Exploring Partner Dynamics: How to Constructively Manage Leadership Differences in Your Design Firm
Presented by Todd Reding, CEO and Partner, CVG
Hosted by BQE Software - October 2023
Does your business partner occasionally drive you crazy? Do you occasionally drive your business partner crazy? The answer is most likely yes…and yes. Running a small or mid-sized design firm isn’t easy, especially when two or more partners are at the helm. Decision-making can be difficult. Responsibilities can feel unbalanced. Priorities can differ. But the good news is you’re not alone – and there’s no such thing as a perfect partnership. There are lessons to be learned from those who have managed differences constructively.
Exploring Partnership Dynamics for Design Firms, Presentation Transcript:
Todd: … The thoughts and observations that you'll hear today really have been shaped by many profound mentors of mine. I've been extremely blessed to have people in my life who have helped guide me, teach me, and who have not backed down from telling me the things that I don't want to hear…
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Background and context
We founded CVG in 2014, so we've been going for 10 years, and we were completely virtual from the very beginning. So the last decade of my professional experience has been in a virtual environment, getting to know many, many architects and people involved in our industry. So when I talk about partners, it's really not a topic I take lightly. I don't trust a lot of people. I am a social person and I have friends, but I wouldn't go into business with most of them. I consider a business partnership, perhaps even more complicated and stronger than a marriage in many ways, because it's tied to so many other things. It's complicated, it's difficult, and like marriages, it doesn't always have an impressive success record. But in a business partnership it's your professional life, it's your financial future, it's your reputation and your brand, it's all tied to this bond that you create with another individual or individuals. So it is like a marriage. You know, a marriage, if you get divorced in today's world, people kind of understand, right? You, two people who decided to go in different paths, if your business falls apart, it can be even more damaging, personally and emotionally. It can really set you back. So I'm a big believer that language is very important. Let me be clear, that doesn't mean I'm great at it. My wife might tell you that communication is always something I can improve on, but it is, I do really value the importance of having a common understanding of language.
So today, we're going to talk about this idea of partnerships. What is a partnership and what are some of the fundamental challenges many of these commitments face? And what are some ideas, some thoughts that I can tell you today that might help you strengthen that or overcome some of those challenges? Also to be clear, partnerships are not required. In the decade of research that we've done in the small architecture space, because I'm not an architect, so it takes countless hours of learning about the space and what some of those common challenges are, we found many, many, many architects who were sole proprietors, had been sole proprietors, many who had been in partnerships that broke apart and dissolved and now they're on their own. And many, many of them are successful and happy and content. So as I talk about partnerships today, please don't hear me say that that's your only path to success, that you've got to achieve that. There are some pros and cons to both avenues. But today, we're gonna talk about partnerships.
The term “partners”
I want to talk a little bit about this term partners a little more just to make sure we're all on the same page. You know, a lot of firms will use the terms “partner” and “principal” interchangeably. Some firms create levels like associate principals, assistant principals, so forth. In my mind, what we're gonna talk about today is a partnership, which really means a long-term commitment, most of the time permanent, almost like tenure as a faculty member. When you become a partner of a small business, again, I'm not really talking about 500 employees and up, I'm really focused on small businesses, which is almost entirely where we work. And in that world, when you become a partner, when you accept that responsibility, it's typically for life. You're sort of saying, this is a job that I'm going to enter into for the long-term permanent health of the organization. And when that comes to an end, you're bringing up other talent to take on those leadership roles and in many cases fund your retirement or your downgrade of responsibilities however you want to frame it. But that's kind of what we're talking about today. You know, when you become a partner, it removes some of these traditional layers of compensation studies and performance evaluations, job descriptions, work schedules. The traditional way of looking at those topics changes when someone becomes a partner, regardless of the ownership percentage or the capital investments or the longevity. We're looking today as partners as total leaders of the firm, all in, so to speak. Again, not making any difference of how much you own or don't own, when you become a partner, you're really a permanent leader of that firm.
