TRP 295: [Legal] How to Incentivize Partners for Business Development with Michael Roch

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high stakes headhunter, author, and professional speaker, Scott Love. You're listening to The Rainmaking Podcast, and my name is Scott Love. Thank you for joining me on the show. This is part of our Sometimes Tuesday's legal specific series.

[00:00:34] By the way, if you're not in the legal industry, and if you're in a leadership role at a professional services organization, this episode is still going to contain useful information that will help you. Our topic title for today is How to Incentivize Partners for Business Development with Michael Roch. Now, Michael guides partnership boards, managing partners and senior leaders globally on architecting strong partnerships and on leading their organizations to competitive growth.

[00:01:00] Michael has advised dozens of organizations to become market leaders in relation to their global partnering strategy, their partner profit sharing, compensation and reward, and their partnership governance, leadership and execution. Go to the show notes where you'll be able to connect with Michael directly. This podcast is sponsored by SharePoint Legal Insights, formerly known as Leopard Solutions, turning legal intelligence into opportunity, and also by The Rainmaking Magazine.

[00:01:30] Don't lose business to the competition. Read this publication and keep business development top of mind. Visit therainmakingmagazine.com today to chart your course to greater rainmaking success. I hope you get some great ideas from my conversation with Michael today. Thank you for listening. Hey, this is Scott Love with The Rainmaking Podcast. Our guest today is Michael Roch, and we're talking about how to incentivize partners for business development.

[00:02:00] Michael, thank you for joining me on the show today. Hello, Scott. Pleasure to be here. Thank you for having me. Absolutely. I've met with probably 70 firms in their offices over the years. I've talked with thousands of lawyers, hundreds of law firm leaders, and this has been a common theme, that you've got the smartest people in the world that sometimes are blindsided by the fact later in their career that I really haven't done much business development.

[00:02:25] Because I thought, because I'm a credentialed expert and I'm really, really good, the business would come to me. And I think that's a problem. So I want to talk with you today, Michael, about how do we solve that problem. Let me ask you this question and start with this. What's the overarching theme that professional services leaders should follow in incentivizing partners to develop business? Yeah, that's a great question, Scott. But I think a couple of things. One, one size does not fit all.

[00:02:55] So depending on your sector, depending on the size of your firm, depending on your partnership makeup, you're going to look at that equation differently as to how do you reward business development, how do you incentivize for business development? The second factor that comes to play is what kind of firm you want to build.

[00:03:15] So a firm that is looking to achieve a lot of growth very quickly is going to look at business development differently compared to a firm that is a very established firm and that is looking to drive out key client relationships, for example. So the business context, the strategic context matters in this. And then third is this pesky issue of culture.

[00:03:39] When we talk about partnerships, each partnership, each firm, because of where it comes from by nation, by origin, will have a different self-understanding of what it means to be in partnership, what it means to be a partner. And therefore, the angle on business development is different also. And I say that because we work with firms globally. So my day starts usually somewhere in Australia in my morning and it ends in my evening in the US.

[00:04:07] It's how partners in different countries look at what partnership means will have a big impact of how we look at incentivizing BD or how do we compensate, how do we reward on the for business development. That's fantastic. And I really think that's an interesting perspective. I've never really considered it like that before in terms of the context of culture. Let me ask you this question. Have you seen law firm leaders bring this up as a topic that they want you to help with? Have they actually seen this as a problem?

[00:04:36] Let me ask you about that. What happens in a firm to where they realize this is an issue? Yeah, so it goes beyond law firms, right? I mean, the professional services sector is quite wide and each sector will have, depending on where it sits in the maturity cycle, it'll have different things it looks at. But across the board in professional services, yes, firms do come to us to help solve a business development compensation challenge. And there are two of the starting point.

[00:05:06] It just depends. So when we have a traditional UK lockstep firm that doesn't really recognize different contributions by different partners, they're the first order of is, okay, well, you know, how do we get this partnership to start recognizing partners differently for their business development successes? So that's a very different starting point compared to often a sort of mid-market US firm where I have lots of different individuals coming together.

[00:05:34] There, I have a very different angle to business development that we need to look in terms of compensation and how we make that work. The firm context matters usually here. Right. That's really interesting. And so what are some of the things that firms have done? Kind of in keeping with the context of the themes, what are some things that they've done? What are some strategies that they've incorporated that have resulted in an increase in business? Yeah, that's a really great question.

