Governance and Business Planning

Two Essential Elements of Managed Growth

in Professional Services Firms

Governance and Business Planning

Two Essential Elements of Managed Growth

in Professional Services Firms

some observations

Professional services firms with well-documented governance...

•make and implement important decisions more efficiently and with better results•manage succession and transition better•have a higher level of group business performance

some observations

Professional services firms with formal business plans...

•are better able to spot problems before they become crises•have navigated economic downturns better•have been able to recover from downturns more quickly•have faster and better business results from new products and service lines

governancegovernance

Has it been more

than 10 years since

you wrote your

agreement?

Has your partnership grown by more than 30%

since then?

Are any of your

partners over age

50?

Are your younger

partners unhappy?

Are you thinking

about a merger or

acquisition of

another firm?

Is it harder to make

decisions now than

before?

7 “hot issues” in governance

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

amount

purchase period & terms

valuation

“easy in / easy out”

7 “hot issues” in governance

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

non-equity partners?

protection of the founders

multiple classes of equity partners

7 “hot issues” in governance

7 “hot issues” in governance

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

one partner, one vote

veto rights

super-majority

“double majority”

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

7 “hot issues” in governance

“strong” or “weak” managing partner?

“cabinet system”

“mixed” management board

advisory board

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

7 “hot issues” in governance

eligibility

selection criteria

majority required to elect

“up or out” issue

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

7 “hot issues” in governance

To what extent should partner compensation be determined by performance?

What is “performance?”

What weight should be given to “subjective” factors?

capitalization

structure of the partnership

decision making and voting rights

management structure

election of new partners

partner compensation

succession planning

partner retirement policies and options

buy-out

pension / deferred compensation

7 “hot issues” in governance

business planningbusiness planning

trends and successful practices in business planning

multi-year business plans

defined business planning cycle

alternative scenarios

performance measurements and alert values

zero-based budgeting

practice group and individual business plans

links to individual performance goals and performance evaluation

issues and obstacles

It is too time-consuming.

It could be too divisive.

Business plans never work.

It could restrict our flexibility.

the alternativethe alternative