Challenge #1: Sharing a Vision for the Future
So let's go on and start with some common challenges that these partners face. I'm going to talk through a few of them and tell you some stories of firms that we've seen that have confronted some of these and hopefully talk with you about some important ideas to keep in mind. So the first common challenge that we see, particularly again in small businesses, is the idea of a shared vision.
I'll never forget early in our evolution when I was out interviewing as many architects as I could – and if any of you watching this your may have been some of those that I called randomly and asked if you would talk with me – I want to share our appreciation for that. You helped shape what we are today. But in those interviews, I ran into a small firm that specialized in pretty high-end residential work in a very beautiful part of the country. And I sat down with these two partners, the firm had been around for about 10 years, and I asked them to tell me where this was all going. It's a common question. Those of you who've met me, I'm always interested in what the future of your business looks like. What is the vision for the future of this business? And so we started with the first partner who went on to talk a lot about the types of projects that he was very excited about. Nothing wrong with that. It happens all the time when I ask people where you want this business to go. Many architects gravitate towards the type of work that they want to do. That's really not the question I'm asking, but nevertheless, it's important. And so he talked on and on about the types of projects, the types of work. Language, to be quite honest with you, I don't totally understand. I'm not an architect. But I listened, certainly very respectful and empathetic with his position. And, and, uh, you know, he talked for a while about this and then kind of came to a conclusion.
I looked at the other partner and he had this look on his face of fear, honestly. And he's staring at his partner. Again, these people have been in business for a decade. And I said, so what is your vision for the future of this business? And he looks at his partner and he says, “I wanna stop working 70 or 80 hours a week.” So it was a long period of silence and it was very clear that these two partners had gotten very wrapped up into the growth of the business, winning the business, the work, the design, the fundamentals of keeping the place growing and being well-respected and even making some money, staying in business for as long as they had in a highly competitive market. But what they had not done was take the time to really talk about what it is they both wanted from this business long-term. Um, as surprising as that story sounds, it's not uncommon.
So having that shared vision for where you want to go, what you want this to look like, how many employees you want this to have, the types of employees that you want to gain that's so critical for partners to really delve into that with each other. What is your vision in today's market? Many firms are trying to wrestle with where they are headed with this idea of remote work? Are we going to allow people to work remotely? Are we going to ask them to come in one or two days a week? What kind of culture does that create for us? And partners need to really talk about these issues and be on the same page. To be clear, enter this topic knowing there's no right or wrong answer to these questions. The only answer is: what is the right path for you? What are you trying to create? What are you when you identify your goals and your efforts and you create your budgets and your plans, where is this all headed? And making sure that the two partners are really on the same page is critical. So sharing a common vision is really, really important. In the slides, we talk about writing the vision statement and revisiting it annually. I think that's a very, very good exercise. And it might come to some very personal conversations, too, about where you want this business to go and what it does for you, because it's all intertwined in the world of small businesses, we all know. There's, in my mind, there's really no such thing as work-life balance. At least in my experience, that term is, it's really a myth, quite honestly, because it's all blended. We're just not naturally prone to compartmentalize that way. And in a small business, when you're doing such a vast amount of things and so many different unexpected things rely on your time and attention, it's almost impossible to carve out those boundaries. So it's really important that you and your partner or partners all have this very open, honest conversation about where this is all headed.
Challenge #2: Failure to Communicate
I'm going to go into a second common challenge. I'll do a little fun exercise here. Now, if you can send me an email after this is all over and tell me what movie that's from, it's one of my favorites. We'll do a drawing for a fun prize and send you a note. But a failure to communicate is, without any question, one of the top challenges partners see. I can promise you, I have had partners tell me that they have not spoken to their other partner in more than a year. They work together side by side on a daily basis, and they have not spoken to one another in any meaningful way. Certainly they say hello when they're getting coffee, but they literally have not communicated. Now hopefully, the overwhelming majority of people in this call would not fall into that category. However, there's communication, and then there's communication, right? Just talking. It's not just the fun, comfortable stuff. It's the critical stuff. It's the open and vulnerable stuff. If no one on this call, if you haven't read Brene Brown, I highly recommend her. She is a profound writer, professional in the social work field. She talks a lot about feelings and emotions and how we connect as human beings. And I'm always just fascinated with her work on vulnerability and the importance of being vulnerable. It's the only way you get to these deep relationships and business partnerships are no exception. So you definitely want to talk with your business partner about the things that are working and not working.
