Although this seems a fairly straightforward question, if you work in a professional services firm, you might want a reminder.
The business dictionary says it is:
"A type of business organisation in which two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement."
Profit sharing is always a stimulating topic in any professional service firm. Stimulating because it gets people sitting up and taking notice like no other discussion seems to get attention. The 'terms' always take a considerable amount of energy too.
Other key words that often get neglected are 'pool' and 'share'. They signify that a partnership is a collection of resources and talent that come together to serve together. However the reality can be quite different. I've worked in large organisations and in large firms and in both cases when the internal strategy is to divide and conquer the result isn't serving the greater whole. The greater whole representing the client or the firm.
David Maister in his book Managing the Professional Services Firm highlights the value of the lockstep system for the firms that choose to use it. These firms recognise they avoid "discussions of partners' relative contributions, they perserve collegiality and can focus attention externally, on winning and serving clients, rather than internally, on intrafirm politics". Where any firm chooses to place it's attention, internal politics or serving their clients, is ultimately a question for them. I question a firm that fails to look after its client as a priority. Maister goes on to say "if a partner's slice of the pie is predetermined, all that remains is an incentive to work to increase the size of the pie - a welcome coincidence of individual and firm interests." When you align your firm's interests with your people's interests you have a win-win scenario. Increasing the size of the pie increases everyone's share and keeps the energy directed to the client and building the firm's assets.
In a study in 1985 David Maister compiled a list of 'one-firm firm' characteristics to show what set these firms apart.
Specifically:
- Highly selective recruitment;
- A “grow your own” people strategy as opposed to heavy use of laterals, growing only as fast as people could be developed and assimilated;
- Intensive use of training as a socialization process;
- Rejection of a “star system” and related individualistic behavior;
- Avoidance of mergers, in order to sustain the collaborative culture;
- Selective choice of services and markets, so as to win through significant investments in focused areas rather than many small initiatives;
- Active outplacement and alumni management, so that those who leave remain loyal to the firm;
- Compensation based mostly on group performance, not individual performance;
- High investments in research and development; and
- Extensive intrafirm communication, with broad use of consensus-building approaches.
Then in 2006 David Maister and Jack Walker followed up and produced a research report to see what came of their original firms in the study. Although it was true that these firms where basically unrecognisable twenty years later, what was evident was that they were more committed to teamwork and collaboration rather than individual entrepreneurialism. What I find interesting is the article ends talking about the value of 'soft skills' as the element that makes true one-firm firms excel.
Some key benefits of the one-firm model (with the words lifted directly from the research report) that still make sense today:
- Individual members, rewarded through the overall success of the enterprise, are more comfortable bringing in other parts of the firm to both win and serve clients with complex multidisciplinary or multi-jurisdictional matters.
- Clients are generally better served than they would be by a firm of solos or silos. Clients respond positively when individual members support (and, especially, do not undermine) their colleagues. One-firm firms are good at relationships, internally and externally, and are rewarded with cross boundary work.
- One-firm firms nurture their recruits (selectivity, training, high standards) and, done well, can lead to great alumni loyalty. Former employees often leave as loyal advocates of the firm, based on the way they were treated when they were there.
- When times are tough, the way the firm comes together to face challenges places it in a stronger position. There is more trust and loyalty among a team that plays together (nicely) - they tend to stay together.
In 2016, the trick is not to make things more complicated than they need to be.
Make it your aim to simply:
- Set your firm's values
- Confirm your shared priorities
- Make sure everyone knows them, and then
- Live them.
That way the focus remains on the client and the whole pie. The key is to take action when people fall foul of the values or priorities. That's integrity. That's leadership. That's partnership.
