Tuesday, December 05, 2006

Get Your Calculators and Spreadsheets Out. Ready . . . Set . . . Hurry Up and STOP!!!!

I was speaking with a journalist today about our partner compensation system and how it differs from a traditional system. During our conversation we were discussing how some of the most important things in an organization cannot be captured and analyzed in a spreadsheet by a compensation committe. Forget for a moment that spreadsheets exist. Better yet, forget that such a thing as math exists in the world. With those limitations, I want you to make a list of behaviors that you think are valuable to the organization and that ought to be rewarded. Here are just some of the items on my list and why:

Mentoring --> Better knowledge transfer = more challenged workforce = happier people = higher intellectual capital in the firm = lower attrition rates = savings

Internal Referrrals --> More service to clients = firm is more valuable to them = higher loyalty rates = lower "cost of sales" = savings

Leadership --> Good role models = positive influence of people = more productive workforce = profitability

"Good" Business Origination --> Acquiring high-quality clients = challenging work that attorneys enjoy working for = higher productivity = happier clients = higher loyalty = profitability

Service-Orientation --> Better service = happier clients = lower uncollectables and higher loyalty = profitability

Effectiveness --> Better ideas/solutions = better return on invested time = profitability

Trust --> Higher trust levels = higher internal referrals = more services per customer = profotability

Respect and Collegiality --> Mutual respect = better working environment = happier people = lower attrition and higher productivity = profitability.

I could literally go on an on. Do you disagree with any of these? Do you see the link between many of these behaviors and profitability? (If you don't, see an eye doctor immediately, you are likely blind or dangerously close). Take, for example, respect. You all know that it only takes one Grinch to ruin Christmas for a lot of people. . . one partner who is a jerk to make your life miserable. The biggest Gallup study of profit centers ever done shows that people do not leave companies, they leave managers. If your manager is a jerk, you are likely to leave. So, think of an org chart -- If you get one Grinch higher up you are LIKELY to lose top talent in the entire space below them on the org chart costing your firms millions of dollars per year.

Now, if you agree with some of the factors I listed above and you were creating a comp system, you would include them. That is just common sense. So, why is there such a divergence between what we all agree is so important to profitability and what is actually measured and counted in firms? OK -- so you cannot put it in a spreadsheet, so suck it up and realize that letters cannot be turned to numbers. Just because you cannot count it does discount it's significance to your bottom line. Yet, almost invariably the factors that are difficult or impossible to quantify (and at least as important) are not taken into account at all in firms or significantly discounted in weight. As a result, you get an industry full of people just chasing numbers like hamsters on a wheel. Hey Fido, Go Fetch! If they came to Exemplar, they might be asking "Who moved my cheese?"

At Exemplar, we believe that as intellectuals we do not need to dumb down reality "into a spreadsheet" in order to understand its significance to our business. We do not accept the assumption that the most significant performance factors in our business cannot be captured and rewarded. By investing the time to understand what truly matters, we are telling our people that we care about them. . . about recognizing everything they do to drive the business forward. Each person on our team brings to bear their owns strengths and talents and they manifest themselves in many different ways. I would much rather have a team of attorneys chasing their own strengths and talents knowing at every step that we understand their value rather than attorneys who are chasing billable hours and originations because their firm made a value statement that those are the only things they care about. If you were an attorney entering this profession, where would you want to work?

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