So here are some things to think about about communication. Probably many people listening to this have staff meetings, partner roundtable meetings, a variety of different touch base meetings, and they can often get sidelined for clients or difficult employee issues. Sometimes it's the first thing to get moved or canceled. We really encourage you to make standard communication meetings set in stone and not movable. Really, in those meetings, define what's working, what hasn't worked, what you want to accomplish in the next quarter. We have one firm that we work with where the partners are very religious about taking quarterly trips. They schedule something fun, but during that trip, they have some time where they really talk about what's worked in the past quarter, what the goals are for the future quarter, and they don't miss that trip. It's really important to maintain their level of communication. And there's some other important points on the slides that we'll address, but that pretty much captures it.
I don't think I'm telling anybody anything new when I express the importance of honest, open and transparent communication. The firms that are struggling the most that we work with and have one or more partnerships are typically the ones who are avoiding those uncomfortable conversations. They're putting it aside. They're waiting for something else to solve the conflict. And it almost never works, right? It creates more problems in the long run. It may feel like your immediate solution is the only thing that works, when in reality, it's just deepening the wounds. Highly encourage you to address those uncomfortable issues. One partner's not carrying their weight, one partner's talking over the other all the time, one partner is obsessed with design without regard to budget or schedules. These are things that have to be addressed, openly and honestly, as a partnership group. So that's two critical challenges that we see, and I highly encourage you to think about those and work on overcoming them.
Courtney/BQE: We do have a question. How do you justify standardizing these processes when you are a micro firm? If you have limited time to draft policy for a first of two or three, then what do you recommend we prioritize?
Todd: Yeah, that's a great question.
And so I'm going to interpret micro firm as two or three people still probably early in your phase of growth. And you know, like most of the people probably on this call who have grown beyond that size and are now in the 10, 15, 20 person or more stages, they all are going to relate to your question. We've all been there. If you've started a firm at all from scratch, you know that when it's two or three people, it's everybody doing everything. And it feels chaotic. And I totally respect the burden of responsibility that's on you and the demand for your time. However, I still believe that many of the things we're talking about today are as important as getting the work done for a client. And sometimes you have to accept the financial reality of that. You have to carve out a percentage of your time to be committed to these healthy relationships and healthy partnerships. And that means there's time that would otherwise be billable that you're going to have to carve out for this. If you're looking to build a successful firm that's going to grow over time, then you have to be able to invest, not only the cash it takes to invest in things like branding and marketing and websites and doing all that kind of stuff, you also have to be able to invest in the human capital, the leadership that's going to become a part of your DNA. And if you don't invest, if you think you're going to wait until you're 8, 9 or 10 people to have the time. It just doesn't work. Even the firms on this call who are at that size would tell you, you don't feel like you have a ton more time with 10 people than you do when you're at 3. Probably even those of you that are leading firms of 50 or 60 people don't feel like you have the time.
So the importance of carving out that time does not change with the size, and you've just got to do it. You've got to take the time to communicate. It's the same thing as if you're in a family and you're starting a family and you have young children that are constantly counting on you. You're running from one errand to the next and one athletic thing to the next or theater thing to the next. You still have to intentionally take the time to work on the relationship. It's critical.
Courtney/BQE: And then the other question we have is from Steve. Are you suggesting the the quote unquote core group not needing to be all the partners or owners?
Todd: So I think I understand the question, which is, you know, in the beginning, I said that some firms have terms like associate or assistant principals, and they have, you know, a core group of leadership. are partners who have made this permanent commitment to the firm, they're owning an equity stake and they're sort of all in. It's a life decision to lead this firm. Again, typically this applies to firms under 20 people where we're still getting it off the ground. We're still moving it to a place that's going to live beyond the current owners. And so it requires the people that are leading the firm to have these very close relationships. It's not uncommon for there to be another layer outside of that core group, to use your term.
