Up or Out Policy
What are the positives and negatives?
Some consulting firms manage their staffs according to an "up or out" policy governing both promotions and staff retention. Under such a policy, members of staff are expected to progress through the various layers of management towards partnership at a predetermined pace, over the course of a finite number of years. A typical hierarchy among the staff in a consulting firm might be something like this, from highest to lowest:
- Senior Partner
- Junior Partner
- Senior Consultant
As one moves up the hierarchy, one assumes supervisory responsibilities over other members of staff. If the firm or office is organized in set teams, this can be on an ongoing basis. If the firm or office is instead organized as a common pool of talent, such supervisory responsibilities will be on client engagement by client engagement basis. Additionally, as one advances in the hierarchy, one is increasingly expected to market the firm's services to new prospective clients or to sell new engagements to existing clients. Prior success in generating business is particularly vital if one is to advance from manager to partner.
Once a member of staff is deemed unlikely ever to be named a partner, he or she is dismissed. This determination may come at any point during the year, and not just in the annual performance review period. These personnel decisions normally are made by a vote of the partners in a given office. Their evaluations of staff below the level of manager typically, and of necessity, draw heavily on input from those who have supervised those employees either on an ongoing basis or on specific engagements.
The Rationale for Up or Out Policies
There are several rationales behind the adoption of an "up or out" policy. One is that keeping only those people with the potential to become partners is equivalent to retaining those with the greatest intelligence and skills, meaning a stronger and more productive workforce in the firm than would exist if people with lower potential were retained, no matter how valuable they otherwise might be.
Another rationale is that members of staff will work harder if they constantly are chasing the carrot of a potential partnership. By contrast, employees who become content with their current level in the consulting practice, by lacking this incentive to move ahead, theoretically may be prone to working less intensely. Thus, an "up or out" policy is one device to keep all employees constantly on their toes and exerting themselves at full speed.
Note that achieving partnership normally does not confer the same lifetime employment protections as tenure in academia. Usually, there is a mechanism for partners to be evaluated by their peers and/or by superiors in the firm's structure, the latter if the consulting practice in question is part of a large, multi-office firm, such as a public accounting firm.
An unspoken motivation for adopting an "up or out" policy sometimes is a conscious desire to induce employee turnover, to hold down employee compensation costs. Since annual pay raises frequently are generous, maintaining a constant staff churn can be a means to shed high-cost employees and replace them with newer, lower-cost neophytes. Especially at the lower levels of the hierarchy, the supply of eager and competent young MBAs ensures a virtually limitless infusion of new blood, with little or no loss in organizational efficiency.
In contrast to industrial corporations, where advancement can be very slow, with age and seniority factoring heavily into one's eligibility for promotion (though usually not discussed openly), ambitious individuals in a hurry can find "up or out" to be an attractive principle. Moreover, it can seem more honest and straightforward than the tendency of many employers to retain staff by giving them false indications of their future prospects for promotion.
The high turnover work environment under "up or out" can be exceptionally stressful. It frequently can be a rather brutal means of social control, keeping employees constantly fearful of retaining their jobs if they do not work constantly at full speed, at times with workweeks of 80 or 100 or more hours as an ongoing proposition. See our discussion of staff utilization rates in consulting. The pressure to generate high numbers of billable hours is extreme.