One of the most complex and sensitive issues a financial advisory firm, particularly its Chief Operating Officer, can face is when a partner's actions, decisions, or overall performance fall short of the firm's expectations or vision for excellence. These situations often touch on deeply personal, professional, and cultural elements within the firm, making them both thorny and unavoidable.
COOs are often the first to hear about these challenges, acting as the nerve center of operations and serving as the bridge between the partners, team members, and sometimes clients. The difficulty lies in addressing the issue and managing the ripple effects it creates across the firm. These challenges can stem from a wide range of issues: declining productivity, friction with team members, misalignment with company culture, or even inappropriate client or team member interactions. Regardless of the source, one thing is certain—doing nothing is not an option. Inaction risks setting a dangerous precedent and may lead to even more significant challenges, including legal consequences, attrition of top talent, or damage to the firm's reputation.
For COOs navigating this terrain, the most effective path forward is promptly, decisively, and strategically addressing the situation.
The COO's Role: A Critical Responsibility
When a challenging situation involving a partner arises, the COO is often the first to notice the impact—whether expressed through employee feedback, operational inefficiencies, or a shift in firm morale. While it may be tempting to sidestep the discomfort and hope the problem resolves itself, that is rarely, if ever, the case. COOs must be proactive and bring these matters to the CEO's or managing partner's attention without delay.
One COO who faced such a situation described their approach as "consistently delivering data-driven and fact-based information to the firm's leadership." By documenting how the partner's actions or decisions impact key metrics—revenue, client retention, productivity, or even team morale—the COO strengthens their case for why action is necessary. Data removes emotion from the conversation and creates a clear, objective picture of the problem.
At the same time, COOs may find themselves in the delicate position of protecting team members from the adverse effects of a partner's actions. This could involve reassigning tasks, restructuring workflows, or even mediating conflicts. While these measures may temporarily shield the team, they also serve as necessary documentation of the broader impact on operations—another key piece of the puzzle when escalating the issue to leadership.
Why Firms Must Be Proactive
When partner-related challenges are ignored or downplayed, they tend to escalate. As John Watkins, an attorney with Reitler Kailas & Rosenblatt LLP, explains, "Because no one will address it the first time it comes up, the partner whose actions are causing problems may remain unaware of the effects of their actions on others."
Over time, these issues begin to fester, creating an environment where other partners and team members avoid or work around the individual. This erodes team cohesion and can lead to a culture of avoidance, where minor issues snowball into significant disruptions.
Firms that adopt a proactive approach are better equipped to handle these situations. Clear policies and procedures for addressing partner challenges should be embedded in the firm's operating agreement or outlined in a separate document approved by the managing board. These documents should detail what constitutes actionable behavior and the process for addressing concerns, including voting protocols, the handling of equity, non-compete clauses, and other key matters, as well as how decisions—such as removing a partner—are made.
As Watkins puts it, "If they are going to pull this lever, they need to have a clear policy in place."
The Cost of Inaction
One COO shared a cautionary tale about the long-term impact of avoiding these conversations. Years after a partner's actions began to cause disruptions, the firm still grapples with the consequences. Addressing the issue now, after years of acceptance, has only led to confusion and resistance. Team members have learned to sidestep the partner, and the partner's behavior remains unchanged, creating ongoing challenges for the firm.
This scenario highlights the importance of addressing issues early and decisively. The longer a firm tolerates behavior that disrupts its culture or performance, the harder it becomes to reverse course. Worse, the excuse of "that's just the way they are" can begin to feel like an acceptable response, further eroding the firm's standards and culture.
Leadership Requires Courage
The heart of this issue is about leadership—having the courage to address difficult conversations head-on, even when they involve a founding partner or someone who has contributed significantly to the firm's success. It's about upholding the values and standards the firm was built on, ensuring everyone, from the leadership team to the most junior team members, is aligned with those principles.
Firms must empower their COOs to act as stewards of accountability, providing them with the support and resources needed to bring these matters to light. CEOs and managing partners must also demonstrate a willingness to listen, act, and lead by example, showing that no one is above the firm's standards.
Building a Framework for Action
To prepare for these situations, firms should take the following steps:
Coaching Questions for Reflection
Addressing partner challenges is never easy, but it is essential for maintaining the integrity and success of a financial advisory firm. By acting decisively, documenting thoroughly, and leading with courage, COOs and firm leaders can confidently navigate these situations and ensure that the firm remains true to its values and vision.
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