But what I'm really discussing is the people that are considered a part of the permanent future of the firm, and they've taken the steps to do so. So they either bought in or they've been granted equity and they are coming into that core leadership group and shedding, you know, really roles and responsibilities we'll talk about in a second. But they're shedding job titles for the most part. They're shedding things that are, you're there to make the company successful, to put the company before yourself, to think about the long-term picture rather than your next step on the career path. That's really what I'm talking about. Some firms, there might be some layers that wouldn't qualify for that definition, but that's what I'm talking about today.
Challenge #3: Everyone Does Everything
All right, let me go on to the next challenge, which is related to that answer. And the next challenge really is that everyone does everything as an example. Now, for those of you that are sports fans, or if you've ever worked in a commercial kitchen, like I have, or even parents, you know that it's pretty much impossible for those systems to operate if you don't have very specific lanes for everyone to stand. If your sports team, if every player on the field believes that they are the goalie or in a commercial kitchen, if every person believes that they can run from station to station doing anything that they want to do, or if parents believe that there's no division of responsibilities, you're both going to do everything. We all know the outcome is catastrophe, certainly wasted resources and confusion, and in many cases, hurt feelings, costly mistakes, and unengaged individual, disengaged individuals. In many of the firms that we've studied and worked with, when we look at turnover, a lot of the times we can contribute a fairly significant amount of responsibility to a high turnover rate and employee dissatisfaction, we can really attribute it to leaders not staying in their lane, not understanding the different roles and responsibilities that exist within each person's participation. So everybody doing everything is not possible as you grow as an organization. Now the hard part, as many of you watching this know, is that you go from starting a firm where everybody does do everything, if one or two people, right, because there's nobody else to do it.
In transitioning as you grow to really defining what those responsibilities are and letting go of a lot of those responsibilities. We deal with a lot of firm owners that have trouble letting go. They have control issues because they created the organization. And I get it, I totally get it. I've been in that seat. But the only way to make an efficient organization and to really reduce some of that job dissatisfaction that I mentioned is by continually defining what lanes each of those owners, each of those partners needs to stay in. Know what each person is responsible for. Regularly evaluate what each person is responsible for and overcome some of those control issues, except that there's a larger group of people doing the work now, and it's not all going to be done the way you would do it. There are going to be mistakes that are made, some of them costly mistakes. That's part of growing a business. It's part of building an organization that is going to grow beyond yourself.
Everyone says that they want to avoid job titles and organization charts because they're too corporate. I hear it almost every week. The result of an overly cautious or overly resistant approach to that is real ambiguity and a high level of waste, confusion and cost because the firm has not done an adequate role, an adequate job of defining roles and responsibilities within the group. Highly recommend a book to you all. It's not on our recommended reading list at the end of this, but it's the Who Not Why by Dan Sullivan. Very, very good book. You may not go to the extremes that Dan has, but he really talks about the importance of empowering the who around you to really get the job done. But certainly a common challenge among firms with multiple partners is everyone trying to do everything and not really paying attention to who needs to do what.
Challenge #4: Different Leadership Styles
All right, I'm going to go on to common challenge number four, different leadership styles. So again, as I said in the beginning, language is very important. So what does leadership really mean? And I think it's important for partners to have a conversation about what they feel leadership means. Put that down as a topic during your next lunch or your next partner meeting to really gather feedback from the audience. You might be surprised by what some of the impressions are of what leadership really means. In my mind, it's about guiding the firm. It's about setting direction, paying attention to the overall health of the organization. Leadership really is setting that tone, setting that example, and then really paying attention to the course of the organization and addressing and confronting issues that threaten that course, that plan that we've put in place. Using your resources to call attention to things that need to be paid attention to, not necessarily micromanaging, but empowering others to pay attention to them too.
