Long ago, David Maister began preaching the gospel of the One-Firm Firm, the idea that the defining characteristic of some of the world’s most successful professional service firms was their unified culture that promoted professionals’ loyalty and efforts on behalf of collective success. Over the years, some firms have taken well-publicized steps to downplay individual stars, such as McKinsey’s split with Tom Peters.
Today, however, we typically find that many, if not most, of the kinds of knowledge-intensive organizations we study have some form of a “star culture” that celebrates individual achievement. In fact, if you believe that money is a proxy for a given individual’s star power, then the statistics bear out the reality of an ever-widening gap between the elites and the rest. In the legal industry, for instance, the spread between highest- and lowest paid partners in the average firm was 10:1 in 2014, but that gap grew to a whopping 23:1 in some firms.
There are lots of other signals of a “star culture” in firms besides compensation, of course, and we want to hear your experiences and observations:
What are the signals in your professional sector (or your firm) of the prevalence of “stardom”? Is it growing or shrinking? Have you seen any attempts – successful or not – to weed out a star-system and replace it with a more egalitarian culture (or whatever you call it)?
As ever in this Idea Space, please feel free to leave your comments below. If you have an especially sensitive or confidential example that you’d like to share (perhaps one that I could disguise and use in the book, or at least learn from), then please email me directly on hgardner@law.harvard.edu.
Professional Collaboration: Hot Topics and Burning Questions 
We are still promoting “stardom” wherever it makes sense as a differentiator in a narrow market with few players (the “Big Four) that are sometimes difficult to tell apart. On the other hand, keeping a large partnership aligned requires an egalitarian culture. 10:1 in terms of pay spread sounds about right taking into account all seniority levels, although we probably have a somewhat smaller range.
The practical issue with professionals: Everyone is supposed to act like and therefore feels like a star. In their own field of expertise (and in their own mind) they all are. You want to keep that culture and spirit to create a fair amount of internal competition but you need to avoid over-equalizing and thus frustrating your “shining stars”.
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This is a primary focus for my firm and has been on our agenda for some years now. We have observed the need for both deep and where possible differentiated technical expertise, coupled with a genuine desire to collaborate across our 400 partners as a crucial component of our success. Our thesis has been that this can be achieved through adoption of team based goals and rigorous measurement of different outcomes over time, reinforced by direct client feedback and insights.
It is too soon to declare success and successive CEOs have grappled with the right balance. There is also the question of generational differences amongst partners impacting the change, as well as differences between functionally based business divisions.
In terms of REM spreads the 10:1 ratio best describes our position and the trick for us will be to associate collaborative behaviors and outcomes with higher REM outcomes, while still recognizing the importance of individual contribution.
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Peter, thanks for your insights. Getting direct feedback from clients is a bold move, and I can see how partners would be especially responsive to inputs from such credible sources. If you’re willing to share more details on this site, I’m sure others would appreciate learning from you. But if it’s confidential, perhaps I could follow up with you offline?
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A more egalitarian culture (accompanied by a more equal sharing of profits) could be beneficial to law firms in order to try to ensure that a case/matter is dealt with by the partner that is the most qualified on the issue at hand and not necessarily by the partner who – more or less by chance – has the client relationship.
In partner owned law firms, however, such an approach has difficulty in getting accepted, especially by the “stars” who often are also the most influential partners.
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My experience has been that an egalitarian and collaborative culture has been achieved by firms:
– Through long tradition backed up by a simple lockstep. Those joining the firm pick up on the culture and a lock step was described to me by a partner as “I can only earn more, if all my partners earn more”
– Using merit based pay where collaborative behaviour is rewarded financially and recognised as important (you get the behaviour you reward)
– In a most recent case, in a firm where a tradition of collaboration had grown up even though (if anything) the reward system militated against it – it was just seen as the right thing to do
However, I have seen the growth of lateral hires (whose numbers inevitably dilute the existing culture) as starting to erode collaboration. In many cases firms are having to pay “the market rate” to acquire specific laterals – often at the same time as all their competitors, so this drives up the price. This can unbalance the partnership and teach partners that moving around is the best way to maximise income (which will appeal to some of them). So I would say this is driving towards greater “stardom” behaviour.
