13 minute read
LEADERSHIP LESSONS FROM WORKING IN A PARTNERSHIP ENVIRONMENT
Mr Satyanarayan Ramamurthy, Partner, Head of Infrastructure, Govt. and Healthcare, KPMG Singapore
Today, the corporation is the most recognized form of doing business, especially with its strong focus on global direction and unity of purpose and the ability to use limited liability as a weapon to take significant risks. However, in knowledge intensive industries—like investment banking, audit, tax, legal, consulting and engineering services—partnership has been the chosen organizational form for a very long time, and it continues to remain even now.
Some of these professions impose significant personal liability on the practitioners (e.g. Audit), and pooling of these individual risks allows partners to grow their practice while still adhering to their statutory obligations. Some of these partnerships have now evolved into Limited Liability Partnerships (LLPs) as allowed under their legal and regulatory framework, but in terms of the way they are run, they are still very much run as partnerships. Some of them, especially investment banks and some consulting firms, have become listed as companies, to achieve more flexibility in the capital structure. It is interesting to note that some of the oldest partnerships (especially the Big Four) have outlasted the largest Fortune 500 companies, and have been around for close to 175 years. Globally, they are often built as global networks with low corporate overheads, a very flat structure, and a Global
Chairman (or leader) whose salary is often a fraction of what a similar leader in a global corporation of similar size or profitability gets paid. They are also constantly adapting to changing market conditions, finding opportunities in new areas, and pruning areas which do not see strong customer demand.
Partnerships pose interesting opportunities and challenges in leadership and management. I would like to highlight the key lessons I have learnt in my 25 years of working in various leadership positions within a partnership environment. I hope this will be helpful to those of you who are joining similar firms or setting up partnerships in knowledge-driven industries.
I distill my experiences into some key lessons which I explore in detail below: — Autonomy is the elixir which allows partnerships to thrive — Consensus is central to growth and harmony — Surface and resolve conflicts effectively for better relationships — Recruit and integrate people who will fit, not necessarily stars — Benchmark to improve, not explain — Build your trust balance sheet — Give professionals the social status they deserve
Autonomy
Partnerships require significant entrepreneurial drive, and this is possible because of the high level of autonomy. The word ‘partner’ connotes ownership, and the promise of ownership will only be delivered if the individual feels a high level of autonomy in their decision making and a link between effort and reward. Well-run partnerships use autonomy to great effect by harnessing high levels of energy from their partners. One of the key challenges for leaders is on setting the guard-rails in risk taking such that autonomy is not stifled; because once autonomy is curbed, it takes enormous effort to re-ignite it.
I was exhilarated by the autonomy in my early years as a partner in a professional services firm, building a practice. Interestingly my experience in Pond’s in the early 1990s was no different, as it had created a bunch of intrapreneurs. How do you nurture or feed this autonomy? By building trust with your fellow partners. And how do you build trust with your partners? By delivering on promises. How do you deliver on your promises? By knowing your clients and what they will spend in a year.
Building a portfolio becomes important because you will have businesses which are in different stages of maturity—this ensures that the overall portfolio can both allow for returns and provide for investments – without having to draw on the broader partnership. Many people who join professional firms think like executives—they expect someone (shareholders) to stump up the money for investment before showing some results; there are no other shareholders in the partnership, and your fellow partners will bear the pain if something happens.
My experience over the years as partnerships change character and grow is that while the form of decision making (business case meetings and levels of approvals) changes, the essence is often built on the trust the leaders have with the individuals concerned. Often times, partners fret at the forms and processes required, but lose sight of the bigger picture—in a large firm, procedures exist for a reason. If partners focus their energies on the core issues and not on the administrative processes, they will get the necessary support and retain the trust of the leaders.
Professionals who blame the environment rather than take charge of their destiny are unlikely to grow—they will definitely have a role as an employee, but it requires a self-starter to become a partner. Someone who waits for or takes orders is unlikely to step up as a leader. The flip side of this is that most partnership environments offer considerable flexibility to professionals to shape their careers. So being proactive in planning your career journey can become a source of great advantage in a partnership.
Consensus
A key aspect of a partnership is that the shareholders (owners) are also the managers of the enterprise; therefore, aligning individual and collective interest is very important. I share below some of my experiences over the years:
Higher purpose
One of my roles was building greater partnership alignment around the Firm’s higher purpose and this was hugely rewarding. Significant efforts were expended in helping partners define their own `personal purpose’ and then communicate it with their teams. This also resulted in significant improvement in partner and staff engagement scores that had been falling for a few years. A Harvard Business Review article (How an Accounting Firm Convinced Its Employees They Could Change the World, by Bruce N. Pfau, October 2015) documents our journey in detail.
Alignment in goals
Goal alignment, especially around the pace of growth, is an important area where consensus among the partners is required as it is one of the central decisions most partnerships have to make. Some partners who have worked hard on their way up want to `enjoy the good life’. Carrying this group is important if you want effective strategy execution. How growth is achieved is another important aspect which requires consensus—for example, entry into adjacent or even unrelated areas.
Buy-in
My experience with securing buy-in even from the most junior partners has shown that the broad ownership of the decisions changes the commitment these individuals have to the Firm, and they build pride in the Firm’s actions and stand by the decision in difficult times.
Leading in regional roles
In my career, I have been asked to take on several regional leadership roles, where I have had to lead more senior and experienced partners from other large offices like Australia, Japan and China. My approach to getting their support in key decisions is to help them succeed in their roles, often by bringing business to them from large international clients whom they did not have access to, or by using niche areas of expertise where we, in Singapore, have built great depth and can help them sell into their clients.
