How Should The NEW Managing Partner Be Compensated?

Baby boomer partners are rapidly approaching retirement age, creating a huge demographic shift within their firms.   One result of this is a dramatic increase in new managing partners at firms.  Many firms are skipping a generation and turning the reins over to “younger” partners. Firms are also asking their new MPs to divest themselves of a significant part of their client base to enable them to focus more on managing the firm.

How should the new MP be compensated?

Like any job, the scope of the position must first be clarified before compensation can be set.  For example, the compensation of a new MP will vary depending upon answers to the following questions:

• Will the new MP be more of an administrative partner, with few expectations for leadership and managing partner performance and behavior?
• What will the partners expect of the new MP?

The new MP is taking on a major risk:  Will her management style be compatible with the other partners?  If the new MP sheds clients to carve out time for the MP job, this could jeopardize her compensation, both while MP and afterward.   To offset this risk, firms typically provide certain types of compensation guarantees to ensure that the MP is treated fairly in all situations.

For more details, click on How Should the New MP Be Compensated?

Many thanks to Allan Koltin, Steve Weinstein and Mark Thomson for help on this post.