Partners, managers, and associates at professional services firms are some of the hardest working people I know – accountants, bankers, consultants, lawyers, marketers, etc. I started my career as a management consultant. During bad weeks, I would work 90+ hours in addition to 10 hours of travel to make sure that we provided the perfect deliverable for our clients.
In this blog, I want to discuss why professional services firms need, not just good, but great performance management systems. By performance management, I am referring to a set of activities – goal-setting, feedback & recognition, and formal reviews – that are designed to develop and motivate employees. Many professional services firms still use annual reviews – a practice that most consider completely broken.
1) Talent is the most important asset
Many companies talk about how talent is their most important asset. This is especially, and literally, true for professional services firms. At the end of the day, employees and their work, whether it’s a budget, strategy presentation, legal document, or advertisement, are what professional services firms are selling to their clients. Therefore, employee development and retention are not nice-to-haves, they are absolute must-haves.
2) Nature of the operating model
There are aspects of professional services firms’ operating model that just don’t work well with the annual review process.
They are truly agile organizations – employees work in different roles, with different managers and teams, across different clients all the time. Depending on the type of projects/deals, employees could be changing teams as often as every two weeks. It’s impossible to accurately remember who did what (or even just the “who” part) all at once, at the end of the year. Recency and other biases have significant impact. Also, it’s often difficult to assess employees’ work/contribution quantitatively in a meaningful way. For example, what is your “KPI” or “OKR” as an associate consultant? Number of hours worked? Number of pages produced? These are not meaningful.
While OKR- and KPI-driven performance management works for many types of organizations, it isn’t ideal for professional services. Rather, these employees need a system that is more competency/skill-based, using effective feedback to develop and motivate them.
3) Insecure overachievers
This is a common phrase in the professional services industry, and it highlights the employees’ desire to always achieve and push for more. Most employees want feedback and recognition constantly – they want to know how they can improve. Constantly. It’s easy to see why annual reviews just don’t work (or even quarterly reviews).
4) Competition for talent
Competition for talent has become more difficult for professional services in recent years, largely due to the rise of the world of tech and startups. Professional services firms are no longer able to retain employees, especially the Millennials, by simply leveraging their brand names and paying hefty bonuses. These firms have to do more. Great performance management systems help – they enable employees to develop skills, track their progress, and create meaningful relationships in the workplace. These are top drivers of employee retention.
We covered four main reasons why professional services firms need great performance management systems. If you are looking for a performance management solution, check out Pavestep. We are the one performance management solution that is made for the professional service industry. Connect with us!