Of Rainmakers and Managers

Jan 10 2014, 12:18pm CST | by

Of Rainmakers and Managers

What’s worth more? Bringing in a huge account? Or managing the hell out of it and growing it tenfold?

These are questions that many partnerships encounter when they start negotiating their operating agreement or when they decide to revisit it because things have started to feel unfair to one or more partners. It is, in fact, the line of questions I hear most.

First, some definitions. When I say “rainmaker,” I”m referring to the partner who attracts and closes big pieces of business. There’s a lot of networking, promotion and relationship building that goes into this role. It can be time consuming and indeed, all consuming because much of it happens after hours. When I refer to the “manager,” I’m talking about the person who manages the day-to-day of the project, whether that means overseeing a team or doing the actual work.

But if there’s no rainmaker, then there won’t be anything for the manager to manage. Well, that’s not exactly true. The portfolio might not be as big, but that manager will use the good relationships she’s built over time to bring in work. It may not be as sexy or as big, but it’ll grow slowly and steadily. And the manager might argue that a Rainmaker needs the manager to take care of the customer and grow the business. While that is true, it is also true that projects and accounts can be run by non-equity staff.

Navigating the issue starts with realigning egos. Will the rainmaker acknowledge that the other parts of the customer care life cycle are just as important as the close of the first deal. Will the manager assert the value that reliable, steady service contributes to the bottom line?

There is no right answer. You have to decide whether the partnership makes sense. What are you gaining by having a partner that you couldn’t get from a skilled employee? What does the other person bring to the table that increases the value of the enterprise? Do you share a vision for the business? Are there special skills that you need to ensure the creative or financial success of the organization? What kind of agreement will make you feel resentment? Don’t commit until you have explored how different scenarios might play out, and you come up with a framework that feels fair to all parties.

If you decide to stay in business, the next thing to talk about is whether you need a more creative compensation model. Here are three ways to go about it:

  • Equal equity: I’m a fan of the equal split because it’s simple but I understand that it requires an enormous amount of trust and a certain willingness to let occasional inequities go.
  • Lockstep: British law firm use a system that rewards seniority and loyalty, by awarding partners points as their tenure matures. Promotions, pay raises, and bonuses are awarded in a systematic way, and not necessarily based on merit. To incentivize performance, some companies do a hybrid in which a portion of the compensation is merit-based.
  • Source of Origination: In this system, the partner who brings in business gets extra credit and extra compensation to go along with it. This can be executed as  purely proportional, where you track all business and divide profits up based on who brought what in. Or you can share profits up to a certain point and then allocate any additional moneys above that point to be distributed based on origination.

    The downside of this approach is that it can be hard to define origination. For example, if an account comes in and a manager takes over, after the initial engagement is over, and the client renews, does the manager get credit or does the rainmaker still get a piece? Some partnerships impose time limits for origination or define it by contract.Another problem is that some accounts are prone to cycles and over the course of years, things equal out but the income discrepancy year to year can be high. Purely merit-based partnerships may experience extremely high turnover (or collapse) if the compensation model is subject to such volatility.Some companies have developed sophisticated variations of the Source of Origination model, and assign points to each part of the account life cycle, or to particular roles/tasks that deserve credit. Under this model, the rainmaker may get credit for bringing in the work and the manager can earn credit for retention and growth. Meanwhile, the system can also reward thankless, non-revenue producing work such as pro bono or administrative.

The last thing to talk through is just as important as the first two: What happens if one of the partners fails to make the goal? Are there penalties? Second-chances? Or is it game-over? My advice here is to err on the side of compassion and take the long view. Plan for bad things to happen, because they will. And go easy on each other because the reality is that it’s unpleasant to be the low performer and what a partner in distress needs is support, not punishment.

Tell me about how you handle compensation or tweet me @furiouslymandy with the hash tag #committed. If you’re willing to share more details for a survey I’m conducting, please fill out my questionnaire.

If you liked this article, subscribe to my site and Forbes will alert you every time I publish a new post.

Source: Forbes Business

 
 

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