[00:06:01] So the challenge often is that, you know, I mean, some firms just want the revenue, right? They just want partners to deliver the revenue. And that's really all I want my partner to do. Then you've got some other firms are saying, well, look, we're doing pretty okay with revenue, but we want to have better quality of revenue. So meaning that my clients become more profitable, the business that I do with my clients becomes more profitable, and I might want to have fewer clients but serve them in a better way so that I can draw more growth that way.

[00:06:31] Or you have clients who come with a pretty stale client base, meaning they're not really all that good at new client development. We've got a bunch of existing relationships. So now we need to see how can I refocus a couple of partners to acquire some new clients so we can renew our client base. So in each of those three scenarios, we're going to look at different things of what comp lever can we tweak in order to help the firm on that journey. And I say that intentionally the way I have.

[00:07:00] It is a lever. No comp system is self-executing. It always requires a whole bunch of other things to come together for growth to occur. So now with that preface, let me start answering your question. I think the first angle that every firm recognizes is that partners are not created equal. So that means I need to let my partners play to their strengths. So I need to sit down with my partners and say, well, okay, you know, Scott, you are really good at getting new clients in the door.

[00:07:30] So this is what I would like you to focus on. And please be successful with that. Then I turn to, I don't know, George of random name. You know, look, you're really good at building out a client once the client has landed. So please, you know, here are, you know, our five clients where we're just, you know, the client is huge. There's no reason why we're only serving that in one service line. We have these other service line we can throw at it. Please, can you focus on these five clients to build them out of it?

[00:07:56] You might have somewhere where it's, you know, junior partner has just been promoted to equity where it's like, well, look, you know, you, you know, we haven't really nurtured you very well in terms of building business at all. Now, please first, you know, pick your five most interesting senior partners and offer yourself up to see how can you help with one particular part of the portfolio to build that out. So the starting point always is if you're going to use comp to help drive growth, what is each partner strong at? But of course, that requires good leadership.

[00:08:25] It requires a good discussion process, good contribution management in my language. I mean, it does, it doesn't run on autopilot. Once I recognize that, then we can, I mean, typically I look at this in three sort of interlocking circles. So one is I've got this bucket on acquiring new clients.

[00:08:45] I've got this bucket on growing current clients and I've got this bucket on protecting those core clients, which, I mean, usually most firms, the client base is such that we've got a few clients that are providing a lot of the revenue, a lot of the profits. So those crown jewels are in a separate box. They're just a separate type of type of client. And then, well, look, when we're talking about acquiring new clients, you know, very simple metrics, right? What does your pipeline look at? What new clients are you landing? What are the initial revenues?

[00:09:14] Is it the right kind of client? Is it in our priority, strategic priority areas? Or is it just random clients that have come through the door? How are you doing acquisition? The how I think is important here too, which a lot of firms ignore. You know, are you a lone wolf? Are you always hunting alone? Or are you actually hunting in a team? So how are we recognizing that team? How are we showcasing that team to celebrate the successes when they come through? I think that takes a lot. And the word I had in my mind, and you even said it was leadership.

[00:09:42] And I think, you know, a law firm leader or professional services firm leader, they need to take that concept of leadership and really develop that as a competency. And not just something they give a nod to, especially in terms of what are the values of your organization? What's the vision of your organization? And then the individuals that are part of that, what you just said, not everybody's a pitcher. You're going to have somebody who's, I mean, there's your sports metaphor for the day or whatever.

[00:10:10] Not everybody's that one, but you need the whole team. I think that's an area. Leadership is an area that's just not top of mind with law firm leaders, which is kind of ironic in terms of developing those skills to identify those differences and bring those people to perform at their maximum level based on who they are. What do you think about that? Yeah, I think that's a really good observation. So here the sectors are different in a way.

[00:10:37] So the legal sector, you've mentioned law firms a couple of times, it's quite a fragmented sector still. So despite the sector seeing massive consolidation currently, it's still in the grand scheme of things compared to accounting. For example, it's quite a fragmented sector in terms of how many players we have. And that has an impact on how mature leadership is.

[00:11:02] So in the largest mega firms, you've got quite mature leadership structures, leadership development processes, all of that sort of thing. In your more mid-market firms, and that does depend a bit on geography. So some countries take leadership a bit more seriously than others. There, it's like, well, leaders, well, I'm managing a partner, but actually none of my comp system takes care of the stuff, right? That's, you often get that, right? The comp system, right? I drive everything.

