There is a recurring fiction in professional services about how firms get run. The fiction is that someone, somewhere, is making the decisions. A managing partner. A founder. A board. Pull on the thread long enough and you find that the decisions are actually being made by whoever happens to be in the room when the question comes up, and whoever can hold the floor longest. This is fine for a four-person firm. It does not scale. It also does not produce the kind of accountability that a serious organization runs on, because nobody can be held accountable for a decision they did not realize they were making.
The serious version of the question — “who decides what?” — is the most important organizational question any platform of firms has to answer, and it has to be answered explicitly, in writing, with consequences attached. The platforms that answer it well end up running on something that looks like decentralization. The platforms that answer it badly end up running on something that looks like consensus, which is a form of decentralization that has no accountability attached and that produces neither the speed of centralization nor the local intelligence of true decentralization. The right answer is a third thing, and the third thing is what we have been trying to build.
When we acquire a firm we replace the implicit decision-making with something different. Not centralization — the opposite. We push real authority down to the people closest to the work, and we make that authority specific enough that it is unambiguous who decides what. The result looks decentralized because it is decentralized. But it is decentralized by design, not by accident. Decentralization by accident is just chaos. Decentralization by design is a system, and a system is what allows a platform to scale without losing the local intelligence that makes the firms worth owning in the first place.
Hire Operators, Not Managers
The most common mistake we see in small professional services firms is hiring a manager when what the firm needed was an operator. A manager coordinates. An operator owns the result. A manager attends meetings about a problem. An operator solves the problem and then writes a one-paragraph memo about what was done. The skills look similar from the outside; the outcomes are not.
We hire operators. We pay them like operators. We give them real budgets and real decision rights and we measure them against real outcomes. The trade-off is that operators are harder to find, harder to train, and harder to manage in the conventional sense — because the conventional sense of “manage” mostly means “review and approve,” and operators do not need that.
The most reliable test for whether someone is an operator or a manager is to give her a problem and watch what happens in the first forty-eight hours. The operator goes and looks at the problem. She talks to the people involved. She forms a working hypothesis. She makes a small decision to test the hypothesis. By the end of the second day, the problem is either smaller or better understood. The manager, given the same problem, schedules a meeting. She circulates an agenda. She compiles a list of stakeholders. She writes a project plan. By the end of the second day, the problem is exactly the same size it was, but is now accompanied by a calendar invite. Both behaviors are defensible in the abstract. Only one of them produces movement, and movement is what we are paying for.
The second-order consequence of hiring operators is that the holding company needs less of itself. An organization full of managers requires layers of oversight to coordinate the coordination. An organization full of operators requires a lean center whose primary job is to clear obstacles, allocate capital, and stay out of the way. The leaner center is cheaper, faster, and harder for the operators to resent — because the operators do not feel managed, they feel supported. That feeling is the difference between an operator who stays for ten years and an operator who leaves for someone who will give her the room she needed in the first place.
Clear the Obstacles, Do Not Direct the Work
Our role as the holding company is to clear obstacles. That sentence is short and easy to say, and most of what we do every day is figure out what it means in practice. It means we buy the practice management software the firm needs and could not afford alone. It means we hire the controller who lets the firm leader stop doing AR by herself. It means we negotiate the lease, the malpractice insurance, the bank line, the vendor contracts — everything that has nothing to do with serving clients.
What it does not mean is telling the firm what work to take, how to price it, or which clients to fire. Those are the firm’s decisions. We are sometimes asked our opinion. We sometimes give it. But the decision is theirs and the result is theirs.
The discipline of obstacle-clearing without direction is the hardest part of our job. The temptation to direct is constant, because direction is what holding companies traditionally do, because direction feels like value-add, and because direction lets the holding company executives feel like they are earning their pay. We resist the temptation because direction destroys the very thing we are paying the operators for. An operator who is being directed is not an operator anymore. She is a contractor with extra steps. The operator who runs her firm because we cleared her runway, and not because we gave her the playbook, is the operator who actually produces returns over a decade.
Accountability Over Activity
Most professional services firms are organized around activity. Billable hours, time entries, meetings attended, emails sent, documents drafted. None of these things are outcomes. None of them tell you whether the firm is actually getting better at the work. Reorganizing a firm around outcomes is harder than it sounds because almost every existing system — software, compensation, status hierarchy — reinforces activity.
