No matter how organized any HR department or remunerations committee may be, partner remuneration matters can be time-consuming, complex and, sometimes, controversial.
With so many factors to consider around such an intensely personal issue, the results can cause discontent among partners who may feel the decisions are unfair or the process too complicated. This can affect retention, performance and collaborative behaviors. Patience can wear thin and trust can be eroded. Utopia would be a system that’s both efficient and patently fair for all to see.
Is there a solution to this recurring problem? It may pay firms dividends when it comes to remuneration decisions (forgive the pun) to remember the core objective of remuneration: to drive behaviors in the year ahead that will meet business goals. This may sound obvious but it’s easy to forget among the politics and processes of remuneration; revisiting the fundamentals and having a clear framework can make a real difference, especially when it’s implemented rigorously at the start of the financial year.
We’ve looked at six key areas covering how you can simplify remuneration processes AND deliver better results at the same time through consistent objective frameworks, disciplined assessment criteria, informed KPIs and varied feedback processes.
1. Set clear and consistent objectives from the start
Far more important than tinkering with the administrative efficiency of how remunerations decisions are made is the need to set clearly defined goals, KPIs and objectives for partners to work towards in the first place.
Goals and objectives should be treated as a genuine and detailed benchmark by which you will measure your partners’ performance at the end of the year – not as an arbitrary ‘carrot and stick’ technique.
When agreeing partners’ goals at the beginning of the financial year, keep squarely in mind how these goals will help the remunerations committee to make a fair, fast and informed decision next year – whether that’s weighted towards collaborative behaviors, personal development targets or financial metrics.
Also, it’s important to think about how these objectives will encourage the right behaviors from partners. For example, if firms truly want partners to deliver more revenue based on collaborative behaviors with other practice groups, then there has to be a detailed, SMART objective based on those criteria to work towards and measure against.
- Set explicit, targeted and relevant criteria in objectives
- Encourage the right behaviors from partners by outlining performance metrics at the start of the year.
2. Communicate expectations clearly – and support partners along the way
44% of partners surveyed by the Professional Practices Alliance said that firms are failing to properly communicate the relationship between their performance and their remuneration. It’s likely there’s still plenty of improvement to be had in the area of communication!
Firm’s shouldn’t be keeping the criteria for remuneration decisions a closed secret. By sharing their expectations, partners can understand what behaviors are going to be rewarded at the end of the year. If this doesn’t happen, partners will inevitably make up their own minds about what will benefit them at the end of the year, based on what’s seemed to work in the past – potentially leading to the wrong behaviors or setting partners up for a shock come review season.
Having open communication also makes remuneration decisions transparent and fair. Conclusions are then easily justifiable and based on pre-defined, data-driven factors, removing opinion and feeling from the equation.
- Be transparent with remuneration criteria from the outset to drive the right behaviors and dispel controversy around fairness
- Ensure buy-in to the process from all involved for a smooth implementation.
And remember, on top of communicating properly, firms need to consistently apply their remuneration framework. One of the biggest reported issues with remuneration decisions is a feeling that processes can be unfair. It’s crucial to follow through on the promise of reward set out in previously agreed-upon objectives and build relationships of trust. That should ultimately result in better outcomes for the firm and the individual partner.
3. Set the context to behaviors with meaningful objectives aligned to the firm’s goals
If firms want their remuneration processes to encourage firm-wide thinking – and we really think they should – they need to have a clear plan with meaningful, strategic goals that partners are rewarded for meeting.
For instance, meeting financial targets alone might seem great, but did that happen at the expense of other goals that would be of greater benefit to the firm in future years? In reality, a high-performing ‘rainmaker’ partner may bring in plenty of revenue for the firm through work with a new client, but they may have neglected their mentoring duties with trainees – the literal future of the firm.
In addition to remuneration frameworks, firms should establish common goal categories or objective themes for partners and weight those categories’ values against one another. This allows firms to compare partners’ performances objectively (pun very much intended) come review season. For example, themes could include: expanding existing client relationships, building brand or converting prospects.
A framework of objectives and metrics that cross-references each in the context of other, larger goals, can help remuneration committees accurately assess that difference in the value of a partner’s behavior.
4. Spread out the admin with continuous assessment
Reducing admin isn’t the be-all and end-all, but it does count for something. The ideal scenario is for firms to remove their remuneration decisions from spreadsheets and put them in an online, real-time platform. But they can also cut down the process from months to weeks by spreading data collection over a continuous period throughout the year rather than concentrating it in one go in a performance review.
Regular performance reviews or check-ins also give your partners the chance to course-correct before the review comes around, helping them achieve their goals and get them closer to a healthy remuneration package. It’s a win-win.
Consolidating performance data at regular intervals also allows remuneration committees the chance to pull together the information they need more quickly, as half the work of consolidation is done already.
5. Use colleague feedback to get the full story
Many things firms could be doing to build a culture of continuous, open communication can also help with remuneration decisions. For example, 360° feedback surveys help open up conversations around performance and broaden the scope of information available. Using these kinds of surveys incorporates qualitative information, including the perspectives of partners’ colleagues and peers, into the remuneration process – although objective information is important, remuneration committees don’t want to rely solely on statistics and financial information.
Surveys can help firms get behind the pure stats to see what’s going on underneath – if a partner has under-performed on their financial metrics but associates and trainees say they’ve done an amazing job of managing and mentoring a team this year, it may be that they’re indirectly benefitting the firm in other ways that deserve praise.
6. Communicate the key points
Partner remuneration is a potentially touchy, personal issue that nevertheless affects the whole organization. No matter the specific remuneration committee processes in a given firm, it’s always important to clearly set out which actions and behaviors will make a difference to partners’ remuneration. Starting at the beginning with clear objectives will make a huge difference to the effectiveness, efficiency and acceptance of remunerations decisions.
Or, in other words: transparency across processes, clarity in communication around goals and accessibility of information sources, plus integrating those together, are the key points to tackle when helping partners understand how they can climb the remuneration ladder.