Performance Management in the Professions 2015: research and findings David Meagher Head of Analytics

Research purpose To benchmark current performance management practice in the PSF sector To understand priorities for change in relation to performance management practices, tools and methods

Researchers Ray D’Cruz, SkillsScorecard, Australia Michael Roch, KermaPartners, UK Rupprecht Graf von Pfiel, KermaPartners, Germany Richard Chaplin, Managing Partners Forum, UK

Respondent demographics N=240

Strategic context Performance management is central to productivity  Identifying, engaging, rewarding and retaining the most profitable and productive partners and staff  Managing poor performance  Accelerating skills development and behaviours (particularly in client focused capabilities such as pricing, commerciality and cost consciousness)  Systematic approach to nurturing a culture of continuous improvement and process re- engineering through structured learning and KM  Promoting new talent with future-oriented capabilities Profit margin squeeze Parters significant profit expectations Lower costs More certainty Clients Employee significant salary expectations

Preliminary findings 1. Firms want more regular formal and informal conversations 2. The US-led debate about PM is off the mark 3. Honest feedback is the most important outcome of PM 4. Developing partner and manager skills is a priority 5. Project-based feedback is seriously lacking in law firms 6. Financial metrics are still skewed to personal financials 7. HR needs to take its seat at the partner PM table 8. Technology is the enabler for streamlined PM

Research methods Finding #1 Firms want more regular formal and informal performance conversations

Frequency of formal reviews Current versus desired Questions: “How often is FORMAL feedback (periodic review) provided on performance or progress?” and “How often in your personal opinion should FORMAL feedback (periodic review) be provided on performance or progress?” Size of bubble corresponds to the y axis and indicates the % of respondents choosing a given option.

Frequency of informal feedback Current versus desired Questions: “How often is INFORMAL feedback provided on performance or progress?” and “How often in your personal opinion should INFORMAL feedback be provided on performance or progress?” Size of bubble corresponds to the y axis and indicates the % of respondents choosing a given option.

Research methods Finding #2 The US-led debate about performance management is off the mark

US focus on forced rankings and ratings is largely irrelevant for Australian PSFs Trend line: respondents tend to agree on where priorities lie Question: “What are your priorities for improving the periodic review process in the coming 1-2 years?”

Research methods Finding #3 Honest feedback is the most important outcome of performance management

Question: “How important are the following aspects of performance management at your firm?” Honest feedback the most important outcome of performance management

Research methods Finding #4 Developing partner and manager skills is the most important priority for firms

Skills: improving partner and manager skills through training is the number one priority Trend line: respondents tend to agree on where priorities lie Question: “What are your priorities for improving the periodic review process in the coming 1-2 years?”

Research methods Finding #5 Project or matter-based feedback is seriously lacking, especially for law firms

After action reviews: a critical productivity improvement tool missing in action Question: “How consistently is performance reviewed at the end of each job, project or engagement?” X axis indicates % of respondents choosing a given option.

Discussion Why are after action reviews so important given the challenges facing law firms? Why is the use of after action reviews in Australian law firms so lacking? What can L&D do to change the current state?

Research methods Finding #6 Performance assessment is still skewed to personal financial metrics

Key inputs in performance assessment need to be broadened beyond personal financials Question: “What are the main inputs for periodic reviews of partners, employees, management team members?” (respectively)

Research methods Finding #7 HR must take a seat at the table for partner PM by building credibility

Role of HR in designing and implementing partner performance reviews HR involvement in the periodic review process for partners remains very limited – yet more important is the difference in perception between owner and HRD. Question: “How closely is HR currently involved in the design and implementation of periodic reviews?” HR point of view Owner point of view

Use of performance analytics: gaining credibility through data-based insights Performance analytics - the application and analysis of data to produce actionable insights about people and performance. Question: “To what extent are performance analytics (HR reporting, data visualisation, etc.) used in discussions over performance of?”

Research methods Finding #8 Technology is the enabler to make the process easier for everyone

Skills: improving partner and manager skills through training is the number one priority Trend line: respondents tend to agree on where priorities lie Question: “What are your priorities for improving the periodic review process in the coming 1-2 years?”

Research methods Best practice: where to from here?

Preliminary findings 1. Firms want more regular formal and informal conversations 2. The US-led debate about PM is off the mark 3. Honest feedback is the most important outcome of PM 4. Developing partner and manager skills is a priority 5. Project-based feedback is seriously lacking in law firms 6. Financial metrics are still skewed to personal financials 7. HR needs to take its seat at the partner PM table 8. Technology is the enabler for streamlined PM

Future of performance management Traditional approachFuture approaches Annual formal reviewsQuarterly / six monthly formal reviews Assessment focusedDialogue focused Periodic collection of feedbackJust-in-time project-based feedback Annually updated objectivesOngoing objectives updates Single source feedbackMulti source feedback Paper-based, bureaucratic form-fillingOnline, simple and intuitive systems Personal financial metricsPersonal and team financial metrics Personal competency focusTeam competency focus Narrow focus on outputsBalancing inputs and outputs Opaque compensation processTransparent compensation process Compliance focusedBusiness intelligence, analytics focus HR drivenSupervisor, employee and HR driven

Best practice framework Adjust leadership approach Increase use of technology Evolve ways of working Increase / improve use of technology Save time; replace manual processes with technology Streamline and simplify existing technology Build HR’s analytics capabilities (and in doing so improve HR profile and credibility) Adjust leadership approach Designate performance management as the key link between positioning, strategy and behaviour Make it important: establish good practices in your firm‘s DNA; hold people accountable Improve participant skills in as coaching, feedback, objective- consensus and decision- making Engage senior HR in partner performance management Evolve ways of working Tightly link business planning, performance management and remuneration processes to for effectiveness and efficiency Increase frequency of formal and informal conversations; praise good performance and use strengths-based dialogue Review contribution areas and ratings for l appropriateness (be nuanced if necessary) Abolish forced rankings Broaden and balance what performance measures Implement after action reviews as routine business practice

Research methods Conclusion Firms want evolution; more formal and informal performance conversations, kept short and simple, and enabled by technology

Questions? Performance Management in the Professions 2015: research and findings David Meagher Head of Analytics