7 Partner Evaluation

 

Being an equity partner in a law firm means being a co-owner, not an employee. Most partners value their autonomy and independence fiercely. Managing a law firm partnership has been described as herding cats, and for good reason. Yet in one respect, partners are treated as if they were employees: they are subjected to an annual partner evaluation.

In the corporate world, the annual performance review has been widely studied and is widely criticised. More than a third of US companies have abandoned the traditional annual appraisal. They are seen as time-consuming, demotivating, inaccurate, biased and unfair. Most employees believe their managers do not get the review right. A McKinsey survey found that most CEOs do not find the appraisal process in their companies helps to identify top performers.

Remarkably, the legal industry takes a different position. Most law firms conduct an annual partner appraisal, often because it is directly tied to compensation. The question worth asking honestly is whether law firms are actually able to conduct meaningful and unbiased performance appraisals that result in improvement over time, or whether the whole exercise is something else.

 

 

Personal development

The shift toward using partner evaluation as a developmental tool is a relatively modern phenomenon. For much of the twentieth century, law firm partners were viewed as independent guild members who shared office space and expenses but retained total sovereignty over their practice. Evaluation, if it happened at all, was purely retrospective and financial. The conversation was typically a brief notification of the year's profit share, not a dialogue about skill gaps or leadership. The prevailing belief was that by the time a lawyer reached the partnership, they were fully baked. Any attempt by a managing partner to develop or manage an experienced peer was seen as an infringement on professional independence.

 

That began to change as law firms grew larger and more complex in the 1980s. As firms became multi-office enterprises, they hired professional managers from the corporate world who brought with them the belief that behaviour could and should be developed. At the same time, in-house counsel began demanding project management and service consistency. This created a practical need for partner development: an experienced litigator might be a brilliant advocate but a poor manager of a twenty-person team. The evaluation began to evolve from a financial report card into a diagnostic tool for acquiring the skills the market was now demanding. Today, the idea is broadly accepted that even a twenty-year veteran has blind spots and that the partnership benefits from surfacing them. The question is whether the annual review is the right instrument for doing so.

 

 

Groundhog Day

Over many years of practice we have observed little real improvement as a consequence of annual partner evaluation. It seems like the same conversation is repeated year after year. The partner who needs to delegate more has been told so for five years. The partner who should develop a succession plan for their key client is still the only person the client calls. The issues are identified. The behaviour does not change. The conversation begins again twelve months later.

 

This is not surprising when you examine the structure of the annual review. Feedback must be close to the event to be effective. A football coach who only discusses performance once a year, long after the matches have been played, will not produce a better team, however talented the players. The same principle applies to partners. The annual review is too far removed from the behaviours it is intended to address. By the time the conversation happens, the evidence is stale, the context has faded, and the partner's defences are fully prepared.

Research supports this. The meta-analysis by Kluger and DeNisi[1] found that in nearly one third of cases, performance feedback actually led to a decrease in subsequent performance. When a partner leaves a meeting feeling that the feedback was anecdotal, biased or merely a box-ticking exercise, the result is not improvement. It is disengagement. The most successful interventions are those that provide feedback close to the moment and as part of a continuing conversation, not as an annual event.

 

 

Rationalising compensation

Lawyers prefer to believe they base decisions on facts. The legal profession is built on meticulous analysis of all available evidence, and using that as the foundation of a strategy. It comes as no surprise that intuition and gut feeling score particularly low as bases for decision-making among lawyers.

This is especially true when it comes to dividing the profit. Partners value clarity and predictability. The lockstep model provides both, and so does eat-what-you-kill. The modified lockstep, which is the most widely used model, provides neither. It inevitably contains a mix of performance indicators, some measurable and some not, that are used to decide on each partner's compensation. No two modified lockstep systems are the same, and for an individual partner it will be hard to predict with certainty what their compensation will be at the end of the year.

 

The annual partner review serves a specific function in the modified lockstep: it is the ritual that gives rational legitimacy to the inherently subjective process of compensation under a modified lockstep. The compensation committee are the judges who settle the argument. Lawyers are accustomed to the idea that a judge's verdict closes the matter, even if they disagree with it. Perhaps this is partly why they accept the judgement of the compensation committee more readily than employees in other organisations accept their performance reviews.

