Performance management in professional firms: a case study

“Performance management is a means of getting better results from the organisation, teams and individuals within an agreed framework of planned goals, objectives and standards.” (Armstrong and Murlis 1994)

Background

Most professional firms are small or medium sized organisations managed by people who have professional qualifications in their specialist area, such as law or accountancy, but have received little in the way of formal managerial training and so may lack the appropriate expertise. There is a constant need to generate fee income so they also frequently lack the time or the inclination to concentrate on human resource management (HRM) issues. Some firms appoint practice managers to deal with some of the operational issues but these may be regarded as fairly junior appointments compared with the partners who actually make the strategic decisions.

There is a growing recognition by such firms that their main resource is the knowledge and skills of their staff, and they neglect the development of these at their peril. Their main source of competitive advantage is to provide a better service than other firms but as increasingly they are being asked to quote fixed fees for their work this better service cannot take increased time. In addition many clients are looking for quality assurance ‘kitemarks’ awarded by external bodies, such as BS5754, or Investors in People status.

The firm

This was the situation faced by Osborne Solicitors who decided they needed help with performance management in order to compete more effectively for business. Their large commercial clients were increasingly appointing firms to ‘panels’ of approved suppliers and the criteria for admission were stringent, relating not just to professional matters but also based on evidence of sound HRM policies and procedures. The firm had in the past operated in a very traditional manner, in which ‘matters were agreed between gentlemen’ but this was no longer sufficient to secure new business. There was a recognition of the need for change at the highest levels.

Structure of the firm

There are 24 partners and 45 other fee earners, plus 68 support staff. They are spread over four locations with between 15 and 60 miles separating the offices. They specialise in litigation for large commercial clients. These clients have themselves been subject to cost cutting in their own industries, and are therefore looking for more transparent pricing from their suppliers and more work on a ‘fixed fee’ rather than ‘hours worked’ basis.

Decision to introduce a performance management scheme

The firm was keen to achieve Investors in People (IiP) status as they felt this would help them to be included on the list of preferred suppliers for their major clients. In order to achieve this a number of criteria must be satisfied, including having a performance appraisal scheme in order to identify training and development needs. The achievement of IiP requires firms to set business objectives, assess the training needs of their staff and implement appropriate training and development.

Design of the scheme

I was invited into the firm by the managing partner to explore what form of appraisal scheme might be appropriate. However it was also important to sell the idea to the other partners, and the staff, in an attempt to convince them of the potential benefits and to try to allay their understandable fears. I drew up a policy document outlining how the scheme would operate and also the necessary documentation. A number of decisions had to be made about the type of scheme which would suit the culture of the firm.

One of the major decisions to be made concerned whether the outcomes of the appraisal would be related to salary increases in any way. This is a typical area of concern. On the one hand it seems fair to pay the better performers more money than the poorer ones. However a scheme which is intended to improve the knowledge and skills of the staff is less likely to be successful if during their appraisal interview they are conscious that their pay increase will be based on how competent they appear to be. If the scheme is intended to improve the knowledge and skills of the staff then it is important that they are honest in terms of identifying areas for further development.

The scheme includes a self -appraisal form as it is felt this helps to encourage the individuals to take responsibility for their own development. The staff who would carry out the appraisal interviews were identified. It was decided that no one appraiser should appraise more than six individuals as this should ensure they were able to devote the necessary time to the process. They were all given a one day training course in order to ensure they were familiar with the aims of the scheme and had an opportunity to practice the skills involved in setting SMART objectives and conducting the interview. SMART objectives are Specific, Measurable, Agreed, Realistic and Time-bound and are easier to apply for some behaviours than others. For example, it is relatively easy to set an objective for a fee earner which says that they should increase their chargeable hours by 5% over the course of the next year. However it may in fact be more important to the firm that they spend time on training some of their junior staff or increase the profile of the firm by becoming more involved with the relevant professional body. These are more difficult to specify in SMART terms so it will be necessary to identify appropriate performance indicators in order to assess the extent to which progress has been made.

They were encouraged to think of more innovative methods of staff development, such as shadowing, rather than just thinking in terms of attending a training course. Every partner in the firm was appraised by another partner and at the end of this process a review was undertaken to check if any changes to the scheme were required before rolling out the appraisal to other members of the firm.

The appraisees were also given the opportunity to attend a one hour training course during which the aims of the scheme were outlined, the paperwork was reviewed and they were given the chance to voice their concerns and questions. The message was very clear that they would get out of the scheme only what they were prepared to put into it.

The remaining interviews were conducted over the next two month period, and again an evaluation was undertaken to see if any further changes needed to be made. Some revisions were made to the scheme mostly relating to the documentation to ensure that it was absolutely clear how the forms were to be completed and where they were to be sent. All the forms were reviewed by the practice manager in consultation with the managing partner to ensure that the scheme was being operated as intended. As a result of this process some changes were made to the scheme and further refresher training was provided for the appraisers.