Leaders take their life experiences, their knowledge, their abilities, and they find ways to share and serve others, to share that with the rest of the organization and serve others in the organization so that they can be successful and they can make the company successful. I firmly believe that. Jim Collins certainly talked about the level five leader in the book, Good to Great, the servant leader, I think is very, very important. I think it's the way to be an effective leader. That doesn't mean that because you're a good designer and a good architect, that you're a good leader. It doesn't mean that you're not, but the two are very different roles that you can play in an organization. We do find many firms that have been around for a long time. They have long standing employees who have contributed a lot to the success of the organization, lean towards promotion and advancing their career in recognition of that performance. It's sort of like the age old dilemma of taking a phenomenal salesperson and promoting them to be a sales manager. And they're a terrible sales manager. So you did two things. You took the best salesperson you had off the line, out of the market, and you put them in a position where they fail as a manager, and then cause more harm to the sales team than good. You know, something that partners really need to take into account, is the importance of leadership abilities does not necessarily equate to what the person's job performance has been in the past.
Partners, you have a serious influence over the leadership tone that you set in the organization. And I think that's a really important thing to remember. Self-awareness is incredibly important to being a good leader. I highly encourage partners to really work with each other to make sure that you're open to strengths and weaknesses. Ego is checked at the door. Your own personal success often is checked at the door. When you accept the role of partner and you enter that room as partners to talk about the organization, you're leaving that behind. You're there to help the business grow. And whatever is good for the business is where your focus is.
I would also encourage you all to think about outside counsel. Certainly, CVG provides that for our clients, but there are many qualified professionals in this marketplace who can give you an honest reflection on your role as a leader in the organization. I highly recommend things like executive coaches, executive MBA programs, of course, and other training resources that help you grow as a leader. It can be very, very helpful. So work on your personal evolution as an individual. Work on your own personal growth, and that will help you perform better as a leader and help your partnership group serve the firm better as leaders. So that's challenge number four. Be aware of different leadership styles.
I guess one of the things I didn't mention in that is there are, you know, there are the micromanagers. There are the people that are obsessed with the details. There are the people that are obsessed with the details. And there are the people that, you know, believe that leadership is standing at the top of the mountain and looking out over the valley, never setting foot down on the earth. I'm not gonna talk about which one is right or wrong today, but certainly it's not uncommon for different partners to have different styles as to how they approach leadership, which comes back to my original point that you, as a partner, whether it's two or five or ten, need to be talking about what leadership means to you and what you find important. And you before you bring on new partners into your group, you need to be evaluating that individual's perception of leadership. What values do they hold close to their heart about leadership and service to the talent pool? So there we go. There's challenge four.
Challenge #5: Long Distance Partnerships
So challenge number five: long distance partnerships. This of course is a hot topic in today's market because so many firms are dealing with remote workers and considering satellite offices. It seems like in the post-pandemic era everyone didn't just run back to the office and continue doing business as usual. I don't feel like we've ever come back to that, nor do I feel like we ever will come back to a pre-pandemic way of doing business. It's changed and I think it's changed forever. So there really is no right answer here to be honest with you. As I said earlier, it's about finding the model that works best for your firm, for your culture, for your employees. You need to build what works for your firm. And in some cases that may mean satellite offices and remote workers. I certainly encourage you to continue to believe in the importance of physical face-to-face interaction. It definitely has more value-per-minute than distance. And I say that coming to you as a person who's worked in the virtual space now for 10 years. But that face-to-face interaction is so valuable and so important. So if you do choose to embrace a satellite office, entering a new market, you really do have to work on maintaining regular face-to-face interaction.
You also have to really work hard at fighting the silo mentality, not allowing the “us” and “them” barriers to begin to evolve. We do find firms that struggle with satellite locations dealing with processes being different for one location than another. Now, sometimes that you know that arises organically because of the staff that are in one location versus another. You may have project architects all in one location and production people in another location and it just tends to evolve that way. But you really have to fight that silo mentality and be very, very consistent in the way you embrace and enforce processes and set the expectations that those are consistent for you.
