Reference no: EM133158984

HRco is a strategic HR consulting firm reputed for its outstanding analytical capabilities. HRco has about 40 partners who co-own the firm. In addition, HRco has 10 associates who were hired in recent years and are candidates for partnership at the end of their 5-year probationary period. HRco works on complex problems involving the design of company HR strategies in relation to companies business strategies: what kind of employees to hire, how to organize their work, how to compensate them, and more.

Consultants work alone or in teams of two. They are assigned to projects according to availability or at the specific request of client companies. The consultants have the authority to make their own recommendations to clients. All partners are paid an equal share in the firm's total profit (rather than based on individual consultants' revenues). Associates are paid fixed salaries and a bonus based on an annual evaluation by their supervisor, a partner. Partners' performance is not formally evaluated, but a monthly partners' meeting is dedicated to discussion of issues raised by client companies, and the provision of feedback to partners who request it. There are many informal discussions among consultants to share views on how best to act in complex cases.

At their recent annual retreat at a resort in Scottsdale, Arizona, HRco partners discussed the future of their firm in view of the fact that about a quarter of partners will retire within three years. The partners discussed whether and how to change the compensation system .

The main proposal was that each partner will keep half of the consulting fees on his or her projects and the other half would go to HRco to cover costs, with the remaining profit to be distributed equally among partners. The proposal contemplated leaving intact other elements of HRco's organization design.

Please discuss the pros and cons of the new proposal in comparison with the existing system, using the micro organization design framework