June 6, 2005
Return on Partner Effort
I’m always alert to new ideas or concepts to help a firm improve fairness in its compensation plans. Just as I am interested in new ways to track firm performance to keep long-term firm health and short-term partner interest balanced.
Friedrich Blase's article in the "ABA Law Practice Management Section" June issue of Law Practice is a must read. Blase introduces the concept of ROPE, return on partner effort. Essentially, it is annual margin (profit after all expenses other than partner compensation) divided by the total worked time of all partners (billable and non-billable). The resulting measurement provides a key indicator of the firm’s efficiency for converting partners' efforts into income. The resulting measurement is the amount of margin, in dollars, produced by one hour of partner time, time worked on both engagements and non-billable activities, including time spent managing the firm or making rain.
What is important about ROPE is what happens from year to year. Is the trend going down, remaining level or going up? ROPE tells us if the partners are working smarter or harder, it forces management’s attention to the effort being invested in the firm by each partner.
It eliminates much of the frustration on compensation issues within a firm. ROPE requires treating all time spent on firm activities as worked time. Many firms and/or partners within firms tend to record only billable time. However, making the necessary change to record all time appears well worth it. As Blase expands, “Most of the problems in law firms, as well as the partner’s frustrations, lie in areas of non-recorded time. Improving performance on these issues—which take up considerable partner time but rarely find their way into assessments of individual or collective performance — can make a huge difference”…“ a sea change in partner satisfaction and, hence, in partner retention.”
Read this June article in the Law Practice magazine in its entirety. It is worth your time. Friedrich Blase is a partner in Edge International, www.edge.ai, and previously practiced law with an international firm.
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Filed under Compensation, Management by Tom Collins