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in my opinion, nurturing stardom or egalitarian culture would have to depend primarily on type of work professional service firm is executing the most.
If you take for instance firms focused on repetitive work, stardom culture wouldn’t make much sense (apart from sales-oriented partners) – even causing lower knowledge sharing and lower performance.
For firms focused on unique projects with highest added value, I don’t see stardom culture being eradicated, due to problem-solving specifics across different functional, geographical, and industry areas – all being executed by specific stars. “Levelling” stardom in this situation would be very hard to achieve.
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In the engineering/consulting industry, iconic practitioners are often critical to start new practices or move an existing practice towards critical mass or “blue chip” status. A cluster of icons in practice or service area can have transformational effects. In our firm, however, we try to strike a balance between rewarding the substantial contributions of these individuals, while asking them to multiply their contributions by developing other employees to levels of very high contribution, and being willing to share credit (and reward) with these individuals, based on the belief that this approach will best serve the long term interests of our employee-shareholders (and thus themselves as well).
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Peter, interesting to hear how your firm leverages stars’ reputations and expertise not only for attracting work but also for developing others. What do you think makes your stars receptive to your requests for them to spread the wealth? I can see how gurus might be intrinsically motivated to share their wisdom, or feel the cultural pressure to nurture apprentices (or see personal benefit from doing so). But what about sharing credit and reward? That’s much trickier, no?
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In the engineering/consulting industry, iconic practitioners are often critical to start new practices or move an existing practice towards critical mass or “blue chip” status. A cluster of icons in practice or service area can have transformational effects. In our firm, however, we try to strike a balance between rewarding the substantial contributions of these individuals, while asking them to multiply their contributions by developing other employees to levels of very high contribution, and being willing to share credit (and reward) with these individuals, based on the belief that this approach will best serve the long term interests of our employee-shareholders (and thus themselves as well).
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I agree it is trickier to inspire gurus to share credit, but it works a surprising amount of the time. I think this is for several reasons: 1) we typically need teams to be successful and “scale up” – if you don’t build a team by facilitating opportunities, mentoring, and, yes, sharing credit, there is really only so much you can accomplish by yourself. You might be more iconic, but you will accomplish less and have less overall influence on your firm and the profession; 2) we try to impress our our rising stars that the most valuable contribution is to hire people smarter than themselves, invest these colleagues with the ability to do what they do, and then move on to the next thing. This is a compelling vision for many. But not for all, and of course we spend most of our time managing those for which this approach does not resonate. For me the alternative is not compelling at all. Hire people that are 90% as good, and this compounds to send the business into decline.
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Recently, I have been giving much thought to what or who is a Star? Is a Star someone who brings in business? Or services our trusted clients? Or develops our people? Of stewards our firm in any of the many ways possible? To me, this issue is much less about downplaying the Stars but rather celebrating the many Stars as each organization has many, realize it or not. So, I am committed to “celebrating our people” and the many Star things they doing each and every day. For instance, I need star client service colleagues as my highest and best use for our firm is otherwise (a truth). So, rather than take a half-empty view of this…stop doing something….I prefer taking a half-full approach…..start doing something (finding all the stars and celebrating them).
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In our international network we have one firm that shares profits EVENLY among all partners (except new partners who are on a ladder). They believe that all partners need to do what they are good at in order for the firm to achieve its goals.
In my direct firm we have recently converted to a one firm profit sharing system. We have been looking at ways to reward the stars but in the first two years I do not believe that we are there yet. At least initially we seem to pul down those “stars” and prop up the “not-so-stars”.
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In the international management consulting firm that I used to work for, the seniors (from Senior Manager, Associate Partners to Partners) were expected to publish thought leadership articles in local newspapers/ magazines and also to actively seek out public speaking engagements. We were being “promoted” as local experts. The intent was to get customers to recognise us and proactively approach us for our expertise and services. There was also a KPI (minimum 2 articles or one speaking engagement per year) to ensure that we do it.