[00:11:29] That, in my experience, does not work as well than a firm that has a decent comp system and has great leadership. So investing in leadership, I've always supported that. And what do I mean by leadership? So it's not just being gregarious and being a nice guy and sort of being the lighthouse of the firm.

[00:11:46] But it also is about being able to have solid visionary discussions with partners that ties their personal objectives to the firm's objectives and that has good accountability discussions. So you said you're going to do that. You've been off for the last two quarters. How can we help you get this back into place? Super hard discussion to have for any professional services firm leader. But if you've signed up for the job, it's not just an administrative job.

[00:12:16] It's more than a title in a professional firm. It's not like a corporate hierarchy where I can tell you what to do, but I have to be able to make my social system work in the partnership. I have to be able to have a good process and good capabilities, a good framework for how I hold partners to account. And comp is just one tool in that. Right. And that's something that you've seen up close and personal. You've seen that quite a bit working with those law firm leaders that have to have those tough conversations, right? Or not law firm, but any professional services.

[00:12:44] Sure. In some smaller firms, you might be able to do with a bit less, right? It depends on the complexity of the business as well, right? Imagine you've got a firm with, you know, a hundred partners in one office with a relatively defined market. Most partners looking after their own client base. I have a, you know, have it a touch easier than when I've got a international firm in, you know, three continents with, you know, quite a lot of service lines, quite a variety of experience in the partnership.

[00:13:11] Then I've got to have a very different approach to how I deal with this. Yes. Yeah. Right. So what have you seen with a managing partner of a professional services firm? Yeah. You're working with him or with her and you're starting to see them make changes. What are the pitfalls that those leaders need to watch out for so they don't make any mistakes in making adjustments? Yeah. First order is do no harm, right? Right.

[00:13:38] And that goes both for advisors like us and also for the leadership team. So when it comes to making changes to a comp system, if that's what you're asking, then first we look at the size of the change we're looking to drive, right? Is it, is it, is it the benign change or is it something pretty fundamental in the sense of, you know, we used to have a pretty much self-executing tier and bonus system to something a bit more sophisticated where we hold individual partners to their objectives.

[00:14:08] So that's quite a different approach to, to how I operate my firm. If I go from A to B, that more significant change is gonna, in most firms, not the mega firms, but in most firms, you know, with, you know, somewhere between, you know, 12 and, you know, 300 partners, equity partners, that's going to require quite a bit of consultation. It needs people to come on board pretty early that we're running a process for change. We need to get their input.

[00:14:35] We need to give them the impression that they can co-create part of that system because why? Partners embrace what they co-create and they reject what they feel is being done to them, right? So we, we work with our clients both on the content side. What's the best answer for this change in the comp system? But we also work with them on the change side. How far can we push this partnership where it is today? That's what we have firms do, yeah. What have you seen on the non-monetary aspects?

[00:15:05] What can a professional services firm managing partner do in that regard? Oh, that's a great question. So reward covers financial aspects, right? And it covers non-financial aspects. So on the non-financial side, I want, eventually we're going to come back to, you know, how do we look at growing clients? I'll come back to that in just a second. But on non-financials, you can do a couple of things.

[00:15:30] So for the more junior partners, we can give them important projects. We can say, look, you know, our strategy is calling for these 27 things, usually far too many. Of the 27 items, item three is really important. And I'd like you to please leave that initiative and get us to some results. So that's a very nice way to, quote unquote, incentivize younger partners and also to get them used to thinking like equity partners.

[00:15:57] Because what's the difference between an equity partner and any fixed share non-equity partner? My equity partner ideally isn't just somebody who produces, but is also in some respect a co-entrepreneur that helps me deliver growth for the long term. My junior partners coming into equity often aren't used to that, right? They're producing, right? Metrics stay the same, bill of hours, revenue, profit on delivery.

[00:16:22] But what doesn't often change soon enough is the change in mindset that I'm no longer just producing. I've got to do that, but I know I've got to do additional stuff. So giving internal initiatives, I think, is a very nice way to motivate folks. Second is simple recognition. It's, you know, what happens at partners meetings? Do I recognize heroes, individuals, always the same people?

[00:16:47] Or do I recognize teams of partners who are successful together, who have, whatever, landed the client, who have, you know, gone and opened the office successfully and now it's up and running, whatever. The recognizing groups of partners collectively for their collective success has a very high motivational impact. Oh, interesting. And it doesn't cost me anything. I just have to do it. What are some tactical ways with that, besides you mentioned meetings, mentioning people by name and by teams about the good work that they've done?

