Real estate professionals split on partnerships versus corporate prospects

David Lawson 2002


Paul Smith is anxiously eying his mobile phone in case the ring is drowned out by traffic roaring past the pavement café. The first few weeks in any job are always strenuous: building new contacts, confirming that old ones know you have moved and striking some hot deals to begin your new life with a bang. Missing one call can be critical.

  But within minutes the phone is forgotten as he releases a torrent of pent-up tension. The last year has not been easy. After more than a decade at Weatherall Green & Smith, he was nudging the possibility of an equity partnership. Then came   the takeover by French-based Vendome Rome and incorporation as ATIS Real Weatherall.

  Hundreds of surveyors have faced similar crises in the last five years following a surge of mergers and flotations. From college days they had one ambition: to be a partner.  ‘That is the peak. It is the way you can share in the profits you make,’ says Smith.

  Now that target has been blurred as partners become directors or managers. Many welcome the move.  They see partnerships as a cosy, collegiate system where you wait for the old guys to retire or fall under a bus before getting the chance to move up. Meanwhile, they cream off the profits of your hard work.

   Smith disagrees. He has just joined Donaldsons, one of the top names which remains committed to partnership.  And he believes other young surveyors swept up by the tide of incorporation could make the same choice. The main problems are the very things put forward as the driving force behind this revolution. Firms feel they must grow to provide a wider range of services. Some have even merged into global chains.  But this increases the distance between bosses and staff, says Smith. ‘A lot of people are unhappy working for big groups. They feel they become just a number.’

  Partnership and UK headquarters means access to decision making.  ‘Otherwise you can feel decisions are being made by some anonymous people in another country about how much you earn.’   And there is the nub of Smith’s discontent. He is a classic mid-career hotshot who lives to deal - and expects to  reap the rewards of his skills. It rankles to feel that someone, somewhere is stopping him maximising earnings.

  So is the biggest reform ever seen in real estate consultancy coming apart at the seams? It might appear that way as reports emerge every week of some high-flyer switching firms. But are they snubbing the corporates?  And should youngsters coming into the business re-assess whether partnerships are really so bad?

  The picture is not clear. Little evidence has emerged of an exodus from firms like Jones Lang LaSalle, Insignia or even Smith’s old haunt, Weatheralls. High profile defections have taken place but they are often between corporates, such as Peter Leyburn’s move from Insignia to DTZ., or to clients, such as James Hamilton Stubber’s switch from JLL to chief operating officer at Quintain. Others have been sparked by falling markets. The Thames Valley collapse has started a frenzy of movement. The same is likely in the City, as agents used to living high off the hog come to terms with a lettings drought.

    There are certainly problems that can dominate talk around the West End bars where Thirtysomething agents mix after work. Not everyone at JLL, for instance,  is happy to receive share options in lieu of part of their bonus. Mutterings about decisions being made far away in the US also become louder after a few drinks among footsoldiers from Insignia, CB Hillier Parker and Cushman Wakefield Healey & Baker. Their bosses dismiss  such fears as misguided [see panels].  But the shake-up seen over the last few years has clearly muddied the waters.   

  Even Smith admits the choice of partnership or corporate is not clear. The real decider is how firms reward their successful staff. ‘At the end of the day it does not matter whether you are an equity partner or a manager as long as the remuneration package reflects your efforts,’ he says.

   And that must be set out as a clear formula. Partnerships have been demonised because they have tended to make discretionary decisions behind closed doors, yet some corporates are accused of retaining too much of this ethos.  Ironically, Savills, one of the most blue-blooded of the old partnerships, has grabbed the imagination of ambitious youngsters since  incorporating and switching to US-style commission. Greyer heads decry this approach as unsuited to the UK team-based system but  that probably means little to an agent dealing with other professions earning telephone numbers.

  So what is an ambitious young surveyor to do? Smith admits the big corporates can offer a great springboard through training and contact with clients. But in mid career, size can be a problem, as it breeds anonymity. And a directorship is far less rewarding than gaining a slice of the equity through one of the big partnerships or niche players with only a handful of partners, he says.