In summary, building consensus with your fellow partners is central to growth and harmony in the partnership. It is less difficult than it seems if it is focused on helping partners articulate their own purpose and goals as well as achieve them in the true spirit of teamwork.
Conflict resolution
Managing conflict is very important in a partnership, but even more so in environments like South East Asia where dissent is often hidden. It is, therefore, important to surface the dissent and then actively resolve it, rather than assume that—when someone does not speak up on an agenda—their silence is assent. This will be particularly helpful in securing commitments of the often silent majority to effectively execute key decisions.
One of the important areas where dissent needs to be handled sensitively is in the partnership admission process. Often, there are disagreements about whether candidates are partnership-worthy, and emotional factors play a part in these opinions. Managing these processes with the right combination of fact-based persuasion and empathy will enable the partnership to resolve conflict in this important process effectively.
Leadership contests need not be zero-sum games. A senior partner contest means that there will be winners and losers. In a corporate, the loser leaves for other places, but in a partnership we have to work hard to keep the losers motivated and engaged, as the business and relationships built are valuable to the Firm and need significant nurturing. In fact, the losers get the most important available jobs and have to work hand in glove with the winners so that the Firm stays together and grows from strength to strength.
Recruitment and integration
One of the biggest learnings for me as a partner has been in recruiting senior talent and integrating them into the Firm. Time and again, I have learnt that it is not about chasing stars but rather finding professionals who are both team players and whose talent is portable and can be leveraged by the Firm. My intuitive experience in this regard over the last two decades was validated when I read the work of Harvard Professor Boris Groysberg (Chasing Stars, The Myth of Talent and the Portability of Performance, Princeton University Press) with much interest.
One important area where I have spent considerable personal energy over the years is in integrating senior hires. Sharing with them the values and ethos of the Firm, and the choices we have made will inform their decisions for the better. It also brings them closer to the partnership, which is best described as a family. The most satisfying aspect of building people for me is the sense of legacy we leave behind when we retire from the Firm; this makes us work harder to leave the Firm in a better place than where we found it.
In the area of partnership compensation and rewards, choices are important and require significant deliberation:
— Do we reward based on seniority or performance? — How much cash do you pay out and what do you hold back for investment and future needs? — What is the mix of individual, team and overall firm performance in a partner’s pay?
Each partnership will have to find its own answers for the above, but needs to keep in mind the principles of simplicity, motivational impact and equity.
Benchmarking
In a partnership environment, unlike in a corporate, partners have to explain their performance to themselves because they face the raw consequences. In this regard, I have found it very beneficial to not find elaborate explanations for poor performance, but rather focus on how we can keep improving our performance. As Nassim Nicholas Taleb says: “Suckers try to win arguments; non-suckers try to win.”
A few key lessons that I have found very useful in this regard are:
— In a partnership, the pressure is to perform—not to explain—because it hurts our pockets directly;
— We need to use market feedback (especially from clients and business associates) not to explain why we are not doing well, but to get to the root of the problems and solve them;
— Given that we hire so many senior professionals, we need to constantly learn from their best practices, and improve ourselves, not defend our own past practices, because openness to new ideas is what has made for the long term survival of such partnerships;
— I have had the privilege of working with partners from a range of other cultures, and we need to learn from these cultures, as we build a better Firm; and
— The best metric to know if our business is moving in the right direction is to monitor our market share of talent. If our people are leaving for our competitors, they are doing something better than we are and we need to fix it.
Trust
A partnership is a family you adopt yourself into, and every interaction and decision is an opportunity to build your trust balance sheet with your fellow partners.
— In a time-starved world, we need to make social interactions with our colleagues and clients count in a way that they see us helping them make their lives simpler;
— In interacting with colleagues across geographies, it is good to leave money on the table and not optimize your short term outcome to the last dollar, as that will strengthen the long term relationships;
— Different units within the same geography view the world differently, and so you need to understand others’ perspective in order to communicate effectively with them. For example, the commitments an auditor and a management consultant make with regard to a financial target may convey different levels of certainty, and this creates an opportunity for mis-understanding which can be avoided;
— Building physical assets (like real estate) and taking on debt can strain the trust between the current partners, as well as create inter-generational trust issues, so these decisions must be carefully thought through; and
— Partners showing vulnerability and asking for help in key areas should not be seen as weak; instead this should be encouraged as it is a sure way to build trust among each other.
Social status
Peter Drucker, who coined the word `knowledge worker,’ understood it well when he said that for knowledge workers social status was paramount. Partnerships offer one of the best role models for creating social status for knowledge workers. In this regard, the title `Partner’ connotes to the outside world that someone has arrived, and therefore, gets professionals working really hard to get there. Some learnings for me over the years:
— You start building your equity the day you join, regardless of how junior you are. You need to make it count, and not think that you are too far away from the goal.
— Often partners are admitted as non equity or salaried partners and then move to equity. That journey to equity is important and needs to be communicated credibly.
— Increasingly, staff roles like Finance, HR and IT require deep specialists as Firms become larger and more complex. The conundrum facing partnerships is how to give these professionals (who are non-revenue earning) the same social status as‘Partners’.
— With increasing seniority,partners often are forced to abandon client roles for largely internal management roles. This often results in them losing touch with the market, and more importantly losing empathy for their fellow partners; this can be avoided with some client facing responsibilities.
— With increasing complexity in the market, leaders have to work harder than their fellow partners, and should not view leadership as a resting spot before their retirement (where their reports do the work and they enjoy the fruits). The best firms are the ones where the infectious energy and effort of the leaders inspires the rest of the Firm to excel.
To watch the full interaction and Mr Satyanarayan Ramamurthy's talk, check out the latest edition of Business Mandate.
