The Inverted Pyramid – Does This Look Like Your Firm?
There is no question that the most profitable firms (defined as high per partner income) in our profession have figured out that leverage and a well managed pyramid is one of the key ingredients. Why is it then that so many firms, and I would suggest the majority, are struggling with just the opposite – an upside down or inverted pyramid where there are lots of partners and managers but few staff.
We didn’t get here overnight and I would suggest that few of us planned to be here. We wound up with our top heavy firms due to a number of factors. Here are some of the primary culprits:
• Generational issues including the Baby Boomer Bubble, Xers, Millennials, etc.
• Lack of a people plan with effective, consistent recruiting and staff development processes in our firms. We don’t have a process to see enough new faces and we let people hang around too long.
• Promoting non-partner-track people or sometimes marginal folks to higher positions because “we’re preserving staff continuity” and “it’s best for the client” when perhaps it is just the path of least resistance and/or we have no one else.
• Partner compensation plans that focus on chargeable time. Partners stay busy first. Managers are doing staff work and no one has incentive to push the work down.
• “It’s just easier to do it myself and besides I’m a lot more efficient at it”.
If any of this sounds like you, here are some of the outcomes that are not desirable but pretty common. You have too few if any younger staff. You have a tough time keeping the ones you do have busy. Really talented staff, your “all stars”, leave because they don’t see any opportunity to advance in the firm. Managers and staff do the same work on the same clients year after year after year. You have a relatively expensive workforce and you have a difficult time getting paid at their billing rate for work that they have outgrown. Partners are full with compliance work and are not cultivating the high value consulting work. And, worst of all, you don’t have the talent at the right levels to succeed you as a partner in the firm.
Ouch! So, what do we do? First of all we need some time to work out of it. We didn’t get here overnight and we won’t fix it overnight either. Unfortunately, some firms are out of time and that is the reason the profession is seeing so much M&A activity. Hopefully that’s not you and you can start to make changes now, to work on the pyramid.
Read my full article on how to begin the journey in prioritizing and tackling the pyramid structure in your firm.