ALONG WITH THE END of printed books and marriage, the death of the partnership has long been predicted. Yet still it has survived, maybe a little dog-eared in places, maybe having accepted a few compromises along the way.
Yet for how much longer? The recent recession has dealt a damaging blow, with partner redundancies at the top accountancy firms destroying any lingering belief that partnership was a secure reward for the accountant’s gruelling journey to the top. What is more, the difficulties of maintaining collective decision-making in large and complex organisations, together with young accountants’ demand for a better work-life balance, means that the future of partnership in the largest accounting firms is looking decidedly uncertain.
I have been researching partnerships for the past 20 years. When I started, partnership was the pre-eminent form of governance in most major professional sectors; within established professions such as law and accounting, it was viewed as the only legitimate mode of organising. Firms within aspiring professions, such as consulting, often chose to organise themselves as partnerships, thus assuming the mantle of professionalism that it conveyed.
That began to change in the 1980s. The Big Bang ultimately wiped out most of the stockbroking partnerships in the City and, by the start of the 21st century, 32 of the world’s 50 largest consulting firms were publicly quoted. Interestingly, McKinsey incorporated in the 1950s but still refers to its senior consultants as “partners” and in many ways attempts to mimic the partnership form. But if partnership is dying, why do some corporations still pretend to be partnerships?
In a partnership, the firm is owned by a group of senior professionals who are also its core producer-managers. Traditionally, these partners have shared unlimited personal liability for the actions of their colleagues. My research has consistently demonstrated that partnership is more than just a legal form, though: it is a state of mind.
Essentially, partnership is an ethos, a shared set of beliefs and behaviours that defines a community. It is possible for a firm to be a partnership in the legal sense but not “feel” like a partnership. Equally it is possible for a firm to feel like a partnership while remaining a corporation, although the professionals within the firm need to develop systems, structures, and socialisation processes to create and sustain the ethos of partnership.
Partnership works because it provides highly educated professionals with the autonomy they want and think they need to get the job done while binding them together with a sense of common purpose. Partnership at its best fulfills our deep human need to belong to something and to work towards a goal that is bigger than just our own personal advancement. A professional’s need for autonomy derives in part from the nature of professional work: in order to deliver a customised service of the appropriate quality, expert workers must be free to exercise their independent judgement.
It also reflects that many professionals are motivated not simply by money but by the desire for intellectual challenge. This does not sit well within a conventional corporate structure, where the primary objective is supposedly to maximise shareholder value.
In a partnership, the professionals (or at least an elite group of them) are the shareholders. While their professional ethics should prevent them from becoming excessively preoccupied with the bottom line, as owners their natural desire to accumulate wealth will prevent them from squandering their intellectual assets on an unprofitable quest for personal fulfilment. As a senior partner of a major accounting firm once described his fellow partners to me: “We are like a wolf pack. We love to hunt together but when one of us grows too weak to keep up with the pack, we turn on him ruthlessly.”
This combination of high levels of individual autonomy harnessed by a commitment to the collective is extremely powerful. It has shown itself to be remarkably adaptive. I have written elsewhere about how increasing the size and complexity of professional service firms have put pressure on the traditional processes of collective decision making and informal methods of mutual monitoring. It is inevitable that a firm such as PwC, which has operations in 40% more countries than McDonalds, must introduce bureaucratic control methods. Yet the largest and most successful accounting firms have found a way to develop partner management systems and governance structures that maintain an environment in which the partnership ethos can survive. After all, there is no point in preserving the partnership ethos if the partnership itself dies.
There is much that the leaders of partnerships can do to ensure the very best aspects of partnership survive and thrive in a changing world. The collapse of Arthur Anderson post-Enron focused attention on the fragility of professional service firms that are so reliant on their reputational capital.
It is worth recognising that partnership as an organisational form can be extraordinarily resilient. A practice head of a global accounting firm once explained to me: “I do what I want but the things I want are likely to help the firm because that is the way I have been trained. At one level we are completely independent but we all march to the same tune without even thinking about it.”
The very ambitious mergers between accountancy firms over the last 20 years might well have destroyed less robust organisations. Corporations, subject to the hubris of individual chief executives and the pressure to maximise shareholder value, could have collapsed under the strain imposed by mergers on this scale.
When I have spoken to senior figures in some of the largest global partnerships, I have often been struck by the pride with which they talk about their fellow partners, the sense of belonging that they still cherish, and their determination to ensure that the partnership remains strong for future generations to inherit. That ultimately is the clue to the future of the partnership.
As long as people continue to feel proud when they are made a partner and think carefully about whom they choose to join their ranks, they will work hard to ensure the partnership adapts and survives to cope with the challenges that inevitably lie ahead.
Professor Laura Empson is Director of the Centre for Professional Service Firms, Cass Business School, London.