Looking beyond the P&L: A short partner compensation primer for Remuneration Committee members
September 2025
Some professional services firms view allocating partner reward as a spreadsheet exercise. Yet the most successful firms look at their partner compensation system as a powerful lever to direct partners on a common path for growth, market leadership and profitability.
The Partner Reward Trilogy™ is one great way of explaining to busy partner compensation committee members how partner compensation reaches beyond the mere act of allocating money to partners.
Any mature partner compensation system is composed of three fundamental elements (see Figure 1): the financial profit-sharing architecture, the systems and leadership conversations around how partners contribute and the decision-making that ties partner inputs to compensation outputs.
Figure 1: The Partner Reward Trilogy™
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1. Profit-sharing architecture: Your reward philosophy
Your firm’s profit-sharing architecture is just that: it is the financial set-up for how your partners share profits. It represents the underlying philosophy of your partner reward system. This is where the partners decide on the balance between several principles which often compete with each other.
For example, does your profit-sharing arrangement foster a culture of “we’re all in this together”, or are you building an environment around a few “rainmakers”? Most firms will have a little of both.
How your firm answers this question might inform how reward tiers are structured, for example, if there are multiple tiers, how much profit-share is set-aside in bonus pools for different purposes, how returns on capital contributions are structured and how “sticky” a profit-share is (i.e. to what degree prior profit shares inform future profit shares). The unique set-up you choose will also inform how directly reward is tied to individual inputs (e.g. the impact of revenue generation or “originations”).
Another principle to balance is whether reward allocations are mainly driven by formula, for example in an eat-what-you-kill system, or by an evaluation of objectives and key results achieved, for example in a holistic meritocracy? (Many commentators will refer to these principles as “objective” and “subjective” systems – someday I will write a post explaining why these descriptions are invalid.)
How your firm balances fundamental principles such as these informs what label we put on your system; our guide - The Partner Remuneration Handbook identifies seven fundamental archetypes (e.g. lockstep, merit, eat-what-you-kill, etc.). Most market leaders today operate some form of holistic merit system.
As a partner compensation committee member, your role is two-fold. First, to apply the profit-sharing architecture in good faith when determining partner profit shares. Second, to advance the policy so that it continues to support the firm’s strategy and cultural values.
2. Partner contribution management: Incentivizing strategy into action
If your profit-sharing architecture represents your reward philosophy, then the second element – partner contribution management – is the engine that drives forward your financial and strategic goals.
Partner contribution management is about two things: providing a clear framework for what the firm rewards and a sound process for aligning partner results to the firm’s goals.
Your partner contribution framework provides clarity about what counts, i.e. what efforts, results and – sometimes – behaviors lead to financial reward. Ideally, your contribution framework is part of your partner compensation policy and breaks down your strategy into something that is manageable and actionable: what do you need each partner to deliver for the firm? And how do we need each partner to deliver for the firm? Is it ok that each partner operate their own clients, or do we need a more collaborative approach to business development, service delivery, talent development and service innovation?
Your partner contribution process enables a periodic discussion between leaders and partners about how a partner can make the most of their strengths to create results and to make it real: if a partner is great at relationships, why burden them with tiny projects? Typically, this involves a cadence of interactions on agreeing objectives with each partner (partner objectives are never “set”), periodic formal evaluations (best more often than annually) and “in-flight” check-ins with partners, particularly those who are struggling. And your contribution process also provides all inputs – financial and non-financial, quantitative and qualitative – as a starting point for your partner compensation committee.
Your firm’s size, maturity, complexity and its profit-sharing architecture inform the energy the firm needs to deploy on partner contribution management (framework and process). For example, an eat-what-you-kill firm will have partner contribution revolve around a few key financial metrics, whereas a more mature holistic meritocracy or managed lockstep will require a more involved partner objectives-and-key-results (OKR) management process which in turn requires a different leadership skills set.
Either way, partner contribution management serves to guide how partners achieve results for the firm. What you are looking for goes beyond a simple, backward-looking appraisal of performance: instead, look for a dynamic, forward-looking dialogue about how each partner will contribute to the firm’s short and long-term objectives. It answers the critical question: “How are we, as a partnership, collectively achieving our goals, and how are you contributing to them?”
As a partner compensation committee member, your role depends on your firm’s maturity. Larger firms will provide you with an initial recommendation of partner profit shares based on management’s evaluation of a partner’s contribution to the firm. Smaller firms will task you with analyzing partner data to conduct all or part of this evaluation or assessment for your partners.
3. Partner reward decision-making: The bedrock of partner trust
The third element ties partner contribution to the profit-sharing architecture: it’s the quality of the governance for determining partner reward outcomes.
In most large firms, partner compensation is determined by a partner remuneration committee (RemCo) or some other formal subcommittee of the partnership’s governance structure.
The most mature RemCos ask their members to follow a repeatable decision-making process, prescribe data analysis and decision-making aids and continually train members to raise and mitigate cognitive biases and to ensure partner reward is credibly linked to contribution.
Often, and depending on the values a partnership holds, the work of RemCo or its Chair also involves communicating reward allocations to partners and explaining the outcomes of a partner reward round to the partnership.
Championing a decision-making process that is rigorous, fair and clearly communicated is essential. Trusting that their RemCo is the custodian of fairness for all profit allocations across the partnership provides the psychological safety that partners need to focus on high-value client activities, confident their contributions will be recognized appropriately.
As a partner compensation committee member, your role is solely about exuding integrity: integrity that you don’t represent your part of the firm but are driving to profit-share allocations that are fair to all partners of the firm, integrity that you maintain committee deliberations confidentiality even to those partners who are your closest friends and allies, and integrity that you and your committee peers test your outcomes for possible bias and unintended effects before they are communicated to the partnership.
Viewing partner remuneration through our three-part lens of The Partner Reward Trilogy™ transforms partner compensation from a divisive necessity into a unifying strategic advantage.
The combination of designing a profit-sharing approach that looks beyond the P&L, an actively managed partner contribution system and a qualified committee that ensures a robust reward decision-making process, allows you to create a powerful system that aligns efforts, results and behaviors that reinforce culture and strategy.
Does your RemCom currently look beyond the P&L? Here are some additional resources to help you decide.
Diagnostic: Partner Remuneration System Diagnostic™
Participate in our Partner Remuneration System Diagnostic™ to uncover specific actions you can take to measurably improve your partner reward system.
Online program: Partner Remuneration Committee Accelerator™
Ready to cut remuneration committee meeting times and make smarter decisions?
Join our Partner Remuneration Committee Accelerator, a practical online course that equips partnership leaders to become highly effective partner remuneration committee members.
Download program curriculum.
MHPR Insights: Sign up to receive more MHPR Insights, our periodic briefings on value achieved in partnership.
