A spent force
Promotion to partnership no longer brings the perks and rewards it once did, so what do we do with an unmotivated band of staff?
Many years ago, a promotion to partnership was a defining moment in someone's life. Gone were the days of late night work and sleepless nights. Now you could enjoy long lunches with clients, schmoozing prospects and international conferences in Geneva. However as any partner will tell you, that is no longer the case. Being promoted to partnership is now merely an opportunity to work longer hours under more pressure with no job security, and to spend your weekends remotely logged onto the offices computer system.
Unsurprisingly, after a while some partners grow weary of the stress and begin to lose motivation. We have all seen it. The partner in his late fifties who is going nowhere, keeps his portfolio ticking over and manages to leave the office by 5:30 every evening. He knows he is not going to get promoted further within the partnership and has one eye on early retirement, while the other is on the latest score in the Test match.
These people no longer contribute much to the partnership and merely serve to demotivate junior staff who regard them as undeserving bed blockers. So what can be done? Doing nothing and waiting for the person's retirement wastes time and resources. Threats and ultimatums are rarely productive. They usually just result in splits within the partnership and a poor working environment. So there must be a solution.
Some firms are ruthless and expect partners to retire by the age of 55. They then encourage the partner to move onto other challenges elsewhere. This may keep the partnership young and fresh, however most partners do not make enough money to be able to retire 12 years early. They still have a mortgage, school fees and alimony payments to worry about. So a structure and a culture needs to be created and maintained within a partnership to ensure everyone stays motivated, happy and can move onto other challenges if they so wish. So how can this be achieved?
First, remuneration and status have to be performance based. If someone is underperforming, their remuneration and status must reflect that. I once worked in a firm where all the partners were paid the same, irrespective of contribution or performance. That understandably created a lot of friction between the high performers and those who were cruising. It was unworkable in the long term.
Dropping partners down the equity grades or in extreme circumstances, being de-equitised are options. However there are gentler ways of achieving the same end. A grade could easily be created that broadly equated to that of respected elder statesman for those who are no longer prepared to put in the hours. That role could also be coupled with mentoring responsibilities, PR work and networking. Remuneration would, needless to say, be performance based.
Second, regular reviews of performance and points allocations are crucial (most partnerships split profits over and above their monthly draw by way of a points allocation that is reviewed periodically). Needless to say, the point allocations need to be fair. Nothing divides a partnership more than a clearly unmeritocratic points distribution. I would suggest yearly reviews carried out in a transparent way so that no one can sit back on their laurels. This means mediocre performance will be quickly punished and good performance will be quickly rewarded.
Communication will of course be crucial. An ongoing dialogue should exist between the senior partners and the other partners as to what is expected of them and how they will be reviewed. However, for those partners who have lost the fire in their bellies, maybe an alternative future could be arranged. Why not give such people the option to go and take senior roles in local charities? Firms could support and encourage such people as part of their corporate social responsibility.
The charities would gain by having the benefit of a highly skilled and well connected professional who could help develop and drive the charity forward, while the individual could find a new lease of life and give something back to society. It does not need to be a charity. It could be an NGO or even just helping with business start-up advice.
Partners do not need to die at their desk, either literally or metaphorically. An alternative rewarding future does exist for those who are prepared to look for it, however it probably won't involve liquid lunches and international conferences.
Geraint Jones is a tax partner at BKL Tax
He writes the regular in-practice article on doing business for Private Client Adviser