The other thing I'll say about this remote work and remote partner challenge that many firms face is to be very clear about what you expect from this investment. So many firms go down this avenue without really exhaustively asking themselves, what is it that we want that investment of time, energy and money, what is it that we want that to do for the overall business? If we're going to enter a new market in three years, should that be producing an extra half a million in revenue or an additional million in revenue? And how are we ging to measure that? Or do we believe that that other location is going to help us recruit more people? Well, then we should be able to measure that by the number of new employees we're able to hire in that market. You know, be very clear about what you expect that investment to do, and you'll avoid a lot of pain and confusion down the road and inconsistent expectations. Again, I wish there was a perfect answer for everyone. We see a lot of firms very successful at embracing remote work, remote locations, some even using overseas labor, which I know is a big issue in today's market. We see firms that are successful at it, but we also see firms who just have found it not to work for them. And I can honestly tell you in knowing a lot of those cases very closely, there's not one solution for every firm. And that's your responsibility as a partner, as an owner, to work with your leadership group to find the right answer for you and evaluate it and constantly work on it to try to make it work.
Challenge #6: Ownership Transition Planning
All right, next challenge is the idea of ownership transition. It's so often put off and put aside and not talked about. And we really encourage firms to talk about it openly and honestly, you can't begin discussing an ownership transition early enough. You know, what I mean by that is the partners need to talk about when they plan to exit the business. Now let me tell you this. If I had $1 for every person that told me they were going to retire next year and was still working full time 5 years later, we wouldn't be having this conversation. So I get that talking about it does not make it reality. However, it does not mean that you shouldn't talk about what you want, what your dreams are, what your plan is, and sometimes you may say, Todd, we have no idea. I'm 50 years old and I don't know when I'm going to ever slow down. Fine, have that conversation, right? To say that, you know, it's my belief I'm going to be here until I drop. Partners don't talk about this nearly enough. You also don't nearly talk enough about how you're nurturing young talent to come into leadership roles so that they're there to begin taking over ownership when people do want to begin to exit the business. I'm very hesitant to use the word retire because it's just not what it was in my grandfather's day when he worked for the same company for 40 years and then had a retirement celebration and then stayed home and did the things around the house that he wanted to do. It's just not the way it works in today's world anymore, and particularly in the world of architecture. Many of you tell me that you don't see yourself ever not being an architect at some level. So you need to talk about what that means. Does that mean letting go of management responsibilities, not being a partner? What does that strategy look like? And how are you opening up doors for future leadership and ownership to begin coming into the organization so that you can begin to do more of the things that you want to do?
The other thing I would say about ownership transition is so many firms give it away too easily. You're trying to recruit a new architect. You're trying to bring in senior talent. Let's give them some equity. That'll bring them in. Many firms do this without adequate thought about what that means. You all have worked to build this asset. It is valuable. You shouldn't give it away easily. There should be some clear expectations as to what it takes to gain equity in a firm. And we recommend you don't even consider it until the person has worked for you for at least a year, hopefully longer before you even begin having a conversation about an equity position in the firm.
Challenge #7: Lack of Trust
Let me jump to number seven really quickly: the idea of a lack of trust. I just don't know how it happens. I don't know how you find yourself in a partnership with business partners who own a part of the same company you do and you don't trust them. If that's the case, I highly recommend you address it now. Accept the tough pill of having that conversation. If you're the majority owner and you have other owners that you simply don't trust, you've got to work your way out of that. You can't be in a business partnership with people you don't trust. You don't have to like them. You don't have to love them. You don't even have to enjoy being around them, but you sure have to have a basic level of trust that they will live the values they say are important to them, that they are the people that you believe they are and that they say they are. If that's not the case, I don't know how you stay in a business partnership with them.