 

In reality, all the flaws that come with annual employee performance reviews apply equally to annual partner compensation reviews. They are not objective, they are often based on anecdotal evidence, they are subject to recency bias, and they have a tendency to confirm the status quo rather than disturb it. It is in effect a flawed ceremony that provides compensation decisions with an aura of factual objectivity.

 

 

How to train your dog?

Dog owners will know that the way to train their pet is by using instant reward for the good behaviour and instant correction for the bad. It would not make sense to introduce a long delay between behaviour and response. The connection must be immediate or it is lost entirely.

 

Anyone who has raised children will recognise a certain similarity. Young children also learn best from immediate feedback. And arguably the same principle applies to adults. Imagine a football coach who does not discuss and provide feedback after each match, but only on an annual basis. Such a team would surely not become successful, even with talented players. Learning and development only happen if feedback is provided consistently and close to the event. This is the principal reason why annual reviews are not an effective tool for changing behaviour.

 

When asked, law firm leaders invariably state that the annual partner review is an important tool for partner development. The data we have accumulated across our client firms over many years suggests otherwise. We track changes in performance of individual partners across a number of firms and the finding is consistent: partner performance, with the exception of young partners in their first years, remains largely static. The partners who bring in the most revenue and those who trail at the bottom remain predominantly the same from year to year. This clearly indicates that the annual partner review is not an effective tool for improving a partner's performance.

 

 

The haves and the have-nots

Because the amount of net profit in a law firm is the result of a financial equation and therefore limited by definition, dividing the profit pool involves real trade-offs. In order to satisfy the rainmaker stars, there is no alternative but to reduce the profit share available to other partners. In Chapter 5 we explain the effect on a firm's profitability when a small number of outperformers decides to leave. Managing partners are aware of this and will go to great lengths to keep rainmakers happy, including through generous compensation.

 

When profit distribution starts with keeping the top partners satisfied, one might argue that the distribution of the remaining profit has elements of a formality. The pool that remains after the top partners' share is limited, and the other partners will often receive less than a purely merit-based assessment would suggest. In reality, the compensation committee tries to keep the rank-and-file partners sufficiently content, which can only be done by compressing the share available to those at the bottom. These dynamics mean that the annual partner review has very limited room to change an individual partner's compensation. The haves remain the haves and the have nots remain the have nots. A partner might receive an occasional bonus, but other than that most are locked into their bracket, and very little changes from year to year.

 

Annual partner review: waste of time?

If the annual partner review fails to help partners perform better, and if it is already largely clear from the outset in which bracket a partner will end up, why go through the process at all? As we have said, the review serves as a ritual that gives rational legitimacy to the counter-intuitive subjectivity of partner compensation. That may be a reason, but is it sufficient?

 

The partner review process is also extremely time-consuming. It takes at least two hours per partner for each member of the compensation committee, plus at least one hour for each individual partner. Multiply this by the hourly rate and the investment in potential revenue foregone is considerable, with no demonstrable return in the form of improved performance. From a firm's financial perspective, going through the motions of the annual partner review is difficult to justify.

 

This analysis describes what evaluations produce when they are done badly, which is most of the time. The picture changes when they are done well. Partners do not change radically as a result of an annual conversation. People are largely who they are. But that does not mean nothing can shift. A partner who has never been told clearly that their delegation behaviour is costing the firm in associate retention may simply not have registered it as a priority. A partner who has always assumed their client relationships are solid may have no idea that two of their key contacts have been quietly testing other firms. The annual review, when it surfaces real information rather than recycled generalisations, can move someone who was not paying attention to something that matters. We are not going to turn turkeys into squirrels. But a turkey that understands what is expected of it can become a better turkey, and in a partnership of fifty or a hundred partners, that adds up.

 

Consider the experience from both sides. From the partner's perspective: assuming all partners are accomplished lawyers, they will not enter the review without a strategy. Lawyers are trained to explain, to persuade, to deflect criticism and to frame events in the most favourable light. Any criticism will be contested rather than internalised. The objective is to walk away intact financially, not to be improved. Most partners will not leave the review feeling motivated, energised and ready to do things differently.

 

From the perspective of the review committee: the task is to deliver the message that the partner will once again end up in roughly the same bracket as before. The arguments will be based on financial data from the firm's systems and on anecdotal observations and hearsay. Partners in different practice groups or different offices often have no firsthand knowledge of each other's work. They do not know the other partner's most important matters, their handling of difficult client situations, or many other aspects that matter for a genuine assessment. The committee is supposed to provide meaningful feedback on incomplete information while simultaneously avoiding demotivating the person in front of them. None of this is easy or particularly productive.