Over the years, however, I find that there has been less emphasis in promoting stars or experts. Instead, the firm prefers to promote collective thought leadership and industry benchmarks. There is now more industry surveys being conducted to get the views of hundreds, if not thousands of C-level executives. The research findings are then published as the “thought leadership” views. A big move from publishing what individual expert(s) in the firm think or feel, hence less “star culture”.
One observation – I am now based in Singapore and working in a local IT professional services company. There is hardly signs of “star culture”, but instead we are promoting teamwork and team recognition. Could country culture (e.g. Western vs Asian) play a part in whether the “star culture” is present or not? My personal view is that western cultures/ organisations would tend to promote “star culture”, less so in Asian cultures/ organisations….. just a personal opinion.
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It is inevitable to have stars in a law firm. To be successful, a firm needs to have the right mix of stars and, for lack of a better term, service partners. It is important to have a culture that values both ways of contributing to the common success of the firm. In fact, the continuing success of a star-like rainmaker depends on his ability to deliver also the small print stuff. My firm has a strict lock-step system only differentiating on tenure, and that system is not questioned by anyone, including the stars. Having said that, stars are often opinion leaders, although sometimes not really well informed on the subject matter, and special treatment ny management is recommended to avoid spontaneous sniping of good ideas,
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We have been an equal partnership for many years, with access to equity via lock-step over a fairly short period. The “equal partnership” is valued not only by those of us who have been long term partners, but especially by lateral recruits who speak of the destructive behaviours that points systems and the like can seem to encourage. We try to incentivize collaboration in this way, ensuring that work is referred to the most appropriate partner, and clients are “our” clients rather than “my” clients. The challenge is to manage individual performance so that there`s no sense of a free ride at the expense of those partners who are the heaviest hitters. The system depends on a shared sense that over time, with swings and roundabouts, there`s equal reward for roughly equal effort. Measuring referred equally with supervised fees, as well as an about to be introduced more rigorous 360 degree appraisal system for partners, is an approach that we take.
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For me, I think the optimum situation is not to ‘downplay’ stars but, as Alan mentioned above, rather broaden the definition of what constitutes a ‘star’ at the firm in the first place. My experience, certainly in relation to law firms in the UK, is that the ‘rainmaker’ figures of the past are just that, of the past. I can count on two hands the number of partners across all law firms in the UK who truly have a meaningful book of business that would follow them wherever they went.
Given this, to potentially define ‘star’ as someone who brings in the most money is to miss a range of other potential stars within the business: those who best develop and retain talent, those who best promote the external brand of the firm, those that consistently deliver the highest quality of work, etc.
Having been involved in helping a number of law firms recruit later partners and teams, I have been exposed to a variety of different ways in which firms try to achieve a more balanced approach. Some of these have had the adverse effect of reducing performance – effectively squashing ‘stars’ down to the average level of the firm but achieving no corresponding rise elsewhere within the firm. Where I have seen it work best, is where firms celebrate and strive for excellence across the entirety of the business, not just in fee-earning.
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I think that the firm has to have both star sytem and egaritarian system (I call it family system-treating employees like a family). Star system-I call it a merit base system. A professional wants to be challenged each day and wants to reach the highest point of skill level. At the same time, everyone has different potential and has a different pace (some grow quicker early or other grow steadily over time-late boomer). In order to run a better firm, the balance has to be there for both merit base system and family base system. I still respect the way how Marvin Bower built McKinsey and his one-firm concept. Again, a good firm has to have both.
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When I started in the Big 4 22 years ago it seemed we had a significant star culture….and now…it’s stronger than ever. In my mind there is a profound difference between the role of partners in firm governance and the reward they receive. So…it’s entirely possible to be egalitarian in terms of voting and the sense of “partnership” …but still differentiate substantially from a reward perspective.