So on the other side of that coin, you should have partners that you do trust and that you can walk into the room and talk about virtually anything with. The red flags go off in my head all the time when I have clients tell me, okay, we're gonna have a meeting, Todd, but I don't wanna invite so-and-so and so-and-so, even though they're partners and owners of the company, because they're not aware of salaries, they're not aware of finances and all of this. That is a major red flag if you have owners and people who own equity stakes in the business and are considered partners. Now, I'm not talking about you're giving out shares of stock and equity to longstanding employees and doing that to engage people and keep them involved. I'm talking about partners who are charged with running this business and keeping this company going for the long term. That is a group of people that should be able to talk about anything with one another, no matter how difficult it is. So trust is extremely important. I believe it's critical. And so very important, and I think you have to work at it. And as you all know, there are a million books written about trust, a million resources to learn more about how to nurture it, how to gain it, how to give it. But it starts with vulnerability and sharing common values.
Before we take questions, I just want to thank our host of today's webinar, BQE Core. If you'd like to learn more about CORE, how it can help you manage your staff time, expenses, and even make your relationships with your partners better by giving them real time insights into the business, which I think are really, really important. And I encourage you to request a demo from the people at CORE. There's some poll questions on your screen on the right. We'll leave that up to the next few minutes. And now I'm gonna move on to the Q&A.
Courtney/BQE: First question: Is it fair as an individual recently promoted to the role of partner to expect equal say on the vision and the direction of the firm, considering that my ownership shares in the firm are considerably lower than those of the founding partners?
Todd: It's a great question, and one that I hope others may have. So two answers. The first is, it is 100% fair for you to expect to be listened to and to provide input and to give opinions about the vision for the future of the firm and where you want the firm to go.
The second answer is at the end of the day, the person that owns the majority of the firm is charged with making the decisions to make that firm run. So I do believe by granting you the title of partner and bringing you into the partner world, that the owners of the firm, they have to be open to listening to your input. But at the end of the day, somebody has got to make the decision and the owner is the person that's life is on the line. Don't ever forget that the owner of the firm is the one who gets sued. They're the one that the bank wants to know. They're the one the lawyers want to know. Minority owners, they don't care about. So you've still got a majority owner that has ultimate responsibility for the direction of the firm.
However, it just it doesn't take away the fact that you should 100% feel listened to and a part of that conversation. But you also have to respect the fact that they, their life is on the line. Their, their name is on the line and they're charged with making those tough decisions.
Courtney/BQE: Can you comment on the power dynamic when one partner controls the 51% majority of the shares and believes that they are the ultimate decider and how to navigate this?
Todd: Well, if I was a lawyer, I would tell you that the 51% is all that matters. Anything outside of that, you're a minority owner. So, you know, that is the reality. That is the way the law sees it. It's the way finances see it. And while things can get dicey, and, you know, there can certainly be gray areas areas when someone is a 49% owner and has given an enormous amount to the firm. There are cases that can be made that they have more responsibility, but at the end of the day, it is the 51% owner that matters. I am a majority owner of CVG, but there's not a chance in hell that this company would only be where it is because of the leaders that are a part of the CVG community. And it would be stupid of me to not listen and engage all of them. They've helped create this place. So with a good leader, the percentage really doesn't matter. A good leader and owner knows that they're not going to grow this company by themselves. And therefore they've got to engage other leaders and owners in those kinds of conversations. I hope that helps.
Courtney/BQE: How do you recommend navigating the dynamics of differing ownership stakes within the company when there may be several partners at different ownership percentages?
Todd: And, again, I don't want to beat a dead horse. All of the owners who have taken the responsibility of having an equity stake in the firm need to be listened to. I wouldn't buy in nor would I accept equity in a firm where I didn't trust that that was going to be the case. I would need some reassurances from the majority owner or owners that that would be the case. It would be the only reason I would own a stake in that business. However, the reality is the majority owner rules. They make the decisions, they're tasked with making those decisions. And, you know, financially, there's no way around that, but it doesn't change the reality, which is, you know, as a minority owner, you are making a commitment to the greater good of the firm and should be listened to when you're talking about the vision and the future of the firm.
Courtney/BQE: What are your thoughts on establishing a board of directors group for a firm of 25 with three partners? Does it make sense?
