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Exploring Partnership Models for Equitable Compensation Distribution

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Dive into different partnership models like equal, fixed equity, and lock step to understand their strengths, weaknesses, and implications on compensation distribution. Explore the DCC approach for a balanced share allocation. Identify the advantages and challenges each model presents to optimize your partnership structure effectively.

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Exploring Partnership Models for Equitable Compensation Distribution

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  1. SHARING THE PIE

  2. SHARING THE PIE • Types of partnerships • Equity compensation models • DCC approach

  3. SHARING THE PIE • Types of partnerships • Why be in a partnership? • Milk bar owners v fully integrated • Implications for compensation model

  4. SHARING THE PIE • EQUITY COMPENSATION MODELS • Equal partnership • Fixed equity • Lock step

  5. SHARING THE PIE • EQUAL PARTNERSHIP • share profits equally or equally in groups • groups – eg senior and junior with provision for movement • assumption of equal contribution

  6. SHARING THE PIE • EQUAL PARTNERSHIP STRENGHTS • Driver is firm profitability • scope for performance swings • More collegial • focus on external competition • Sense of security • No hoarding

  7. SHARING THE PIE • EQUAL PARTNERSHIP WEAKNESSES • lack of incentives • lowest common denominator

  8. SHARING THE PIE • FIXED EQUITY • usually a goodwill model • different holdings usually determined by historical seniority • normally no predetermined progression

  9. SHARING THE PIE • FIXED EQUITY STRENTHS • ?

  10. SHARING THE PIE • FIXED EQUITY WEAKNESSES • reward disconnected from contribution • Resentful junior partners • Disruptive and divisive progression negotiation

  11. SHARING THE PIE • LOCK STEP • ever increasing share based on seniority • can be strictly seniority or levels • can also be capped

  12. SHARING THE PIE • LOCK STEP STRENGTHS • greatest profit to long stayers • encourages external competition • collegiate culture • no advantage to hoarding • stability • sense of security

  13. SHARING THE PIE • LOCK STEP WEAKNESSES • no individual reward for contribution • resentment toward senior partners • requires acceptance of “equal contribution”

  14. SHARING THE PIE • DCC APPROACH • modified lock step • escalating share up to a max • mandatory de-escalator at retirement

  15. SHARING THE PIE • DCC APPROACH

  16. SHARING THE PIE • DCC APPROACH ADVANTAGES • no shareholding conflict • best qualified on each task • allows contribution across all areas • assists in some strategic goals • escalator satisfies junior partners • Promotes collegiate culture

  17. SHARING THE PIE • DCC APPROACH ISSUES • partner performance • growth of the shares

  18. SHARING THE PIE • CONCLUSION • needs to be simple • promotes strategic objectives • No perfect system

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