Dismissing a Partner

August 30, 1998 · by Hugh Hochberg

Consultant Hugh Hochberg explores the frequent reluctancy to boot an owner and recommends some effective strategies.

Neil Sedaka sang "Breaking Up is Hard to Do" and that has never been more true than when it's become obvious to all parties concerned that a long term professional marriage isn't in the cards. Consultant Hugh Hochberg explores the frequent reluctancy to boot an owner and recommends some effective strategies.

Three partners in a successful design firm had met several times over a period of two years to discuss their concerns about the declining performance of their fourth partner. As with most partners in successful practices, priorities for client satisfaction and project success limited the three partners' willingness to resolve the matter. And the longer the matter went unaddressed, the more the performance of the fourth partner deteriorated.

Reluctance to confront: As with most ownership groups, the cited priorities were less of a factor than the general reluctance to confront the issue directly. Hopes that he would correct his performance without their influence and without their direct intervention also contributed to their delays in attacking the matter. The commitment to deal with it finally was triggered by the need to distribute profits among the partners, at which time the concerned three were very unhappy at the prospect of distributing a full share to the minimal performer.

As with marriages, not all ownership relationships are made in heaven. Just as with marriages of spouses, some ownership groups do not survive the tensions of leading, managing, marketing, financing, and operating a professional practice, and they fall by the wayside. This article does not address why relationships among owners fail. Rather, it offers a way to elevate the performance, appropriately compensate a lesser performing partner, or shorten what can be the long and painful process of dismissing an ownership colleague.

Healthy relationships are founded on competency, trust, and shared goals. In healthy relationships, ample and ongoing dialogue apprises colleagues of each other's expectations and assessments of each owner's role, effort, and results. In less healthy situations, colleagues allow other priorities to intervene, thereby reducing this important relationship lubricant and allowing dissatisfactions to develop and increase in severity. In effect, the colleagues become less collegial. Efforts toward correcting deficient performance are most effective when they help to restore the partners' dialogue. However, the longer the delay in initiating the efforts, the more likely it will be that the resolution will be to dismiss the offender or fragment the partnership.

With this realization, one approach toward resolution--and in fact the approach followed by the real but unidentified case that opens this article--might warrant consideration by any owners facing such an issue.

First step: Refusing to accept the status quo
One major failing of most efforts to resolve poor performance among owners, particularly when the offender has strength and power and intimidates others, is to deny the status quo as an option. Stated differently, the three concerned partners in the case study expressed very clearly to their fourth partner that he had to agree to a "fall-back position," which was that if he didn't agree to a plan to change his performance, role, and/or compensation, he would leave the firm immediately. This set the stage for change. (Unfortunately, too many firms are founded on the principle that owners will always be excellent performers, will always support each other, will always accommodate each other's performance - and a host of other rationales--and therefore they omit a covenant in their ownership agreement that can allow an owner's dismissal. For these firms, playing hardball as this process suggests is considerably more difficult, without reverting to disbanding the practice.)

Second step: Developing a game plan for role, performance, and compensation
Once the offending colleague acknowledged the unacceptability of the status quo the entire ownership group can start down the path leading to an action plan. In the case study, this action plan turned out to be a more narrowly defined role at lower compensation and a reduced partnership status. But importantly, the plan also included specific performance measures that would lead to a broader role, increased compensation, and restoration of full partnership status.

Third step: Supporting good performance and acting about poor performance
In actuality, the offending partner took things seriously for about two months, apparently accepting the reduced role, working hard to perform well within it, and understanding the need to modify his compensation to reflect his role and performance. The partners acknowledged and supported the changes. After that two month period, however, the offender's commitment to the plan and performance both deteriorated markedly. Shortly thereafter the partners lost confidence in a turn-around, and they terminated the partner. In so doing, the partners paid full value as defined in the ownership agreement. Although they probably had grounds for paying less, they wanted to acknowledge the departed partner's contributions to the firm prior to the performance decline. They also wanted to avoid extended negotiation and ill will that very possibly would have occurred had they tried to pay a lesser amount for the ownership redemption.

Epilogue
Several months after the departure from the firm, the departed partner, the remaining partners, and perhaps most significantly, the firm, are all better off. The departed partner--unburdened from the stresses of the firm whose vision proved inconsistent with his own--found a more appropriate place for himself in private practice, civic involvement, and professional pro bono activities. The remaining partners coalesced into a stronger group able to focus on the opportunities and challenges of the marketplace. The firm, whose staff was quite aware of the partners' conflict (despite the partners' denial of its visibility), has a more stable environment. The staff is now better able to concentrate on client service, project quality, professional development, and profitability. While the marketplace and overall economy contributed to the firm's rise in profitability, the elimination of the senior level conflict clearly was a factor, resulting in higher bonuses to staff and partners alike in the years since the conflict's resolution.

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