Leadership is a burden—it means providing unwavering belief in the success of the firm, inspiring others even when you may need inspiration yourself and always holding yourself to a very high standard. Only a few are willing to carry that burden. In fact, if only a few partners are interested in management, even fewer are interested in being leaders. Leadership has to come from somewhere though, otherwise the employees and perhaps clients can feel the lack of direction.
A few weeks ago, we were hiking with another family. Our group was made up of four adults and three kids. At one point, we, the adults, started arguing about which direction to go. We had a very sketchy map and a very ambiguous set of directions. We spent maybe 10 minutes in a “friendly” discussion of direction when we noticed that the kids’ faces were getting longer and longer and they started fretting that we were lost and we would never go home. This is what happens when there is no leadership in a firm—the kids get scared.
Leadership does not need to be centralized. Centralizing leadership creates a more decisive organization that can act and react faster. Decentralizing leadership, however, can increase the reach of the organization and make sure that every aspect of the business receives attention. Perhaps you can look at leaders as not just decision-makers but also as ambassadors of the values of the firm. The Knights of the Round Table were a great example—each rode on his quest to spread the values of Camelot. A good firm will find a manner of decisive action but will also ask the partners to be its “knights” and deliver that vision to the rest of the firm.
The Founders
Leadership style is the manner in which a firm answers the question, “Where are we going and why are we headed there?” My experience has been that leadership style in a firm has a lot to do with history. Firms started by a charismatic and empowered founder tend to look for a single strong leader to continue that tradition. Firms that have been created by an involved group of founders tend to emanate that style in the next generation.
Both styles can work well—a more democratic and decentralized group of involved partners can be quite good collective leaders for a firm. So too can one CEO be effective. As long as someone is leading and it is clear who the leader is.
A CEO or managing partner should always be a leader, as the scope and responsibility of their post will necessitate that they participate in articulating the vision of the firm and endorsing its values. A CEO should not be the only source of leadership in a professional services firm, though. Rather, all partners should participate in the process.
The stamp of the founders is always felt—whether they are still part of the firm or not. Some of the habits the founders created may be less functional. Firms where founders were very reluctant to be leaders will likely create future owners who also believe they should not be driving the car. Firms where the founders preferred to drive from the backseat are likely to create a group of future backseat drivers.
In fact, my experience has been that there is no such thing as a founder who is not a leader. There are founders who acknowledge their responsibility to lead and there are those who lead from the backseat, but a founder is always a leader. Some just hate to admit it.
Why Are We Looking To Hire Leaders?
It is worth considering why advisory firms are so attracted to professional “leadership” and why many hire outside CEOs to lead them into the future. The answer probably lies in a combination of things. The firms might be mimicking the way large corporations manage themselves. Many may fail to recognize the difference between this, a professional services business, and the manufacturing or technology companies they are getting their management science theories from.
Large corporations tend to centralize management and rely on professional leaders because they need to put the business under the “supervision” of a group of frequently passive investors.
Without centralization, it is very difficult for the investors to put their arms around the business and oversee its performance.
But the distributed decision-making of a law firm or accounting firm will make it practically impossible for a group of investors to own the business and expect certain results. In fact, frequently the first thing the acquirer of a wealth management business does is centralize the decision-making and remove the co-CEO and partner structures that may have governed the firms up to that point. Centralization frequently improves control, but it does not necessarily improve the result for clients, employees or even owners.