"Making partner" isn't what it used to be.
Not long ago, a young professional who was admitted to partnership at a major law or accounting firm could look forward to a long and profitable career with job security that rivaled academic tenure. More like clubs than corporations, these firms closed ranks around partners with personal problems and bore the cost of carrying underperformers. Ousting a partner for purely economic reasons was almost unheard of.
"Into the mid-'80s, once you made partner you had it made," said Arthur W. Bowman, publisher of Bowman's Accounting Report, an industry newsletter based in Atlanta. "That has changed."
Today, a growing number are moving to get rid of those who do not contribute to the firm's bottom line.
In the latest example of the cold winds of economic reality blowing through professional partnerships, KPMG Peat Marwick, the nation's second-largest accounting firm, said yesterday it will fire about 300 of its 1,875 partners this spring.
"What Peat is doing has been done at smaller firms" all over the country, Bowman said.
"We are all kind of skinnying down," said Thomas P. Ochsenschlager, a partner in the national office of Grant Thornton here.
"What used be the standard, even though as you got older maybe you weren't as efficient, maybe you couldn't carry the same client load, they would let you coast along. Those days are gone. Frankly it's tough," Ochsenschlager said.
Law firms, too, are calling in partners who don't seem to be pulling their weight and asking them to leave. Prestigious firms in Boston, New York and Chicago have ousted partners recently, some of 30 years' standing.
While this trend is less obvious in Washington, some smaller firms have folded altogether, leaving their partners scrambling for employment.
"It seems either the ship sinks or they want to throw you overboard," said one accountant in a smaller firm here. "Either way, it's got everybody looking over their shoulders."
Still, Ochsenschlager thinks that the reductions in numbers are "in reality probably a pretty healthy response to very tough conditions in the industry."
Unlike the accounting firm of Laventhol & Horwath, which went into bankruptcy late last year under the weight of $85 million in bank debt and a number of lawsuits charging that it had performed shoddy audits, KPMG does not find itself on the edge of financial collapse. Although the firm's earnings have been flat recently, officials insisted the moves stem from a desire to head off financial difficulty rather than as a response to it.
"We realize that we need to have a partnership team with the right skills to meet the changing needs of our clients," and thus the firm is acting now "rather than waiting for the bad news to impact us," said spokeswoman Barbara Kraft.
The 300 or so partners to be ousted will be chosen "by consensus," Kraft said. They will be picked by local office managing partners and area partners. These recommendations will be voted on by the management committee.
Partners, who make between $125,000 and $1 million a year, will get a year's pay as severance plus some pension benefits. Bowman estimated that the average would be around $250,000. The firm will also provide "outplacement" assistance for those ousted.
Those chosen will be told by March 1 and are expected to be out of the firm by May 1.
Bowman and other experts said that KPMG Peat Marwick has been "over-partnered" and lacked "leverage" in many areas. This is the accounting version of too many officers and not enough soldiers. Bowman estimated that Peat partners supervise about seven staff people, while the average for the industry is nine to 14.
But he noted that the firm had a big layoff five years ago -- and promptly admitted almost as many new partners the following year. He said that accounting has to cut back on the number of people admitted to partnership simply because they have been with the firm 12 years and "can say, 'Hey, it's my turn.' "