Todd: Absolutely, and I would begin working on it right away. I 100% believe it makes sense. I would change the term to a “board of advisors” if you're privately held and you're not going to require the individuals to have fiduciary responsibility or legal responsibility over the firm, then they are nothing more than advisors. However, if you're going to form a board of advisors that are going to give their time and energy to helping advise you on how to run the firm, you better listen to them, right? So, a board of advisors is a very, very healthy thing to do. I recommend that be no more than five or six individuals individuals who have a strong level of experience in your field, they can help you open doors to new clients. You can look for ones that have specialties in areas like legal or accounting, maybe ownership transition, or depending upon what the needs of the firm are. But I would shape that group right away. We have examples of roles and responsibilities for those boards. We help firms set up boards of advisors all the time. Don't hesitate to contact us. Very, very good move for a firm of that size. Meeting typically three, maybe four times a year, and typically compensating the board members with a small stipend for a day's work or whatever time it may be that you're going to require them for a year. They're not typically not doing it for the money. It's just a chance to reward them in some way for the time that they're giving you. And then if you do have one meeting in person a year or more, typically firms pay for lodging and travel to do that. But a Board of Advisors, very, very positive step for a firm of 25.
Todd: CVG has been around for 10 years. I won't do a big, long commercial, but we specialize in working with small and mid-sized firms. We've got an incredible team of people. Everything from marketing to recruitment to leadership development, everything related to running the business, we help firms with. We take a very holistic approach. We look at it in terms of the entire firm and where you're headed, what your vision is. So contact us, reach out to us. We have tons of resources on our website. You can email us, have appointments with us.
I'll also just mention to you that I am taking a cross-country trip, leaving next week and throughout the month of November, taking my Jeep and my tent and visiting our clients all over the east side of the country, up through Minneapolis, Ohio, West Virginia, South Carolina, Florida, Alabama. If anybody's out there and would love to meet or keep an eye on our trip, we'll have a ton of stuff on social media, but that's, it's kind of symbolic of the kind of firm that we are. We get out, we see our clients, we work in the field with you. As I said, we've been virtual from day one, reach out to us, we'd love to get to know you.
Courtney/BQE: I'm going to go ahead and ask one more last question while people take a look at the resources slide. Should larger shareholders also have a larger responsibility distribution in regards to the “everyone does everything” issue and partner roles plus responsibilities?
Todd: So my immediate answer is no. The majority shareholder does not automatically mean that that person should have more responsibility. It does mean that that person has more legal responsibility and fiduciary responsibility towards the firm. I would hope you couldn’t be majority shareholder and not do any of the work. That would be fantastic, right? So I don't think that there's any correlation between majority shares or minority shares and your assignment of responsibilities. I think that should be something that you all agree to as a leadership group. As the majority shareholder, you clearly come to the table with undeniable levels of responsibility. You are the one who will be sued. You are the one who will take a pay cut when you can't make payroll. But it doesn't necessarily mean that you automatically are the one to make all of the decisions in the firm. It's not uncommon at all for a majority shareholder to have senior staff that are compensated to take on more of those management responsibilities, day-to-day responsibilities, and so forth. So you have to pick the model that works for the firm and definitely define those levels of responsibilities and roles in the same way the minority shareholder doesn't automatically have veto powers over a hire or a vision for the future of the firm. I would say the same thing applies to the majority shareholder. Yes, you clearly have the power to do those things, but you want to engage others. You want others to feel involved and responsible. It doesn't have to be that way instantly.
Courtney/BQE: It does look like we are out of time for questions. I'd just like to thank everyone for attending this webinar, and we'll be sure to send you the recording link for this webinar by e-mail, so you can re-watch or share. Thank you so much, Todd, for educating us on this topic. We hope you all enjoyed today's session and hope to see you at the next webinar. let us know what topics you're interested in. And if you want a demo with core or interested in learning more about CVG. If you are interested in future events, please visit our events page on bqe.com. And I hope you all have a great rest of your day. Thanks everybody.