Visitor commentary: balancing acts – partnership versus firm
Professor Laura Empson and David Morley ask what makes partnerships different from companies, what they ask of the people who run them
Immerse yourself in a strong and successful professional partnership even for a short period of time and it will become apparent that these are unique units that require a very specific type of leadership.
Strong partnerships can – and often do – create an extraordinary sense of attachment and commitment to those who have already been partnered and to those earlier in their careers who wish to become partners one day.
These characteristics distinguish partnerships from more conventional corporate structures.
Of course, many people feel very committed to their work in companies. And there are companies – some family businesses, for example – that can foster the level of loyalty, cohesion and belonging in partnerships. But it is the depth and breadth of commitment in partnerships that sets them apart.
What requirements are placed on the executives charged with protecting, maintaining and even developing partnerships?
There are some clear differences on the surface. In partnerships, the economic interests of owners and producers are usually closely linked – partners of course wear both hats.
In the corporate world, executives are primarily accountable to shareholders, and the interests of management and investors can vary widely. The partnership avoids the principal-agent problem.
Other powerful forces play a role, for example identity. While the partners may have a great deal of autonomy – to manage their practice and their clients – many share the same desire to be part of a collective enterprise, along with other high performing colleagues who are bigger than they as individuals.
These ties are real. People tend to get to know each other well, at least within the same office or practice, after growing up through the ranks together. They understand each other’s strengths and weaknesses and want their partners to be successful.
It’s not just about legal form. There are some companies – McKinsey is one example – that choose to often successfully emulate the best qualities of partnerships. And when you analyze what they are trying to copy, it boils down to three main factors.
First of all, it is about how you hire employees and integrate them into the corporate culture. This could be a young lawyer who comes straight from university and wants to develop into a top professional and hopefully take on a partner role.
Or, more problematic, it could be a sideways adjustment. The best companies spend a lot of time and money hiring the right person, someone who understands and is accepted into the culture – and integrating them to avoid the risk of so-called “organ rejection”.
Second, it is about how high-level professionals are administered, inspired, rewarded and sanctioned within formal and informal power structures, the latter often being more important than the former. For example, peer pressure is a strong influencing force within a partnership that is usually as strong as the direct top-down authority.
After all, it’s about governance. Do you choose your leader? How do your managers get involved and ensure supervision? Where are you looking for challenges?
One man who has a unique perspective on leadership challenges in both a partnership and corporate context is Sir Ian Davis, former global managing partner of McKinsey and now a non-executive on many blue-chip corporate boards of directors, including Rolls-Royce, where he is is the chairperson.
On the latest installment of our Leading Professional People podcast, Sir Ian joined us to identify leadership in these two very different environments. He quickly identified a number of subtle balancing acts for a partnership leader to master.
Business leaders tend to exercise power in a more directional manner, while partnerships require a more consensual style. Use power too directly in a partnership, and chances are you will fail. Partners simply do not accept power exercised in this way.
In this sense, the position of leader in a partnership can resemble a non-executive chairman of a company who, while having a lot of authority and influence, has little or no formal executive power.
Leadership is always contextual, and the trick is to choose the leadership style that best suits your specific circumstances.
Again it’s about balance. For example, in a professional company there is a delicate balance between autonomy – something partners ask for and expect – and anarchy.
And there will be times when, in order to maintain and develop the collective identity and social bond that characterize a strong partnership, it may be necessary to tolerate a degree of individual underperformance, if only for a short time.
Since professional organizations rarely have non-executives to challenge leadership, executives must look elsewhere for setbacks. Customers can be a potential source of challenge, and it is important that executives seek direct customer feedback rather than having other partners filter it. As the recent spate of professional misconduct scandals has shown, the desire to satisfy the customer can lead professionals into murky ethical waters.
Younger company employees are an equally important source of challenge. For example, when they play a role in strategic initiatives, innovation and different views are encouraged. It also sends an important signal that they have an important role to play in shaping the company’s destiny and preserving its culture.
Growth can be a particular puzzle for partnerships. It is quite common to find a group of partners who fear that growing too far and too quickly will ultimately destroy the unique culture of partnership. There can be a sharp divide between partners who have a reductionist view of growth and expansionists.
Of course, the pursuit of growth for the wrong reasons is very dangerous. Only expand because your competitors are doing so, rather than for strategic reasons, and you can drive the company into a wall – or worse, a lawsuit.
However, growth and dynamism in a partnership are critical to maintaining morale and making room for the next generation of partners.
That means finding a way to grow that preserves and enriches the partnership rather than jeopardizing it. And this is perhaps the area where it is most difficult for the leader to find the right balance.
So growth, like everything else, needs to be managed with a sense of guardianship – guided by a determination to leave the partnership in a better state than you found it to be.
Click here to listen to the latest Empson & Morley – Leading Professional People podcast, in which Professor Laura Empson and David Morley discuss the challenges of partnering with Sir Ian Davis.