The Role of Partners and Leadership in Growing a Consultancy

Key Takeaways

• Leadership Quality: Essential for growth, ranked as crucial by buyers. Effective leadership isn’t limited to founders but involves a team.
• Importance of Partnerships: Partnerships provide support, skill synergy, better decision-making, expanded networks, economies of scale, reduced risk, and more personal time. However, choosing the wrong partner is a common regret among founders.
• Autonomy vs. Control: Balancing autonomy and control is vital. Partners need clear roles and responsibilities, which can be challenging as the firm grows.
• Common Problems: In larger firms, leadership roles can become misallocated, leading to inefficiencies. It’s crucial to ensure partners focus on their strengths and avoid redundant leadership positions.
• Effective Leadership Establishment: As firms grow, a full-time CEO should emerge, and leadership roles should be clearly defined and based on competence. Processes and metrics should support effective delegation.

Effective partnerships and authentic leadership play a significant role in the successful growth of consultancy firms. The intricate dynamics between partners and the strategic allocation of leadership responsibilities are crucial to navigating the complexities of expansion and achieving sustainable success.

The Importance of Leadership Quality

The quality of the leadership team is ranked joint first (with profit growth and market proposition) as the most important factor in buyers’ minds when considering a purchase, so it is important to get right.

Leadership in a growing firm isn’t just about the founder(s). Amancio Torres, who sold ShiftIn in 2017, said:

“The first thing you must tell your readers is not to do it alone. Don’t even do it with two of you. Get two or three partners early on. Solo works in some businesses, but it doesn’t in consulting.”

Only one of the 72 founder interviewees for my book achieved a sale without a partnership, and that founder regretted the decision. I do occasionally come across a founder that successfully grew and sold their firm by themselves, but they are not common.

Benefits of Finding a Good Co-founder

The benefits of finding a good partner to grow your firm are:

• Overcoming Loneliness: Being an entrepreneur is a tough journey, and even the most understanding spouse or significant other may not provide you with the empathy and support that you need.
• Synergising Skills: You are likely to have weaknesses that hamper your efforts. A well-chosen partner or two can fill the gaps and provide a more rounded offering.
• Better Decisions: Two heads are usually better than one. Having someone bright to bounce ideas off can lead to better decisions (although be mindful of group-think).
• Networks: Double the partners can mean double the network, which can mean double the sales.
• Economies of scale: You don’t both need an accountant, a website, a LinkedIn presence, and a lawyer. Splitting the administrative burden frees you up to spend more time billing.
• Risk: With several partners, you might end up putting less money into the company, which means the investment is more feasible and the risk is lower.
• Time: With one or more partners, there is more scope for you to spend less time in the office. The shared CEO role in Virgo meant they had more time to do things they loved. Either way, a partnership often means a more civilised existence.

Potential Downsides of Partnerships

The downside of partnerships, of course, is that they can go wrong. This can be pretty messy and expensive, with lawyers and accountants being involved, low levels of performance, a loss of clients, and acrimonious relations.

When founders were asked what their biggest regrets were in growing a firm, ‘partnering with the wrong person’ was ranked top (with not taking more risks).

Autonomy vs. Control in Partnerships

Yet there is a fundamental conflict at the heart of growing consulting firms. Partners and senior consultants often want autonomy but also realize that some controls are needed for strategy and strategy implementation to work.

The tension is further complicated by the fact that partners can both ignore the CEO/MD and sometimes have enough share between them to vote to remove them. Leadership of partners therefore often needs to be based on the traits mentioned above: integrity, reassurance, and persuasion.

If you end up with many partners, it is important to evolve into a position where everyone is clear on their decision-making role in the firm. For some, this may realistically mean having no senior role at all.

Sadly, many growing firms do not manage this evolution well because they put off the frank discussions needed about how decision-making will change as the firm grows.

Common Problems in Partnership-Led Firms

Two problems abound. First, in most newer consultancies, a handful of partners take on leadership roles between them – discussing strategy, taking the initiative on the different challenges that emerge, and managing the coordination of an increasingly complex firm.

It is easy for this situation to become entrenched and result in partners leading things for which they have no skill or desire. Partnerships in larger firms often confuse an optimal allocation of roles and responsibilities.

In larger firms, partners should focus only on what they are good at. If that is just delivery, then let them deliver.

Second, as firms get larger, the number of partners typically increases, and it is often automatically assumed that partners should be on the leadership team. Typical problems emerge quickly:

• There is no one leading important but unglamorous processes such as thought leadership creation or process development.
• There are too many partners ‘leading’ more glamorous processes such as the sales strategy.
• A handful of people don’t lead anything at all but still want their voices heard.
• A handful of people who are often great at delivery or sales really have no competence at strategy or leadership and at best muddy the waters.

Establishing Effective Leadership in Growing Firms

As the firm grows above 20-30 or so employees, one person should have moved into a more or less full-time CEO position, partners/directors should be clear on their responsibilities – moving towards mutually exclusive and collectively exhaustive roles).

The firm should focus on establishing a leadership team based upon necessary competence rather than partnership coincidence, and processes and metrics should be in place to encourage as much delegation as possible.

Conclusion

The evolution of a consultancy firm from a small enterprise to a thriving firm is significantly influenced by the quality of its partnerships and leadership.

By recognizing the inherent challenges and strategically addressing them, consulting firms can harness the collective strengths of their leadership teams to foster robust growth and long-term stability.