Using the balanced scorecard to improve partner performance

"Not more clever management tools!" our partners cry. But the balanced scorecard, I believe, is worth a good look. After all, millions of businesses have used it, so why would we not?

What is the balanced scorecard?

In 1992, Kaplan and Norton developed the idea of a balanced scorecard as a performance management tool to align the operational activities of a business with its larger-scale objectives.

The balanced scorecard introduced the idea that not only financial outcomes should be measured but also operational, marketing and development inputs. The underlying rationale is that organisations cannot directly influence financial outcomes because these are a measure of the past. So, the organisation must instead measure those areas where direct management intervention is possible to influence the future performance of the business.

The balanced scorecard highlights four areas of measurement to assess performance:

1. clients: market share, customer retention, customer acquisition, customer satisfaction and customer profitability;

2. best practice: identification of market, delivery and service to clients;

3. people: employee capabilities, productivity, motivation and alignment; and

4. financial: revenue, growth and cost management.

A simple quadrant based around these four headings is created. Each quadrant contains a series of objectives for the individual or team. Behind each top-line objective are a series of specific goals that can be measured regularly to test if the objectives are being met.

The balanced scorecard will be tailored to the aims of each business, although many of the objectives and goals of different businesses will have similarities.

How to use the balanced scorecard

Turning to the practical application of the tool, the partner agrees with his manager the objectives under each heading. Many of these will be generic, but others will be tailored specifically to the individual partner. It may be appropriate to set extra goals for partners who have, for example, management responsibilities.

The partner and the manager will timetable regular meetings to discuss the objectives in the scorecard. The meetings should complement the partner's annual appraisal and will give the partner an opportunity to discuss his progress in meeting his appraisal objectives.

The balanced scorecard is a tool that is designed to encourage, support and reward good behaviours. For the system to motivate people and hold them accountable, there has to be an element of reward and, if appropriate, penalty.

To achieve this effectively, it is important that the manager responsible for the scoring participates fully in the decision about reward. The results will also be taken into account in any decision about a partner's career prospects. Training or coaching needs will be identified during the regular meetings.

A transparent tool

Used properly, the balanced scorecard can be a very powerful tool. It will remind partners of their responsibilities and encourage them to align their actions with the aims of the firm. It is a mechanism that explicitly recognises and measures total contribution.

A balanced scorecard demonstrates to partners that it is not just their financial performance that is being rewarded or penalised but that their total contribution is taken into account.

The performance of partners can be managed against total contribution by linking it directly to the reward system and their career progression. The behaviours expected from partners will be integrated within the targets being measured, which will encourage partners to modify their behaviours, as necessary, to achieve the desired outcomes.

Do you agree? Should we use the balanced scorecard in law firms?

Guy Vincent is a partner and the former managing partner at UK law firm Bircham Dyson Bell (www.bdb-law.co.uk). He specialises in legal and management issues facing law firms.