 

 

Lockstep, EWYK and black box

So far, we have concentrated primarily on the modified lockstep, but what about partner evaluation in other compensation systems?

 

In an eat-what-you-kill system, partners keep what they earn minus agreed costs. If the cost attribution metrics are clear and well defined, there will be no need for a compensation committee. EWYK is a cooperation of individuals who retain a high degree of autonomy. Partners cannot technically be underperforming in the institutional sense, because any shortfall in revenue harms only themselves. Where firms include other elements alongside individual revenue, a conversation may be needed to explain and justify the outcome, but if all criteria are mathematical and objective, each partner can do the calculation themselves.

 

The pure lockstep, while an endangered species today, has its own evaluation dynamic. Some lockstep firms have implemented gates, outlined in Chapter 3. To pass the gate, a partner must fulfil certain pre-set criteria. Most will be objective, such as generating a minimum level of revenue; others will be more subjective, such as business development capability or leadership. When subjective elements enter the equation, explanation and justification become necessary. Lockstep firms must also be permanently alert to structural underperformance, because the model only works when everyone on the ladder is contributing at a sufficient level. Early identification of a partner who is falling behind can help address the situation before it becomes a larger problem.

 

The black box compensation model, described in Chapter 3, is the only partner compensation system that cannot exist without a compensation committee having a substantive annual conversation with each individual partner. The black box is opportunistic and subjective by design. There are no metrics from which a partner could calculate their own outcome. The committee decides and must communicate, which makes the quality of those conversations more important in a black box firm than in any other system.

 

 

Partner evaluation as a tool for coaching and development

The annual partner review is intended to serve two distinct purposes. The first is communication on the size of a partner's compensation after the fiscal year has closed. The second is coaching and development: using the evaluation as a tool to help a partner build a stronger practice.

 

As we have outlined, for coaching and development one conversation a year will not do much good, especially when that conversation is also connected to compensation. Feedback must be much more frequent, ideally close to or during the relevant event. The setting must also be safe. This means that for feedback to be meaningful for development purposes it must be decoupled from compensation. One can also question whether the managing partner or a member of the compensation committee is the right person to deliver developmental feedback. The managing partner will often be too far removed from the partner's day-to-day practice to provide specific and credible observations. The compensation committee carries too much financial association for the partner to feel genuinely safe in the conversation. Probably the local practice group leader is the best positioned person for the job, and this is a role that should be formally recognised as part of their responsibilities.

 

Traditionally, very few firms have regarded coaching and development of partners as a structural part of a practice group head's role. We think this should change. Talent is the capital of a law firm. Developing and growing that talent makes sense from a straightforward business perspective. Any increase in revenue resulting from partner development translates fully into profit, because there are no additional costs attached. But development is not only about revenue. Better partners attract better mandates, which add to the reputation of the firm, the practice area and the partner individually. Stronger reputation attracts still better mandates, and the upward spiral continues. Investing in partner development and coaching is probably the best investment a law firm can make. So why is it so rarely done in a structured way?

 

The explanation is probably complex. Partners value autonomy and equality, and there is typically a significant threshold of hesitation to overcome before offering feedback to a fellow partner, or before accepting it. We also suspect that, quietly, the strongest partners are content with a status quo in which they remain dominant. Making other partners stronger creates competition. It might draw clients toward others or reduce their own influence within the partnership. Perhaps strong partners simply do not want other partners to become stronger. If this is true, it is a damaging dynamic that no compensation formula can correct on its own.

 

 

The psychology of the evaluation conversation

Evaluating a fellow partner is a psychological tightrope walk. Partners are legally and culturally co-owners, yet the evaluation process temporarily casts them in the role of a subordinate receiving feedback. For a managing partner, providing constructive criticism to a peer who may be older, have a larger book of business, or have even been a mentor in the past, requires navigating a series of genuine psychological barriers.

 

The most significant is the fear of destabilising the firm's economics. When a managing partner evaluates a high-performing rainmaker, there is an implicit threat of exit. The evaluator often softens or omits critical feedback because they fear the partner will feel insulted and take their book of business to a competitor. This creates a feedback vacuum at the very top of the firm, where the most powerful partners, who often have the greatest influence on firm culture, receive the least genuine developmental guidance.