We measure firm leaders on a small number of things and we measure them honestly. Client outcomes. Client retention. Staff retention. Financial performance, but properly defined, not just revenue. The depth of the bench they are building. The state of the systems they inherited and are improving. That is the report card. Everything else is noise.
The honest version of accountability is harder than the polite version. The polite version is “we have aligned on the metrics and we are tracking them together.” The honest version is “if these numbers are wrong for two years in a row, the firm leader will be replaced, and she knows it.” The polite version produces firm leaders who manage expectations. The honest version produces firm leaders who manage the firm. The first kind of accountability is theater; the second kind is architecture. Operators want the second kind, because they want to know what game they are playing and whether they are winning it. Managers prefer the first kind, because the theater protects them from being measured. The clarity of the honest version is part of why we are able to recruit the operators we recruit.
Long Horizons
Decentralization works only if the people you have decentralized to know they are going to be there long enough to live with the consequences of their decisions. Most professional services firms run on much shorter horizons than the work demands — quarterly hour targets, annual partner draws, three-year strategic plans that change every twelve months. The result is that the operators in those firms make decisions on the timescale of their reviews, not on the timescale of the firm.
We are a permanent holder. We do not have a fund clock. We do not have a sponsor pressing for an exit. The firm leaders we hire know they are going to be running their firm five years from now, ten years from now, longer if they want it. That changes how they make decisions. They make better ones.
The economic literature has been pointing at this for a long time, and the professional services industry has been ignoring it for almost as long. Short-horizon principals produce short-horizon agents, who produce short-horizon decisions, which compound into a portfolio of firms whose long-term value is significantly lower than the sum of their parts. Long-horizon principals do not have a magic touch — they just remove the pressure that forces operators to make decisions they know are wrong on a five-year view because they are right on a five-quarter view. The structural choice of being permanent capital is one of the highest-leverage choices a holding company can make. It changes nothing about any individual decision. It changes everything about the distribution of decisions over time. We have made that choice. It is the choice that, more than any other, is responsible for the kinds of firms we can build.
What This Looks Like on a Random Tuesday
The probate firm leader needs to decide whether to take on a complex litigated matter that will tie up two associates for six months. She does not need our permission. She does not ask for it. She decides, takes the case, and a week later sends a short note explaining the reasoning. We file it away. If the case goes badly, we will not second-guess the decision; we will look at what the firm learned. If it goes well, we will not take credit for it; we will look at what the firm learned.
That is what decentralized leadership looks like in practice. It is not a slogan. It is a series of small, specific moments in which the person closest to the work decides, owns, and learns. We are betting that over time, a platform of firms run by operators who own their decisions outperforms a platform of firms run by managers who report on theirs. So far the bet is paying off.
The cultural insight underneath this Tuesday is that ownership cannot be granted in theory and withheld in practice. Either the firm leader has the authority to take the matter or she does not. If the platform reserves the right to second-guess the decision after the fact, then the authority she has is conditional, and conditional authority is a kind of pseudo-authority that produces all the work of decision-making with none of the benefits. We have decided to give real authority and to accept the occasional bad decision that comes with real authority, because the alternative is to retain the right to micromanage and to receive, in exchange, firm leaders who behave like middle managers. The bad decision is bounded. The pseudo-authority is corrosive. The trade is obvious once you have lived on both sides of it.
What to Do Monday Morning
Write down, by role, who decides what. Do it in enough detail that there is no ambiguity. The firm leader decides on staffing, pricing, work selection, and local marketing. The platform decides on systems, capital allocation, and the leadership of the firm. The audit is the document. The document is the architecture. The architecture is what protects the decentralization from drifting back into the default centralization that every organization eventually slides toward.
Hire operators, not managers, even when the resume of the manager looks more impressive. The manager will be easier to evaluate in the interview and harder to live with after. The operator will be harder to find, harder to read, and a better long-term bet. Train yourself, as a leader, to recognize the operator pattern in interviews — the bias for action, the comfort with incomplete information, the willingness to be wrong in writing.
And finally, lengthen the horizons of the people you have decentralized to. If you cannot promise them that they will be there in five years, do not pretend you can decentralize to them in the meantime. Short-horizon decentralization is just an excuse to push hard decisions onto people who cannot afford to make them well. Long-horizon decentralization is what produces the firms that compound into something durable, and the durability is the entire point.