Using your partnership agreement to set objectives, KPI’s and to review performance

Partnership agreements should be used as a tool for detailing rights, responsibilities, capital contributions and so on, of each partner. However, they are also a useful and powerful tool for setting goals and targets for the partnership and individual partners generally.

If drafted correctly, they will allow the partners to identify weaknesses in the partnership, especially if the overall goals of the partners do not align. The likelihood of the partnership failing if goals do not align is quite high, as partners will be pulled in different directions.

Often in partnerships, individual skillsets will vary and therefore it is important that when goals and key performance indicators (“KPIs”) are considered, that they are achievable and relevant.

Working towards an unachievable or irrelevant target will waste time, be demotivational and can lead to avoidable partnership disputes later down the line.

Working together the partners should:

• Set individual and partnership objectives.
• Set individual and partnership KPIs.
• Review their performance or objectives periodically against their KPIs.
• Deal with any identified problems promptly to ensure that they remain on track to meeting their objectives.

Setting objectives

KPIs will only be useful if they align with the objectives and strategy of the partnership.

It is, therefore, imperative that the partners identify what they want to achieve over the next few months and years and what resources they need to achieve the results, and prepare overall partnership objectives on that basis.

If the partnership engages other personnel, they will also want to ensure that they are engaged and motivated to achieve these objectives, as often a lot of the hard work is completed by those in which you employ.

Setting KPIs

KPIs should be relevant to the partnership objectives, measurable and agreed. The two types of KPIs discussed below are strategic and operational.

Strategic KPIs are forward looking and can relate to plans that the partnership has in the future i.e., to grow by 10% in the next five years.

These do not necessarily need to be measured day-to-day, however, they should be agreed, and progress should be monitored periodically.

Operational KPIs relate more to the day-to-day and should, in theory, be easier to measure and generally relate to quantifiable data such as revenue, transaction instructions, time and return on investment.

Both KPIs are important, and they should link with one another, and be relayed to employees through individual targets or set as part of their performance reviews, with the overall aim of promoting partnership growth.

Reviewing KPIs and dealing with problems

Operational KPIs should be reviewed regularly – even up to weekly or monthly to ensure that everything is aligning to meet the bigger partnership objective. This may be reviewed at member level and in distinct teams with employees. This enables problems or lack of progress to be identified early and if required, further targets to be set.

Strategic KPIs should be reviewed periodically, but as above, as soon as an issue is apparent, it needs to be dealt with.

Often, problems arise due to lack of engagement or the KPI not measuring the correct data or on the flip side, trying to measure too much data. The partnership agreement should be drafted in such a way that the partners review any identified problems together, following which, the partners shall agree to engage with one another to agree a solution.

If no solution is agreed upon and a disagreement happens between the partners, the agreement should outline how the dispute is dealt with and if there is no remedy due to equal partner votes for and against the remedy, how such a deadlock should be dealt with for the greater good of the partnership as a whole.