 

There is also a competence problem on the part of the evaluator. Most managing partners were trained as elite practitioners, not as coaches. They may feel genuinely out of their depth when trying to give feedback on leadership style or interpersonal dynamics to a peer. To avoid this discomfort, the conversation often retreats into the safety of hard metrics, effectively abandoning the developmental dimension of the meeting.

 

On the receiving end, many senior partners experience any feedback as a challenge to their professional identity. For decades their sense of self-worth has been built on being the expert who has the answers. The suggestion that they need to develop their delegation skills or modernise their approach can be perceived as an attack on their core standing. This often triggers defensiveness, where external factors are blamed rather than behaviour examined. The managing partner, sensing this reaction, steps back from the harder points, and the conversation ends without anything of substance having been addressed.

 

Unlike a corporate CEO who has structural authority over a subordinate, a managing partner's authority is contingent: it exists only as long as the partnership continues to grant it. The person being evaluated today may be voting on the managing partner's re-election next year. This creates a mutual non-aggression dynamic that makes genuinely honest evaluation extremely difficult. Both parties know the cost of a real confrontation, and both quietly choose to avoid it.

 

Bringing in an external party to facilitate the evaluation, whether a senior HR professional or an external advisor familiar with the firm and the industry, can help break this dynamic. It shifts the source of the feedback from peer judgement to collected data, and it allows the managing partner to act as an ally in the partner's development rather than as a judge. In our experience, this makes the conversation both more honest and more productive.

 

 

The difficult conversation

Evaluating a partner who generates exceptional revenue but damages the people around them is the ultimate test of a firm's governance. The financial dependency is real and the managing partner knows it. The result is usually that the behaviour is tolerated and the review produces no change.

 

The most effective approach is to frame the conversation in financial rather than personal terms. Abrasive behaviour is not just a character trait; it is a cost. It manifests in high associate turnover, increased recruitment expense, and the suppression of cross-selling because colleagues prefer to avoid the partner's involvement. Presenting the managing partner's own calculation of what the partner's leadership style is costing the firm keeps the conversation within the partner's professional comfort zone. The argument is about economics, not personality, and the partner can engage with it on those terms.

 

A useful structural tool in this situation is decoupling the base profit share from a cultural component. The partner is paid their market rate for the revenue they generate, which ensures they are not financially motivated to leave. A separate, meaningful component of their potential compensation is linked to team health: retention of associates in their practice group, satisfaction scores from their team, evidence of mentoring and development. This makes the link between behaviour and reward explicit without cutting core compensation to the point where departure becomes rational.

 

A firm that wants to have this conversation credibly also needs to know its own position. That means understanding which of the partner's client relationships are genuinely personal and portable, and which have enough institutional weight that they would survive the partner's departure. When the firm has done this analysis honestly, the managing partner can speak with more confidence. The superstar often senses whether the firm is genuinely prepared to hold a line, or whether the threat of departure will be met with capitulation as it always has been before.

 

 

The 360-degree review and its limits

The 360-degree feedback mechanism is theoretically sound and widely used. In practice, it collides with the power dynamics of professional partnerships in ways that limit its value.

 

When a partner has a reputation for being difficult or punitive, associates and peers will instinctively provide safe, generic feedback. They use cautious language and avoid specifics. The result is a data set that reflects the partner's reputation for making life uncomfortable rather than an accurate assessment of their behaviour. This effectively turns the 360-degree process into a mirror that reflects only what the powerful partner wants to see.

 

At the other extreme, the 360-degree process can become a vehicle for payback. When associates are already planning their departure or peers are in direct competition for the same bonus pool, the feedback can become hostile and tactical. The partner, recognising this, dismisses the entire report as a coordinated attack. The data set loses its credibility before the conversation has started.

 

The most useful application of 360-degree feedback is as a trend tool rather than an annual verdict. A single year of data is too susceptible to the power and political dynamics described above. When the data is tracked over several years across different teams and offices, the persistent signals begin to separate from the noise. A partner who is consistently rated as uncollaborative across multiple cohorts, over multiple years, cannot easily argue that the feedback reflects a single difficult period or a coordinated effort against them. The pattern becomes the evidence.

