Ineffective partners and how to deal with them

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Most accounting, tax and advisory CPA firm professionals who have demonstrated that they can help perpetuate an organization become partners between the ages of 35 and 42. In many cases, these same professionals retire from their firms as they approach the age of 60, 65 or 70.

Many emotional and physical changes happen to us humans over the course of 25, 30 or 35 years. Sometimes for the good and sometimes for the bad, our personal lives, energy levels and productivity at the age of 35 usually are different than our personal lives, energy levels and productivity at the age of 65. When these “human” changes have a prolonged, negative effect on job performance and impact at the firm, the managing partner is required to address an “ineffective partner.”

Let’s begin with the definition of an “ineffective partner.” I’m not referring to a person who usually delivers results year in and year out but occasionally has a less than stellar year because of a major client loss due to a sale or bankruptcy, a divorce or some other life-changing event. Those are one-off situations that usually self-correct if the partner is properly counseled and has the right support system in the office and at home. For purposes of this column, ineffective partners are defined as those who haven’t been carrying their weight over a prolonged period of time and, as a result, that partner’s compensation and contribution (or value to the partnership) are no longer aligned.

Arguably, performance counseling with constructive feedback for partners who fit this definition, particularly those who have been with the firm for a considerable number of years, is one of the more distasteful and difficult tasks that a managing partner has to undertake in fulfilling his/her responsibilities. Many managing partners hope the problem simply goes away so they don’t have to address it. But, as we all know, hope is not a strategy and it is very naive to think the problem will just go away. Because of a lack of inertia and for a number of other reasons, many managing partners simply don’t do a good job at addressing and dealing with ineffective partners.

History has shown us that a managing partner shouldn’t hide under the bushes in these circumstances because the longer the firm’s senior leadership delays addressing the matter head on, the harder it is to deal with it. With time, it is usually harder for partners to take corrective action, which requires a “full tank of gas.” They can’t face reality or simply begin to run out of “gas.” And the harder it is for partners to correct poor performances, the harder it becomes for the managing partner to do the right thing, which may simply be performance counseling with constructive feedback. Sometimes the right thing might also require a downward compensation adjustment. Other times the right thing to do is a combination of performance counseling and compensation adjustment. And, finally, when all else fails, the right thing to do might be out counseling of the partners. Whatever it may be, the sooner the situations are addressed, the better the outcomes will be for all involved including clients and staff.

When others in the firm see ineffective partners endure year after year and overstay their welcome, it becomes very demoralizing particularly to the younger partners, future partners and potential super stars. They ask, “Why does senior leadership allow ineffective partners to continue with the firm?” “Isn’t the situation diluting the compensation of the high-performing partners?” “Why is that tolerated?” “What am I doing working here?” “I don’t want to be associated with a firm that accepts mediocrity and I certainly don’t want to be a partner in a firm that doesn’t deal with important partner personnel issues on a timely basis.”

Finally, there is the reality, or at a minimum the perception, that ineffective partners are clogging up the pathway for future partnerships and, therefore, reducing opportunities that otherwise would be available to the next generation of leaders.

There is little, if any, upside in retaining partners who are characterized as ineffective. Approach them on a timely basis with respect, sensitivity and dignity as their issues are being addressed. If performance counseling doesn’t lead to corrective action, measured compensation adjustments should be considered and, if appropriate, handled with an even hand. But, if repeated attempts to right the ship do not produce the desired outcomes, outplacing the partners are unfortunately the path that needs to be taken. And while it is not an easy task, as managing partner, your responsibility, of course, is to do what’s in the best interests of the firm and, on occasion, this responsibility brings with it some tough decisions. Having said all of that, if you need to outplace partners who are no longer effective, we suggest a “soft landing” which includes the following:

Communicate that, based on their past performances, in your opinion, continuing with the firm is no longer in their best interest. While it is a message that no one likes to deliver or receive, in time it will become obvious that voluntarily leaving the firm is the preferred path for the exit. If any of the exiting partners want to stay in public accounting, let them unless unique circumstances do not warrant such. Let the partners staying in public accounting take some clients. Waive the covenants and liquidating damages usually contained in partnership agreements.

Do you have ineffective partners in your firm? How many? Have you waited too long for performance counseling with constructive feedback to have an impact? Have you waited too long to appropriately adjust compensation? Is outplacing long overdue?

If you have answered yes to any of these questions, the quicker you tend to these partners, the better it is for all involved, including the partners, and the quicker you tend to these partners, the more respect you will demand and deserve from your partner group and other staff looking from the outside in. Finally, the quicker you tend to these partners, the better chance you have of retaining your young and future partners.

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