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Passion, People and Principles

What’s a Senior Partner For?

post # 182 — September 5, 2006 — a Managing post

I received an email enquiry as follows:

Have you commented in your writings on the value of a firm having both a senior partner and managing partner – akin to the corporate equivalent of a chairman and CEO – or can you direct me to some recommended material?

The first thing to note is that the use of the two terms senior partner and managing partner is not a common phenomenon worldwide. It’s normal in the UK and Europe, but very rare in the US, which tends to combine the roles into one. “Senior partner” is not a term you’ll hear used much in the US.

I haven’t written about this topic directly, although I wrote a chapter on governance in Managing the Professional Service Firm which included these thoughts:

Like a nation state, these (governance) elements can be divided into three groups. The firm’s board represents the legislative branch whose duty it is to approve (or disapprove) the policies under which the polity will operate. The managing partner, together with the executive committee and the business manager, form the executive branch. Finally, the compensation committee represents the judiciary.

The board of partners corresponds closely to the corporate model of a board of directors representing the interests of the “shareholders” (in this case, partners). Like a corporate board, a primary function of this body is to oversee and monitor the activities of the executive (the managing partner) to ensure that the shareholders’ interests are being served.

Many firms have observed that where the firm’s highest committee serves both a policy and executive role, the day-to-day minutiae tend to dominate the committee’s deliberations and real policy debates are neglected. Accordingly, most firms have found it wise to separate the policy and executive functions. This same conclusion is generated by a “division of powers” consideration. By separating the policy and executive functions, the firm avoids having too much power located in one body.

The senior partner or chairman can play the policy / legislative functions (at least in the sense of the firm’s core constitution) or its judiciary functions – setting pay for those in high positions, or serving as a court of appeals for those who wish to protest an executive decision.

The senior partner, as chairman of a board of partners, could exercise the same policy formation and management oversight roles that a chairman in a public company is suppose to fulfill. I say “supposed’ because we all know that there is a lot of charades and facades in corporate governance. In the publicly-held corporate world, few boards really exercise much oversight – governments have had to legislate (i.e. Sarbanes-Oxley) to get them to do some basics. Most corporate boards have been “captured” my management, and do not really exercise an independent function.

All of which is to say that it would be dangerous to assume that the corporate model or terminology is a positive metaphor. It may be exactly the model you want to stay away from!

However, it does help us outline a choice that must be made about the senior partner role. In corporate governance theory, the chairman plays an oversight role towards the CEO / managing partner, holding the managing partner “accountable” in the same way that the managing partner holds top executives within the organization accountable for their targets and performance.

This is actually a very intriguing model, particularly in a partnership where the chairman of the board of partners is supposed to represent the shareholder / partners (as, in theory, the corporate chairman is supposed to represent the corporate shareholders.)

It’s a good idea, but is it achievable and desirable in your firm? Is your CEO / managing partner really prepared to be held accountable? Especially when he or she spends his or her year holding everybody else accountable? It’s my experience that top people will say they want to be held accountable. But they don’t really. They will agree to the forms of accountability being put in place, but will neuter it when it actually tries to exercise any power.

There’s a completely different way of looking at all this, which is actually much more likely to work. That is to make one person (the senior partner) the external face and the other (the managing partner) the internal face of the organization.

In this (quite common) approach, the senior partner represents the firm to the marketplace and other external constituencies (governments, media, communities, media) while the managing partner focuses on actually managing the internal constituencies – partners, junior professionals, other employees.

While this division of labors makes a lot of sense, it’s worth pointing out that the skills (and orientation) involved are quite distinct. As a result, the (equally common) policy of automatically promoting the managing partner to senior partner at the end of the managing term is probably not a sensible idea.

Anyone else out there have a view on the right division of responsibilities between a senior partner and a managing partner?


Jennifer said:

One comment (tangential, I’m afraid). Having sat on a Board of partners, the thing I found strange about it is that, apart from the Chairman, the remainder of the Board were, by necessity, junior to the executive they were overseeing.

Given your comments about corporate governance and the model we were trying to achieve, I can’t see how else you would do it, but it did mean that you had to be pretty careful to pick the right people who could cope with that dynamic, which, given it was an election, was pretty hard to do.

One other thing, though – it’s a pretty standard corporate governance view (outside the US, where things are different) that it’s a really bad idea to promote a CEO to chairman of the Board in any firm. The personal dynamics are all wrong, regardless of whether the new CEO is the chairman’s choice or not. And personal dynamics matter a great deal in making corporate governance work.

posted on September 5, 2006

Vironika said:

David, thanks for the help. Your articles and books are helpful indeed.

posted on May 17, 2007