There are Three Distinct Types of Firm

source: themuse.com

There are three predominant reasons for partners to go into business together, according to Professor Stephen Mayson (see stephenmayson.com).

None is inherently better than the others and each should have their appropriate supporting cultures which affect investment and approach to management and strategy. Each one can be successful.

The three reasons for being in partnership together are:

  1. For Convenience
  2. For Complementing
  3. For Combining

I describe these cultures below.

Convenience

  • Partners simply share the overheads. The mathematical way of expressing this culture is 1 + 1 = 1.
  • Each partner has “my clients”.
  • Administration can be kept simple with little need for sophisticated ‘back office’ teams or expensive IT systems.
  • Strategic thinking is left to individuals or not done at all. Little time is spent on a firm strategy. There might not even be practice groups.

Complementing

  • Partners join to offer a range of services to clients. So, here 1 + 1 = 2.
  • Partners see clients as “my client’s and my team’s”.
  • Some administration and management are required to support this infrastructure.
  • More thinking is needed on strategy, particularly at practice group level.

Combining

  • Partners join to help build an integrated range of services and approach to service delivery. Here, teams combine so that 2 + 2 = 5.
  • Partners talk about “the firm’s clients” and act as custodians for the long-term future success of the firm (ie leave it in better shape).
  • These firms need to invest in good IT, such as CRM systems, and need more management and leadership to create the shared vision and make things happen.
  • A clear strategy is vital to ensure everyone knows where the ship is sailing. And that the ship gets there, avoiding rocks and icebergs!

Key Lessons

You might read this and think the Combining firm, with its 2+ 2 = 5 approach, will do best. This is not necessarily so. Such firms – and there aren’t many – are making bigger investments. They have significantly bigger overhead costs and the leadership challenge of herding their cats to truly combine. Not easy to achieve, because deep down, many practitioners prefer to be sole traders!

The important thing is to be clear what kind of firm you are. For example, if you’re a Convenience firm, avoid investing heavily in management and sophisticated IT systems. You are unlikely to get the payback. If you are a Combining firm, it will be essential to invest in having effective leadership.

What type of firm is yours?

 

 

 

 

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