To achieve such a transition, super-ensembles need to establish several structures:

• The executive committee of a firm frequently acts as a board of directors, representing the shareholders (owners) and checking the executive power of the CEO. An effective committee will allow for a more disciplined management approach.

• The president of a company typically manages the executive team and is more focused on day-to-day execution while the CEO focuses more on high-level strategy. Though the distinction may seem unnecessary in a service firm, the president’s office can be used to groom future CEOs. It can give the president a chance to handle some of the top-level responsibilities and participate in the leadership of the firm.

• Chief operating officers are most often hired from the outside to improve a firm’s operations, and most firms already have one when they are ready to step to the next level. That next step for super-ensembles usually means elevating their COOs—raising them from their back-office management duties and putting them second or third in command of the firm so they can manage the overall infrastructure the firm will need to pursue its strategy.

A key concept in this discussion is the notion that authority comes from an office and is “bestowed” on the person in that office. Nothing reinforces that like a term limit. A CEO should not be “CEO for life” and the same is true for other positions, including those on the executive committee.

Firms with large structures and institutional ownership understand these concepts more. The presence of the institutional owner creates a more functional board of directors (since that’s often how the institutional owners exercise their control and rights) and a more disciplined governance process.

Lateral Partners
When a firm is young, its partner ranks are often filled by company employees—people who have worked their way up, been promoted and earned the right to be owners. They are strongly connected to their firms since they “grew up” in them. This model is comfortable and ensures the continuity of culture.
But if a $5 billion firm is to retain its pace of growth and add the talent it needs, it will eventually have to find “lateral” partners from the outside. Some may join with their own established practices and client bases. Others may be valuable technical specialists.

To be successful, firms will need a mechanism to attract and embrace such partners and quickly integrate them (not push them away as culturally incompatible). This seems logical, but in practice it is very, very difficult to do. So much of the information and decisions in a firm flow through a naturally established system of personal relationships and historical patterns that the “newcomers” are not part of.