By Dave Kuhlman
Most professional service firms care about creating a sense of ownership among their Partners (or the equivalent). On the surface, this is reasonable—in most partnership agreements the Partners are the owners of the business so they have a right and an obligation to behave like it. At a deeper level, an ownership mentality is critical since your Partners are the R&D, marketing engine, sales force, and a significant part of the manufacturing operation. There is no substitute for an owner’s productivity and enthusiasm. Making these key people owners and aligning their interests seems obvious. One would think that being an owner is the surest way to get people to act like an owner—but as it turns out, it’s also insufficient.
Most professional firms are owned by their Partners and partnership is the golden ring many aspire to, at least until the Millennials came along with their own career aspirations. Being a Partner, or desiring to be one, has been a foundation of professional firms for centuries. The basic idea—that senior professionals should be in business together and share the direction, risks, and rewards of their efforts—dates back at to at least 1792 for the accountants, when Josiah Wade founded Tribe Clarke and Company, and far longer for lawyers. The management consultants are younger, but they modeled themselves on the lawyers and accountants. James O. McKinsey was an accountant and Marvin Bower was a lawyer by training, for example.
These firms brought individuals in early in their careers, apprenticed them, and ultimately the best became owners, full participants in the business. This simple equation (Being an Owner = Acting Like One) worked for centuries, but it has begun to break down as firms grow in size and complexity. This happens because:
- The partnership grows too large for Partners to work side-by-side frequently and as a result they do not know and trust each other naturally;
- Each Partner’s contribution becomes a smaller and smaller percentage of the whole, limiting their ability to see their impact on the enterprise; and
- An influx of lateral or direct-admit Partners dilutes the common culture and DNA of the Firm. (Although there are six actions firms can take to make direct admit partners accretive.)
Simply providing ownership opportunities, publishing financials and holding annual Partner meetings are no longer enough. An employee mindset creeps in, sapping the energy and entrepreneurial spirit that firms need to survive and thrive.
So what should you do? Being smaller is not an option in a competitive global world. Creating virtual “mini-firms” within the larger enterprise helps, but can create silos that ultimately defeat the purpose of being a firm in the first place. To create a greater sense of ownership and to encourage Partners to act like owners, leaders should:
- Engage Partners, don’t just communicate with them. Professionals are deeply skilled in analyzing and working through business questions with their clients. They respond positively to discussion and debate far more than simply reading or hearing information. They are trained not to take things at face value and they won’t take the information you provide at face value either. (The Center for Audit Quality’s Cindy Fornelli has an insider’s perspective on the importance of independence, objectivity and skepticism.) Agreement is not the goal, nor is it sometimes even possible—the ongoing discussion of the firm’s needs and direction is enough. In short, engage them and they will engage with the business.
- Put Partners to work on critical firm tasks. Partners who are involved in developing something for the firm are more engaged, even beyond the issue they are working on. Partners are often more willing to support new ideas developed by other (non-leadership) Partners than to accept pronouncements from on high. Although it is tempting to maximize leverage and let the firm’s leaders do the work, carefully selected engagement on firm matters pays off in coherence and momentum—value that far exceeds the cost of lost productivity.
- Build the leadership pipeline early and continually renew it. First, continually refreshing the leadership pool results in leaders with closer ties to the Partners, since their line experience is more recent. Second, Partners being developed for leadership are more engaged. They feel more involved when they are developing business skills in addition to their profession skills. This doesn’t mean that every Partner gets to be a leader, but building leadership skills and renewing the firm’s leadership means most everyone begins to show leadership in a hundred small ways.
- Provide a demonstrably fair division of the spoils. Partners respond to a sense that they, and those around them, are recognized in proportion to their contributions. Although most Partners have healthy egos, they do acknowledge differences in performance and role. Seeing that the results of their collective effort are being shared appropriately enhances their willingness to act as owners of the business. Of course, most firms are too large and complex to enable Partners to see and understand each individual’s contribution and reward but a rigorous process of procedural justice goes a long way towards establishing a sense of fairness.
The pressures of size, distance and complexity constantly lull Partners toward an employee mindset. Keeping the entrepreneurial spirit, the sense of active ownership, alive requires constant effort, but that effort pays off in energy, alignment and momentum in the market.
My book, Leading Firms, offers more on the subject of practices that create a high-performing culture. Drop me an email if you would like to receive a copy.