March 26, 2007
Law Firm PEP (Profit Per Equity Partner) Under Fire
PEP as a measure of law firm financial performance has come under fire lately. See the Adam Smith, Esq. post Is PEP the Proper Measure of Success?. Profit per Partner is a perfectly legitimate measure of financial return to the owners of a law firm. There are, however, those shortsighted firm leaders who would maximize PEP at the expense of long-term law firm success just as in the corporate world you can find some less-than-stellar CEOs who focus on earnings per share while damaging the long-term value of the business.
How should performance of a law firm be judged? What attributes should management use as its steering points for long-term success? For the answer, you don’t have to look far. Peter Drucker spelled out the eight areas in which organizations create value in the eyes of those to whom it is accountable. The eight key result areas are:
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Customer Satisfaction
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Productivity
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Innovation
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Resources
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Management Development and Performance
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Employee Attitude and Performance
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Public Responsibility
The point is no single metric tells the whole story. The successful organization must address each of the eight areas through its objectives and control systems. It must set goals, measure performance, and hold people accountable in all eight areas. Profit per Partner is just one measure. It isn’t an inappropriate one. Like any other single metric, it can be inappropriately pursued.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
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Filed under Law Firm Bus Model by Tom Collins
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