[00:17:17] What are some other things that you've seen professional services firms have done to really shine a light on those individuals and those teams? Yeah. Well, so you have a couple of options. So one thing that I've seen some firms do is that they operate a token system. What do you mean by token system? What I mean is that, you know, during the course of the year, each partner has 10 tokens or how many ever you want. By example, that they can give away to other partners for helping them out.

[00:17:44] So I will give you a token, you, Scott, because you've helped me out on something, you get a token. It doesn't have to be business development. It can be anything, right? You've helped me solve this problem for my client. You've helped me, whatever. And then we see where the tokens land. The token itself is very motivating, but also then seeing, you know, if I have 13 people who have lots of tokens, often it's not the people that you'd expect.

[00:18:07] So you'd expect all the rainmakers, oh, they get lots of tokens, but it's often the unsung heroes, right? That I've seen work in some firms quite well. The other one that I like to deploy when we come to growing existing large relationships is holding partners to account together. Why do key account programs fail in professional firms often?

[00:18:34] Because I've got two client relationship partners that I've assigned to a client or three or four or five. But come comp time, I don't care what the results are that that client has achieved for comp purposes. I just care about, oh, what's their number? What's their number? Their number? No, no, no. If we can say, look, you know, for these crown jewel clients, for these 12 clients, we've got five partners in each of these clients who are really looking after the relationship globally. We joined those five partners at the hip with respect to that client.

[00:19:02] So the client relationship meets goal, meets the results, revenue growth, profitability, extension service line, whatever the client plan calls for. Then all the five partners where the CRPs do well. The client doesn't do well. I don't extend my service lines. I don't achieve my revenue goals. Then all five partners don't do well.

[00:19:24] If I look at it from that lens, come comp time, has a very different effect for how I can get partners to the hard yards with these more difficult relationships. Is that making sense? It does. It really does. That's really interesting. And I can see that that in itself is a whole core competency that managing partners really need to understand. And I'm sure there's a lot of awkward conversations, not awkward, but challenging conversations to discuss those things. Yes. Let me ask you this question, Michael.

[00:19:53] Let's say you've worked with a professional services firm. Tell me a story of a firm. You don't have to mention the name, of course. But what were the problems that they had before you started working with them? What were the main inflection points, the things where they started doing it? Now we've got some critical mass. What was the result of that organization? Yeah. So typically a client doesn't come to us naked. What I mean by that is they realize they've got an issue with their comp system. They might've tried a couple of tweaks.

[00:20:21] Either they don't think they've nailed the problem or they've reached the end of their solutions that they think they can reach. And that often happens in a couple of different contexts. So one is a firm that starts to bleed a lot of partners, right? And saying, oh, you know, geez, we're losing a lot of partners to a competitor X, Y, and Z, either because they pay more or because they're more profitable. I can't print money, right? We can just change how we allocate the money that the firm makes, but we can help the firm with more success.

[00:20:48] So it's usually if the firm has a difficulty with a partnership, that's scenario one. Scenario two is when the strategy has changed completely, right? And we have a new group of managing partner plus a couple of deputies who said, look, you know, this has been a really sleepy place the last 10 years. Our growth has been incremental. Can we not grow by 50% over the next five years? Let's go do that. What do we need to make that happen?

[00:21:13] Geez, we don't think that our comp system would support that sort of thing and, you know, put the money where it belongs. Those are two very common scenarios where we get involved. The answer then is it's going to depend on what they need. But those are two very common contexts. I see. Yeah. And how have you seen your clients benefit from the work that you've done with them? What's been the result?

[00:21:36] So on the former, I would like to say that when we've had firms that have come to us after have had a painful period of partner departures, it's funny. It's it's I almost don't want to tell you this, but it's yes, it's about the changes in the comp system that we're making to see, look, you know, this is all. It's no longer working. It's no longer market relevant. Partners don't get it. They want to have some meal. That's one thing.

[00:22:00] But what it does also is having the discussion rewelds the partners to their social system and to their common future. So in that respect, I think I can begin point to a number of firms where we've come in after they've had been bleeding partners that are no longer bleeding partners and that are back on a given trajectory.

[00:22:23] On the growth side, it's hard to draw a direct relationship between our work and the growth that the client achieves. Why? Because it's not our business, right? We were just helping them fix the comp system, but they are then achieving the growth to make it happen. And maybe what I can say, one of my favorite success stories actually was a very small client. In 2007, 2008, this client came.

