortfalls and an expectation as to what will happen if he does not.

While financial success is a conclusion rather than a trait that can be changed,
a good evaluator will ensure the managing partner understands that his position is not sustainable unless the firm grows and shows increased revenues. These evaluations are very important because the managing partner in most firms sets not only the tone for the firm, but becomes the face of the firm. Without strong leadership, firms rarely succeed. The managing partner should be given the same expectations and consequences as all of the partners.

In summary, firms must have a formal review and evaluation of the managing partner in a methodical, logical way.
At the beginning of the year, they must
set measurable goals for him. He should
be evaluated based upon his attainment
of those goals.

The goals should be tailored to the culture of the firm. They must always focus upon the financial growth of the firm.
The managing partner is not doing his
job if revenues are not going up. Ultimately, if the managing partner is not meeting
his goals, the firm must be prepared to change leaders.

Julious P. Smith Jr is chair emeritus at US law firm Williams Mullen (www.williamsmullen.com)

Endnote

1. See 'Incentivised leadership', Bryan Schwartz, Managing Partner, December 2014/January 2015, Vol. 17 Issue 4