Let’s consider salary alone. Salaries for partners range anywhere from $200,000 to $500,000 in my experience. To afford such compensation, firms need a certain level of revenue that is managed by the partners. As a rule of thumb, I would propose a partner’s compensation should not exceed 30% of the revenue he or she is responsible for (using that guideline, a partner with a salary of $250,000 should generate at least $833,000 in revenue). If the owner brings in less revenue than that, the firm can’t sustain its desired profit.
Add a generous set of benefits and a share of profits and partners now have to produce a million or more in revenue to keep the firm’s economics at the right level.
Yet often there’s a partner who loses a valuable source of referrals or the ability to add clients. Or the partner’s energy level declines and his or her passion for work disappears. It usually happens gradually, and the rest of the partners witness a gradual decline in revenues.
At first everyone is supportive and encouraging, but after a year or two the situation becomes tense as the others realize they are paying for someone else’s slack. In one of the situations I have seen, a partner was receiving $600,000 in income to manage $500,000 in revenues.
Relationships
Sometimes a partner or owner is a good contributor but is also a frustrated or frustrating member of the partner group. It is not unusual to see in larger partner groups someone who is not only unhappy with the firm but seems to spend most of the time sabotaging every initiative. Such people vote against necessary projects, block the addition of new partners and veto mergers. At some point, they may not even be logical; they simply want to spite their partners and punish them for some past “wrongs.”
I wish these cases were rare, but they aren’t. Usually, they start with some friction between two individuals. This escalates and later involves the rest of the partners, who might then side with or support one of the parties of the conflict, leaving the other in isolation.
The lonely partner, now defeated, can be like a dormant volcano causing frequent earthquakes, always threatening to blow up. That’s why partners should think twice about simply outvoting someone and leaving them to stew.
In other cases, just the personality and communication style of some partners may cause them to become unacceptable to the others in the group. Some people are simply abrasive, prone to conflict, turning every discussion into a fight and failing to get along with anyone. And their reputation for being “difficult” is often a self-fulfilling prophesy. It’s not that they simply lost a political battle—that they were merely outvoted—but that they alienated everyone around them and found themselves alone.
Circumstances