Stars are critically important to me for three reasons
a) They attract talent. Disproprtionately. In certain areas – particularly my bailiwick of tax – there are luminaries to whom the best junior talent is inextricably drawn. It crops up in nearly every ‘experienced hire’ interview I conduct….”why do you want to work here?” “Because [ ] and [ ] have such a great reputation”
b) They drive revenue and margin growth. In the U.S. at least, I’m fairly sure the Big 4 would all like to get themselves to an average profit per partner of around $1m. Let’s assume margins in advisory are maybe 20%. And maybe tax 30%….that means your ‘average’ advisory partner needs to be biling $5m, and tax $3.5m. So…bearing in mind that you have new partners contributing less, a major component of economic success for a firm are those stars who are billing 2x 3x the average. They are the ones who lead and win the largest pursuits. They have a disproportionate ‘win rate’. They are the ones who have an ability to manage large teams of other partners, and help them maximize their success. They are the people who, when clients are asked ‘who did you use for your latest acquisition’ they say [XXX] at [Y Firm]
c) They serve as a signal to other partners as to what good behaviour looks like. How do you continue to encourage your partner group to raise their game? How do you signal to staff on ‘partner track’ what behaviours you wish them to exhibit? These are the role models whose actions are promoted and rewarded (visibly) by firm leadership…
Heidi – you rightly focus on reward. Definitely a strong signal…but in my world that is not overtly transparent to other partners. Clearly stars need to feel there’s a structure and plan that rewards them appropriately (it stops them from leaving and keeps them motivated), but what communicates to the practice more strongly is:
– internal PR…who is featuring in internal news items? who is being invited to speak at team meetings?
– leadership roles…outside of practice management activity (which stars often loathe), who are your industry leaders? who are your practice specialty leaders? Who gets showcased at client events? who do you send to government consultations?
– alignment to ‘star accounts’. Within the Big 4 it is typical to find a stratification of accounts…with there being a band of high profile clients who have the potential to spend more than (say) $100m globally on consulting fees. Partners who have either global engagement partner,concurring partner, lead advisory partner, or lead tax partner roles on these accounts will be clearly understood by the practice as stars. And…not surprisingly, the best staff want to work on the highest profile accounts, and with the best partners in that area.
– The technical press – some partners are stars because they can sell, deliver, and inspire client confidence. Some partners are stars because they are pure “gurus” – and for these folks (and this is no different to the academic world) – stardom is reinforced by producing technical papers for the community at large. Who is promoted to write articles by the firm is therefore another strong signal.
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Accounting firms are very team oriented in nature due to the nature of work. We have to have collaborative culture to function well.
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This is such an interesting topic. Heidi, thanks for asking me to join this group. (and I actually used the research you’ve done on collaboration with my team just last week – thank you!)
We are a management consultancy focused on strategy execution – centered on the human struggle of change in strategy. One of the things we’ve done (since our firm’s founding 17 years ago) is to address this clearly through our culture and values. At the core of our values is “our client’s cause is our success.” This is supported by four “planks” – and one of these hits this head-on:
We celebrate individuals and their contributions to the vitality of our firm.
–We are committed to nurturing and developing each person.
–We appreciate the power of diversity.
–We reward and recognize achievements.
–Each of us takes responsibility for teaching and learning.
–Everyone has the opportunity and encouragement to do great work.
So while we have an incredibly team-based, collaborative approach, we also want to make sure that our culture is sustained through individual accountability. After all, if everyone is accountable for everything, no one is really accountable for any one thing. Therefore, it’s how the individuals support the goals of the team, our firm and ultimately our clients.
Make sense? Happy to share more.
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We have almost 60 employees. I say 55 of 60 are professionals in mostly accounting field. We applaud individual stars by recognizing them in our monthly meeting in front of our people. Monetary reward is, I think, is modest for a success of brining in a new annuity client. They are 15% in the first year, 7.5% for the next two years. We tend to shy away from heavy bonus structure. I think I said it before. It has to be balance.
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