What’s Wrong with Performance Targets?
Most companies set performance goals and targets for employees and then monitor productivity. Professional services firms do so, normally in the form of billable hours. I've always been skeptical that this was a smart way to motivate great people so I was intrigued when I encountered a highly-successful international law firm, Slaughter and May, that does neither.
"We've never had targets," partner Graham White told me. "They've never really been part of the firm. And historically we were always reluctant to move to hourly rates, for the simple reason that we thought it was better for us and for our clients to have an agreed fee for the job. That goes a long way back. So we do hourly rates, but only when the client insists. Culturally [we'd ] rather bill by a fee for the job."
It isn't just tradition that informs Slaughter and May's approach. It's also derived from an observation of the way that good legal thinking happens. Thinking, in and of itself, isn't confined to schedules, meetings, and clocks. It takes place anywhere and everywhere.
"Sometimes you will wake up with a solution to a difficult issue which has come to you in your sleep. We know that lots of problems are resolved in sleep. Well, how do you bill for that?"
According to White, this approach has all kinds of benefits. Not just sleep-induced solutions, but a better attitude to collaborative work.
"It means that partners are less likely to hoard work," says White. "No one has anything to fear from getting other people involved; it won't impact how much they take home. There's no incentive to work ridiculous hours unnecessarily."
The biggest case against billable hours and targets is that they direct energy and attention away from what matters most: the relationship between lawyer and client.
"Targets militate against investing the extra time or attention, which is what it takes to become a trusted advisor. That's at the heart of what we do–and targets just won't get you there. They don't encourage you to spend time building up the relationship and they don't inspire the kind of creative thinking that makes the relationship both central and special."
Margaret Heffernan is an entrepreneur and author. She has been chief executive of InfoMation Corporation, ZineZone Corporation, and iCAST Corporation. In 2014, she published her fourth book, A Bigger Prize: How We Can Do Better Than the Competition.