Problem areas

The following points were identified as a result of the evaluation of the first round of appraisals:

Need to ensure the documentation is very clear in terms of what information is recorded where and the route the paperwork has to follow.

During the first year of the appraisal the business objectives were still being clarified which made it more difficult to relate an individual’s objectives to the firm’s objectives.

The issue of confidentiality was important to ensure a balance between encouraging openness on the part of the appraise as they knew who would have access to their completed form, but also providing necessary information to team leaders to enable them to plan the work of their teams.

It became clear that some of the original appraisers lacked the necessary interpersonal skills to conduct the interviews.

Some appraisers said they found it difficult to find the time to carry out the necessary preparation.

Some appraisers found it difficult to set SMART objectives.

There was insufficient time spent on monitoring and feedback during the course of the year, particularly in ensuring that identified training and development took place.

It was difficult to set objectives for some more senior staff as there is no clear career progression for them to follow.

Design of scheme

Main issues

Link with pay or not

There has been a long running debate in the literature as to the advantages and disadvantages of linking pay with performance. I was clear that in this situation where the main objective was to improve the knowledge and skills of the staff, linking their appraisal to pay would reduce the acceptability of the scheme. Once the principle of appraisal is well accepted it may be possible to review this situation.

Performance ratings or not

Some schemes use rating forms which rank people on scales from 1 to 5 in terms of their supervisory ability, technical skill etc. These are likely to be particularly important if the final outcome is to be related to a salary increase. There is always a danger with such rating schemes that the central points will be used to the exclusion of the others, and that mangers vary in how they view staff so the same person could get different grading from different managers. There are techniques to try to overcome these tendencies but I feel there should be a sound reason why rating schemes are needed in the first place.

Open or closed

At one time it was relatively common for appraisals to be written privately and for the comments not to be shown to the individual concerned. This has become less common over the years, partly as a result of cultural change and partly in line with legislation such as the Data Protection Act which is bases on the principle that the individual has the right to see the information which is held about them

Measurable objectives

If the scheme is not to include rating scales there is a need for some other method of seeing how the individual has performed over the year. The concept of ‘performance by objectives’ has a long history and is based on the principle that if each individual is set objectives which are in line with business objectives and works hard during the year in an attempt to achieve them, then the business itself should achieve its objectives.

Links with business objectives

It is perhaps the case that many professional firms have not clarified their business objectives, beyond trying to increase the level of profits, in the way that is more common for larger commercial organisations. Although the bottom line will always be important, concentration solely on this aspect may hinder the development of the business in order to help it to react and anticipate changes in the business environment.

Lessons to be learned

Commitment from senior mangers is essential.

However even where this has been achieved there is still a need to convince others of the benefits to be achieved. In the firm under consideration the introduction of performance appraisal was just one initiative of many, including a move to team working and the introduction of greatly increased information technology, and many staff were feeling shell shocked at the pace of change.

Staff may leave the firm.

Any change can be experienced as stressful and some staff may not like the new way in which things are being done. Other staff may realise that their particular skills and interests are no longer as valued by the firm and decide to part ways as a result. This may actually be an advantage as it provides an opportunity to find new staff with the required skills and abilities, so long as only a relatively small number react in this way.

Need for clarity about where business is trying to go.

There will always be a number of directions in which the firm can go in terms of entering new markets or winning new clients. The danger is that no clear priorities are allocated and if everything is a priority then in practice nothing may be a priority.

Staff must be clear about what the scheme is trying to achieve.

Both appraisers and appraisees must be clear about the objectives, and in particular not using the appraisal interview to deal with issues which should have been dealt with by a disciplinary interviews at the time an incident occurred. It is a two way process with the two individuals working together to achieve the identified objectives.

Appraisers need training in order to win their commitment.

Busy people need convincing that the time they spend on an activity will bring them benefits. If a busy manager spends no time on preparation and carries out a perfunctory interview then it is hardly surprising that they can see no real improvement in the performance of the staff they appraise.

Give them an opportunity to practice the necessary skills

Not everybody possesses the skills likely to lead to a productive appraisal interview, but it is the same skills of feedback, coaching and leadership that are likely to determine their performance as a manger over the year. If appraisers can see the links between the way in which they conduct the interview and the way they communicate with their staff throughout out the year, they are more likely to consider it worthwhile to spend time developing their skills in this area.

Paperwork must be monitored

One of the most damaging outcomes of an appraisal interview is when nothing at all happens as a result as then it can be truly said to have been a waste of time! If training and development needs are identified then action should be taken to ensure this is carried out, or feedback given as to why this will not be possible at the present time. One of the objectives that the appraisers themselves are set should involve whether they are developing the staff who work for them and the report s of the appraisal interviews are one way of monitoring this.

Review and evaluation with necessary changes made

Any scheme will need to change over time in line with other developments in the business environment and changing views as to what is considered to be best practice. A balance needs to be struck between constantly making changes without allowing previous changes to bed in, and allowing a scheme to become stale and out of line with current needs. 

Grant H.