Giving away ownership to build legacy

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Egon Zehnder asked this question to every prospective partner from 1964 until his retirement in 2000. Candidates who hesitated heard a follow-up: "If you aren't comfortable, don't join us. You'll be unhappy." This wasn't negotiation theater—it was a filter. The compensation structure would never change, so candidates needed to self-select out before they could damage what he was building.

Most professional services firms run on opposite arithmetic. The partner who brings in the most business takes home the most money. Eat-what-you-kill compensation creates internal competition where colleagues hoard clients, guard relationships, and optimize for personal billings over institutional success. High performers view partnerships as temporary vehicles for individual wealth extraction rather than permanent institutions worth building.

Zehnder chose a third path that would prove structural impossibility builds trust that cultural aspiration cannot replicate.

From individual extraction to institutional permanence

1. Pay for seniority, not performance

The counterintuitive move: don't reward the partner with the highest billings—pay every partner based solely on years of service. Egon Zehnder established lockstep compensation in 1964, not as cultural aspiration but as structural requirement. When partners cannot profit from individual performance, they stop optimizing for personal client lists and start building institutional capabilities that outlast any individual. Seniority-based pay forces hiring of team players who get pleasure from collective success over personal advancement.

2. Make all business firm business

Eliminate the concept of "my clients" entirely. Egon Zehnder operates as a single profit center where every project belongs to the firm, every relationship serves the institution, and the best consultant—regardless of who sourced the client—goes on every engagement. This structural impossibility prevents client hoarding, eliminates turf wars, and ensures that expertise trumps ego in every assignment. Partners collaborate because extracting individual value is mathematically impossible.

3. Give away majority control when most valuable

In 1976, when Egon Zehnder was twelve years old and thriving, founder Egon Zehnder surrendered his majority shareholding to redistribute equity equally among all partners. He transformed from sole owner to equal shareholder, creating what he called "truly equal partnership that was unparalleled." In 2000, he returned his remaining shares entirely to the partnership. His son Peter called it "the greatest and wisest act of his career"—proving that permanent institutions are built by founders willing to make their own extraction impossible.

4. Screen for collaboration over star power

Zehnder would ask prospective partners a blunt question: "Even if you have the highest billings in the firm and are responsible for 60% of your office's profits, you won't get an extra penny for it. Picture yourself in that situation. Are you comfortable with it? If you aren't, don't join us. You'll be unhappy." This filtering mechanism ensures only those committed to institutional building join—and the ones who join stay. Individual stars who need validation through compensation self-select out before they can damage collaborative culture.

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On July 4, 1964, Egon Zehnder walked away from Spencer Stuart over a philosophical disagreement. Spencer Stuart charged contingency fees based on placed executives' salaries. Zehnder saw this as degrading. At 34, he opened his own firm in a Zurich townhouse with one assistant.

The industry standard: partners paid themselves based on individual billings. Bring in $5 million, take home a percentage. Guard your clients. Optimize for personal production.

Zehnder rejected this entirely.

Partners would be paid based solely on seniority, not individual performance. All business belonged to the firm. Profits shared equally based on tenure. The best consultant staffed every engagement regardless of who originated the relationship.

Industry veterans said it was impossible. How do you attract stars? How do you retain high performers?

His filter: "Even if you have the highest billings and 60% of office profits, you won't get an extra penny. Are you comfortable?" If candidates hesitated, he told them not to join.

By 1976, the firm had established itself globally. Zehnder personally controlled majority ownership.

What he did next shocked the industry.

In 1976, Egon Zehnder gave away his majority stake. Equity redistributed equally among all partners. No special shares. No founder privilege. Complete equality regardless of when partners joined.

Business advisors called it financial suicide. His reasoning: encoding permanence required making it impossible for anyone to profit from selling the firm. The firm would outlast any individual because no individual could own enough to destroy it.

His son Peter later called it "the greatest and wisest act of his career."

The real test came in the early 2000s. Professional services firms abandoned lockstep en masse. High performers left for merit-based competitors. Industry analysts predicted Egon Zehnder would either adapt or lose talent.

The firm surveyed all partners: Should we abandon lockstep compensation?

Ninety-nine percent voted to keep it.

Three decades of structural impossibility had proven something counterintuitive: eliminating individual profit forces you to build institutional trust that clients pay premium prices to access. Eighty percent of projects came from repeat clients.

In 2000, Zehnder returned his remaining shares to the partnership and stepped away from client work. At 70, he walked away from ownership completely.

By 2023, Egon Zehnder generated CHF 800 million in revenue across 67 offices. Six hundred consultants, all compensated by seniority, all operating as one firm. Privately held, debt-free, partner-owned.

Employee reviews describe "absence of internal competition" where colleagues "genuinely want to watch people succeed." Not cultural aspiration but structural reality.

Zehnder died in 2021 at 91. The firm continues on principles he encoded six decades earlier. Lockstep intact. One-firm structure persists. Equal partnership endures.

"Our compensation system often prompts people to ask me how we manage to hire 'stars', let alone keep them," Zehnder once told Harvard Business Review. The answer: we don't hire people who need to be stars. We hire people who want to build institutions."

From strategy to legacy

Zehnder's achievement wasn't creating a culture of collaboration—it was making collaboration the only profitable path. When individual extraction becomes structurally impossible, partners stop asking "how much can I take?" and start asking "what can we build?" This pattern appears beyond professional services: Gore-Tex eliminated traditional hierarchy entirely,

John Lewis distributed ownership among all employees, and Mondragon's worker cooperatives have maintained 60,000+ workers for decades. The common thread isn't inspiring speeches about teamwork but compensation structures that make hoarding impossible and sharing inevitable. Organizations that encode this impossibility into founding documents create trust that competitors spending millions on culture consultants cannot replicate.

When asked years after giving away majority ownership why he did it, Zehnder's answer was matter-of-fact: some things are more important than personal wealth. Clients return because the institution remembers their needs. Partners stay because wealth comes from building, not extracting.