INTEGRATION OR DISINTEGRATION, THAT IS THE QUESTION

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By Leon Sacks | Oct 28, 2020

The objective here is not to be alarmist or suggest that there is a binary choice between life or death, as in Shakespeare’s allusion. It is, however, meant to draw attention to the need for continuous focus on what keeps a professional services firm, and more particularly a partnership, ticking and successful, namely the integration and collective behavior of its partners.

Integration means that partners are working in the same direction towards a shared goal, that that they are aligned in managing their teams and representing the firm and that their capabilities, knowledge, experience and relationships complement each other.

Disintegration is a danger when there are conflicting priorities amongst the partners and divergent opinions about the way business should be conducted and individualistic rather than collective behavior becomes prevalent. The partners or groups of partners become isolated and unhappy and the firm may become a composite of fiefdoms rather than a homogenous unit.

The current reality of disruption with rapid changes in demand and supply chains is challenging leaders and management in the corporate world. In a partnership such challenges are often magnified by the fact that partners consider themselves co-owners of the business, desire to have a say in how business is conducted and wish to share the benefits.

While overseeing the quality of work, client relations, finances, talent, business development and efficient operations, management needs to be attuned to the concerns, motivation and behavior of partners that, untreated, might be detrimental to the achievement of goals in all those areas. Just as a relationship of a married couple needs to be managed so does a partnership, except that in the latter case the marriage counsellor has to deal with multiple people!

Clearly management deals with partner issues on a daily basis and often this means putting out fires and/or spending a great deal of time in managing people’s expectations or explaining why a certain decision makes sense. Issues will always arise but would it not be more efficient to have integration as a permanent item on the agenda knowing that it will require continuous action as the firm grows and changes and as its partners’ careers advance and ambitions change?

Conditions that might indicate the need for greater integration efforts include:

  • partner grievances or departures
  • extensive partner discussions on strategy, structure or processes
  • incompatibility between partners
  • doubts raised by partners about contributions of others
  • reduced partner performance or motivation
  • unsuccessful lateral integration
  • reduced retention rates of attorneys
  • individual v institutional behavior
  • offices or practice groups working autonomously
  • different approaches to service delivery and client management
  • little or no sharing of information
  • “my clients” attitude prevails rather than “our clients”
  • partner compensation system not perceived as fair
  • complaints of excessive centralization or lack of flexibility
  • inconsistent quality of service perceived by clients

These conditions might not have been a common trait but as a firm grows, the partner ranks grow, the number of offices/practices grow and the firm adapts to market conditions, they may develop quickly. If they are not isolated and become a pattern, management needs to evaluate the causes and adopt a remedial action plan.

As suggested earlier, it is preferable that this be done on an ongoing basis taking the temperature of the organization and the status of the partnership on a regular basis and adjusting accordingly – what we might call the integration “agenda”.

The integration agenda should aim to ensure:

a) Partners are “supporting sponsors”

The alignment of partners with the vision and strategy of the firm and their consistent adherence to common and agreed-upon principles is key to leading the firm in the right direction. They should all be supporting sponsors of the firm’s direction and communicate a consistent message in that regard. Partners are largely the face of the firm to clients and its professionals and their behavior weighs heavily on the way the firm is perceived.

b) Strategy drives structure

Whatever the message for integration, if a firm’s structure drives behaviors that are not aligned to that strategy, it will not succeed. As the Harvard Business Review once stated “leaders can no longer afford to follow the common practice of letting structure drive strategy”.

A crude example: if two offices of a firm are organized as two business units with their own local management and the partners in each office are compensated largely based on the results of their own office, a strategy of sharing resources and cross-selling might be prejudiced or, at a minimum, not incentivized.

c) A collaborative environment

Collaboration generates internal synergies (e.g. sharing talent and knowledge) and external benefits (e.g. client development) while allowing partners to feel more connected to each other, reduce their levels of stress (hopefully!) and enjoy more work freedom. Incentives and support for collaboration that reflects a more institutional approach to conducting business are to be encouraged. This is by no means inconsistent with an entrepreneurial approach to business or rewarding individuals for extraordinary performance.

It is not uncommon to find firms consisting of different groups or individuals that are somewhat autonomous, take different approaches to service delivery and client development and work largely in isolation from others (the “composite of fiefdoms” mentioned earlier). This is rarely a pre-meditated or deliberate action but rather derives from different cultures and work habits (resulting from previous experience in other organizations) and behaviors driven by the firm’s governance and partner compensation system (i.e. what is my decision-making authority and how is my compensation determined).

To be an “integrated” firm, a firm that is effective in providing solutions for clients and is efficient in its use of resources, it is imperative to create a unified culture and adopt governance and compensation models that motivate a one firm approach. Consequently, principles that typically underpin integration may be summarized under three headings:

Governance

  • the governance and decision-making structure be clear and understandable
  • the management structure reflects diversity of practices and offices, but with all decisions aligned to the firm’s strategy and to the best interests of the firm as a whole
  • the governance structure reflects the importance of practice and industry groups as natural integrators across offices and jurisdictions
  • authority and policies for decision-making be delegated as appropriate to avoid shackling the organization while allowing for risk mitigation
  • Committees and task forces with appropriate partner representation deal with ongoing issues (e.g. Compensation Committee, Talent Management) and specific projects (e.g. Strategy Review, Remote Working), respectively
  • a partner communication structure that allows partners to be continually informed and feel they are being consulted on issues of relevance to the business

Partner Compensation

  • the compensation system provides clarity on expectations of contributions from partners and aligns compensation with such contributions
  • adopt the right mix of compensation criteria to motivate and reward both behavior that drives the firm strategy (revenues, originations) as well as collaborative behavior that encourages teamwork and partner investment in the growth of the pie, rather than a struggle for a larger share (cross-selling, training initiatives)
  • couple the collection of objective data with subjective inquiries to adequately measure partner contributions and allow for appropriate discretion in applying compensation criteria to promote fair and equitable results
  • consistent partner feedback process

Leadership

  • build and support a culture with a shared mission, joint long-term goals and shared risks and rewards
  • align structure to strategy, clarify roles and responsibilities and enforce accountability
  • promote transparency and open communication and be inclusive
  • build trust and confidence facilitating interaction between partners and creating a healthy dose of interdependence amongst them

Firms can easily lose the focus on integration, an intangible asset, while they are busy dealing with the tangible issues of day to day operations, developing business, serving clients and controlling finances. It is better to manage integration than recover from disintegration.

Leon Sacks is a trusted international executive noted for growing revenues and managing transformation projects for professional service firms in the management consulting and legal industries. He is based in Miami and focused on the Americas, has worked extensively in Latin America and is fluent in Portuguese and Spanish. Contact: leon@edge-international.com