 

The experience of firms that have used 360 reviews consistently over several years is more positive than the structural critique suggests. The first year is typically the hardest: partners resist the process, distrust the anonymity, and interpret feedback selectively. By the third or fourth year, something changes. Partners have accumulated enough data to see patterns they cannot easily dismiss. The criteria being measured have become familiar enough that people know what behaviours are being evaluated and why. Those who once gamed the process have either stopped or become more subtle about it, and the difference shows in the data. The instrument does not become perfect. It becomes useful.

 

The 360-degree review should be the opening of a broader inquiry, not the conclusion of one. Its real value is in identifying discrepancies between how a partner believes they are leading and how they are actually experienced. Even where the data is partially skewed by fear or politics, the existence of that skew is itself informative: a culture in which people are too afraid to provide honest feedback is a culture that needs to be addressed, regardless of what the actual scores say.

 

 

An alternative method

Having a performance review conversation once a year does not make much sense, as we have explained throughout this chapter. The review is too far removed from the relevant actions, the evidence is anecdotal and partly biased, and the setting is not conducive to genuine learning and development. If the annual partner review is ineffective, is there a better alternative?

 

We have developed a methodology in which partners collect compensation points and receive feedback on a quarterly basis. There is no need to change the mix of elements a firm has decided to include in determining partner compensation. The only difference is timing: instead of once a year after the year has closed, partners earn compensation points each quarter. The clear advantage is that it is already clear throughout the year how many points each partner has accumulated. The only step remaining at year end is to distribute the profit accordingly once the books have closed. Absolute clarity and transparency.

 

The second advantage is perhaps more important. The quarterly cycle provides almost immediate feedback. When a partner knows at the end of each quarter what they have earned and what the evaluation of their contribution has been, they have a genuine incentive to perform differently in the next quarter. The gap between behaviour and consequence is short enough for the connection to be real.

 

This methodology is also not more time-consuming than the annual alternative. Because of the quarterly cycle, predictability is much higher and fewer partners require in-person conversations to understand their position. Partners receive their quarterly performance data in writing or can follow their progress on the firm's intranet. Only a handful will have questions that require a substantive meeting. Our alternative methodology has a higher likelihood of positively influencing partner behaviour and development, while saving a significant number of partner hours that the annual review cycle currently consumes.

 

 

The right purpose for partner evaluation

The traditional annual partner evaluation, treated as a sacred ceremony that transforms subjective compensation decisions into something resembling objective assessment, is a structurally flawed and largely ineffective tool for genuine professional growth. Real-world evidence confirms that once-a-year sessions rarely produce behavioural change. Partners default to ingrained habits within days of the review. The conversation begins again the following year.

 

To move beyond this cycle, firms need to be honest about what the annual review is and is not. It is a necessary communication about compensation in any system with a subjective component. It is not, on its own, an instrument of development. Development requires frequency, proximity to the relevant events, and a safe setting that is genuinely separated from financial consequence. These requirements cannot be met in an annual compensation review, regardless of how skilfully it is conducted.

 

The firms that are most effective at developing their partners treat coaching as a structural part of leadership at the practice group level, create a quarterly feedback rhythm that keeps the connection between behaviour and consequence short, and separate development conversations from compensation conversations so that neither is contaminated by the other. Compensation is the mechanism that legitimises the partnership's assessment of what each partner has contributed. Development is the investment the firm makes in ensuring those contributions grow over time. Both matter. But they are different things, and they need different conversations.

 

There is one purpose of the annual review that these criticisms do not undermine. It is the moment when a partner understands, often for the first time in explicit terms, where they stand in the partnership and what the firm actually needs from them. Not what they think they are contributing, but what the firm sees and values. That conversation about alignment between the partner’s own direction and the firm’s direction is genuinely useful, and the annual review may be the only structured occasion on which it happens. Used well, the review is not just a verdict on the past year. It is an alignment on the next one. By making strategy the frame for the conversation rather than individual performance, the inherently subjective nature of compensation becomes easier for partners to accept. They are being asked to contribute to something specific, not just measured against a standard they did not set.

What the evaluation process reveals most consistently is a challenge that sits at the centre of every partnership: what to do with the partners who are neither stars nor failures. Chapter 8 is about them.

 

[1] Kluger, A.N. & DeNisi, A. (1996). The effects of feedback interventions on performance: a historical review, a meta-analysis, and a preliminary feedback intervention theory. Psychological Bulletin, 119(2), 254–284.