[00:22:51] They were, it's a UK client. They came to us. They were eight million pounds revenue, about $16 million in revenue. Today, that firm is clicking over a hundred million pounds, so $200 million in revenue. And it's one of the most profitable one in the UK. Now, I'm very proud of that story in part because, you know, it's one of our longest standing clients and we've been with them for quite a long time. But the partners have delivered on that growth. They've made that work.

[00:23:19] And, you know, is it due to our work? You know, I like to think that we've had a small part of play, but it's the, you know, we're just the advisors, right? I'm just the advisor. The partners have made that happen for themselves. And that's exciting. It's exciting to see that happen. So as we bring this to a conclusion, Michael, what are three action steps you'd recommend that managing partners of professional services should follow to really start with some of the changes that you suggest today? I've got a couple.

[00:23:48] So the first one would be don't let your policy go stale. So if you have a partner comp policy that, you know, you haven't really adjusted or have been too scared to adjust for a long, long time, often, you know, we get into a business that has, that's grown by a factor of four or five or 10. And since the last time that they've looked at their partner comp policy, we're just, we were just starting a project like that now.

[00:24:16] It's like, okay, it's normal that the structures don't catch up to the growth. That's normal. And it should be that way too, right? I mean, it's, it's, it's not as important as growing the business, but don't let your policy go too stale. Now look at it periodically every few years. Or better, even after each partner comp round, pick one topic that you're going to evolve. That's step one.

[00:24:37] Step two is I'm, you know, we've worked with a lot of US firms, but I'm not a massive fan of, and this does go a lot to the law firms now. I'm not a big fan of these origination credits. They're usually the single number. It's almost always wrong. It's always messy. We're working with firms on the collaboration side. So how can we improve partner collaboration? Well, the first thing you look at is, well, how do you allocate origination credits? Well, geez, you know, it's a zero sum game.

[00:25:07] And if I give you some, I get less. I immediately, immediately, now I have a collaboration problem. So look at your originations a bit more nuanced along the lines that I've suggested. Just be more clear about, okay, we want new client acquisition. We want growth of existing relationships, and we've got to protect our core, our core crown jewels. So just look at your originations in a bit more nuanced way. And then third really is this context of working together as partners, right?

[00:25:36] You're in partnership, not just to share an office. You're there to do stuff together. So in your comp system, or when you speak with a partner, especially the ones who are a bit more individualistic minded, make it as one of the objectives to say, look, you know, pick, I don't care who, pick one partner with whom you're going to go out and do something together. Because that too, you know, it would just, you know, it doesn't just get more business or help get more business.

[00:26:04] It also wells the partnership together. And cohesion is one of the things that we test for when we review a partner compensation system is how cohesive is this partnership. Those would be my top three. Don't let it go stale. Look at the originations in a lot more nuanced way. And third, I'm really look at this collaborative cohesion aspect that I think is so important for why we're operating as a partnership and not as a random corporation providing some services. Right.

[00:26:33] Well, Michael, I want to thank you for being here today and sharing these significant insights that I'm sure will help a lot of people listening to it. And before we go, tell our listeners about what you do. What is your consulting all about? Tell us a little bit about that, Michael. Sure. Well, thank you. Yeah, look, I mean, the essence is we build strong partnerships worldwide. So we are a boutique consulting firm that advises professional firms of all sizes globally on things like partner compensation, incentives, profit sharing, equity.

[00:27:02] We do look at compensation aspects in M&A. We also look at achieving growth through alliances with other firms. The client tends to be the managing partner, the board, senior partner chair, sometimes the C-suite, the CFO, CHRO, whoever is in charge of or holds the partner comp on side of things. And, you know, what we do, the most common thing is, you know, top to bottom partner compensation reviews. If not top to bottom, then on specific aspects.

[00:27:31] Mostly we get involved on the equity partner side, but we look across the partnership, of course, also. Sometimes we serve on a retained basis for leaders. So where we are simply on speed dial, basically. And sometimes we also serve as, quote unquote, non-executive director for comp committees. So some of the larger firms want to have an independent person on the comp committee. And we do that kind of thing as well. To a public firm. That's terrific, Michael.

[00:28:01] Thank you for being here on the show and for sharing your wisdom today. And I absolutely want to have you back on in the future so we can go a little bit deeper on some of these topics that we covered today. Thank you so much for being here, Michael. Great job. Thank you. I appreciate it. Thank you. Thank you for listening to The Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com.

[00:28:28] To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit therainmakingpodcast.com.