Jones Lang LaSalle

If Jones Lang Wootton was still around, Alastair Hughes  might have been an equity partner. He was a rising star when the partnership merged and incorporated as Jones Lang LaSalle,  but a mere 12 years up from graduate trainee, he would still be well down the pecking order.   Two years after appointment as JLL managing director for England, there is still a sense of shock. ‘It was a brave move,’ says one insider. But that was intentional – a powerful demonstration of change in management style. Even the official biography headlines the fact that he is ‘bringing fresh ideas and a new perspective to the firm as it develops its core business from the traditional chartered surveyor to the global business and investment adviser’.

   At a mere 35 he is a role model, showing Young Turks that ability arther than grey hair is now the key to advancement. But what about those still climbing the greasy pole? The rumours of discontent over bonus decisions made in Chicago, of shares replacing cash and an exodus of staff?   Hughes insists shares are an essential part of maintaining the sense of ownership that is one of the few benefits of a partnership. Earnings lie in the hands of staff themselves meeting targets.  These are set for regions like England and  profits are  dispersed to business divisions such as agency or management,  then down to individuals. Everyone can hammer on a door to ask an immediate boss what’s going on.

  ‘The key benefit of corporate management is how transparent this all is,’ says Hughes. And he is unapologetic that heavy hitters might feel shortchanged. Some of the rewards are aimed at non-financial targets like attitude, risk-taking and training. JLL also refuses to adopt commission-based earnings, despite its US links. ‘We want people working together, not just for themselves,’ he says.   The disgruntled can move on as JLL training is a ticket to just about anywhere. Hughes insists that very few have left. ‘And most of those have gone to work for clients rather than return to partnerships.’       


People no longer go into jobs expecting to stay their whole career so they are unwilling to wait for the rewards of partnership, says Alan Froggatt, chief executive of Insignia Richard Ellis. Corporate structures mean they get those rewards earlier rather than competing for a limited number of partnership places. ‘Our two highest earners would not have been equity partners under the old Richard Ellis structure,’ he says.

 And neither are involved in agency, the area where ambitious surveyors become most restless about not keeping what they see as their fair share of  earnings. Both are in consultancy.   He has become used to accusations of discontent since the merger with Insignia. ‘We are not run from New York. I’m in control and earnings are based on UK fee income rather than some anonymous trans-Atlantic decision,’ he says.

 Teams are set targets. ‘But you need to keep back some discretionary bonus to reward those who fall through the holes, such as someone taking a risk in moving jobs or performing well in a team that has not done so well,’ he says.   ‘We haven’t lost people because of the incorporation or merger, other than those at St Quintin who left early on because they did not want to be part of this kind of group. Moves are just part of the merry-go-round where firms tempt in staff from competitors for a variety of reasons, including more responsibility as well as bonus levels.’

King Sturge

Partnerships remain the best way of running a people business, where the owners are directly involved, says Mark Perone, joint managing partner at King Sturge. But that does not mean they are inherently less attractive than the new style of corporate firm. ‘The crucial factor is quality of management. That can be good or bad in either camp,’ he says.  ‘There are good partnerships and bad. We take a modern approach through consensus management.

  ‘You don’t have to be incorporated to run in a corporate style. We don’t have 45 partners sitting down to make every decision. We have operational boards.’  Nor is a partnership necessarily a bunch of old-timers. ‘Our youngest is in his 20s,’ says Perone.   He is unapologetic about discretionary bonuses. ‘We tried using a set formula but it did not work. There are too many variables. But it is not in our interests to cream off earnings as we will lose our best people. In fact, the opposite happens, with partners taking cuts to reward  staff.’

ATIS Real Weatheralls

Firms become unwieldy once beyond 20 or so partners or £30m turnover, according to Greg Cooke, who led Weatherall Green & Smith into a takeover by French-based group Vendome Rome, emerging as chairman of ATIS Real Weatheralls. ‘Partners are owners and expect to run the show,’ he says. That slows decision making in a world where consultants have to be fast on their feet.

  He admitted that loss of opportunity to become an equity partner might rankle those just below the threshold but there were also downsides to promotion, such as losing company pension rights. ‘Partners are classed as self-employed,’ he says.

  He denies the move has widened the gap with staff.   Decision making remains in London, he insists. But incorporation means about two-thirds of bonuses are now decided by performance and the rest at the discretion of directors. This is the reverse of the position under partnership.  He insists that ‘only a couple’ of staff have left since the takeover.