Founder & Managing Partner at Patrick Morgan | Sourcing elite talent in Professional Services and Private Equity
There’s a growing sentiment among the larger Professional Services firms that the ratio of revenue-generating employees to non-revenue roles is far too low. These firms are increasingly under pressure to reassess the layers of “leadership” and internal roles that may not be delivering tangible value to the organisation. This scrutiny is particularly acute in firms now backed by Private Equity investors. With PE’s focus on operational efficiency and commercial outcomes, we are beginning to see a shift in how these firms are structured—including multiple Partner-level redundancies as traditional Partnership models are challenged and underperforming layers are removed. PE investors often advocate for leaner, more performance-driven organisations. Their approach includes equity incentives cascading throughout the business not solely reserved for senior ranks—alongside lower base compensation but the potential for significantly higher variable pay. The focus is on aligning rewards directly with commercial impact. A notable shift in mindset is emerging: under these models, a first-year Partner with exceptional commercial success could out-earn a ten-year Partner. This stands in stark contrast to the traditional Partnership model within the larger firms, which, some argue, disproportionately rewards tenure over tangible results. The outcome? A redefinition of what leadership and success look like in the Professional Services sector—one that prioritises measurable impact over hierarchy and tradition. Credit: Neal McNamara
In my view at these large firms, the partners that have the ability to effectively serve large complex client do. Those that can’t become internal non-generating revenue partners and pretend to know how to serve clients. It’s frustrating to partners that take on the high risk and responsibility of large client responsibilities. I have always believed there are too many internal non-revenue producing roles at these firms. I continue to believe these firms should be governed by an independent boards that can focus on structure strategy’s and proper, not bloated, overhead. PE firms have the right focus.
This makes complete sense. Big4 has very senior partners conducting internal roles like quality, risk and commercial review which would be conducted by a senior director in industry. A senior director who's actually experienced and qualified in those areas and potentially being paid £200k not over £1m a year. Partners argument was that those roles have to be conducted by Partners as only Partners listen to Partners. If that's accepted as being true then Big4 have a much wider problem
Thinking from the employee perspective, this boils down to meritocracy versus bureaucracy. Many join these firms in hopes of large payouts and work hard, thinking the rewards will be significant. Bloated orgs dilute the firms’ ability to compensate the hardest worker/best seller, even in the best of years. In a slump, bloated firms may not react quickly enough to shed the extra HC and that further impacts op efficiency and ability to reward the beat performance. The employees feel the sting on many fronts, the challenges in comp, the cultural feel, and the caterpillar hiring/RIF. It’s not always rough, but figuring out how to help and not hinder makes the going smoother.
There is always a debate about this ratio and what the right balance is, especially when the market is soft. It is a good debate and there are certainly situations that need correcting, that said one must not forget 3 things: a) the roles of junior and senior partners are different, the former are focused on delivery and building their business book, the latter are focused on relationships, building the pyramid and transmitting accounts, and helping junior partners build their business platforms, b) non-revenue generating roles are not necessarily without value: senior partners in management positions bring experience and perspective, handle some sensitive and valuable internal tasks, or create some IP that builds the brand (eg books), plus commercially senior partners are here to handover established accounts to more junior partners whilst they try and open new accounts, and c) not all partners are hunters, some are farmers, some are topic experts that enable other partners’ business. So again it is a good debate and there is certainly a need to regularly check the balance is right, but it may not be as black and white as some think.
When I look at our industry James, I can’t help but reflect upon the fact that we are only here, only exist, in order to support our customers in improving their businesses. It has therefore always intrigued me with many traditional firms as to why there are quite so many non-revenue generating roles in their hierarchy? It’s as if the upper levels feel they have done their graft on the shop floor and it’s time to move upstairs to the deep pile carpet and exec restaurant (showing my age there). Why would any consulting exec not be out in the market working alongside their customers, especially if by default they are saying that they are the most experienced in their business? 🙋♂️🤷♂️
The aim of a lot of partners is to get into a “matrix intersect” role. All care, no responsibility climb up the responsibility ratings and lord over people actually working with clients to generate revenue and deliver value. The longer they’re there, the less relevant to the market they become. Then they get promoted into a higher intersect role. It’s absolutely crazy… no other industry would tolerate it…
Long time in making. Should have happened ages ago. Traditional big four are heavily lumbered with layers of non client facing , managing partners that are the source of internal lethargy, politics, land grab and inefficiency. Removing these layers and exiting these partners would not only remove the financial burden these firms carry, but more importantly, these firms can move to a better culture of meritocracy rather than political intrigue.
I feel that this post, albeit well written, is more of a eyeballs bait. At first glance it feels right, but the more you think about it the less sense it makes. Let’s start with the basics, the definition of “revenue generating”. Revenue generation begins with the top of the funnel and in the case of consulting is the direct result of years of relationships building. A good partner has built lasting relationships with clients and gained their trust. There is no efficiency substitute here. The second implied statement is that consulting firms pay little attention to commercial performance. This couldn’t be further from reality. In my experience, consulting firms excel in engagement economics. The irony here is that consulting firms provide the bulk of the due diligence, transition planning, etc. strategies for PE-backed M&A deals. That is, consulting firms advise PE firms. Sorry, I don’t see much value of PE firms acquiring consulting firms.
About time. The legacy leaders who sat on network clients and grew by allocation will struggle. Let the rainmaker and hunter prevail. Executer and delivery while important needs to stand aside. A Partner who is both should lead the firm. Personality, Presentation skills, People skills, Business Development and Technical skills should be tested every year. Do you bring in atleast 50% of what you take? If all metrics are not clear.
Thinking from the 'non-revenue generating' population this comes down to short-sightedness. Success, in my estimation, begins with support, transparency and integrity. A person could be a despicable leader but as long as they are generating high revenue, companies turn a blind eye to how they treat their teams. If all of your corporate services go AI, there will be no one to reign in the micro and macro mistreatment. Isn't it true that un-happy employees produce less?