Managing Toxicity in Senior Leadership: Keeping or Terminating the Employee?

Managing Toxicity in Senior Leadership: Keeping or Terminating the Employee?

In the realm of professional service firms, a toxic member in the senior leadership team can wreak havoc on organizational culture, employee morale, and overall business performance. Addressing this issue requires a delicate balance, considering both the pros and cons of keeping the employee and the pros and cons of termination. In this article, we will explore a fictional case study to illustrate the trade-offs involved in handling a toxic leader and offer insights on making the best decision for the firm.

Case Study: The Troubled VP

Imagine a boutique professional service firm, Excelius Consulting, which recently experienced a significant increase in market share under the guidance of its leadership team. However, within this triumphant team lies a dark shadow named Victor, the Vice President of Operations. Victor’s expertise is unmatched, but his management style is abrasive and demoralizing. His leadership has resulted in high turnover, a toxic work environment, and client complaints.

Pros of Keeping Victor:

    1. Specialized Expertise: Victor possesses unparalleled knowledge and skills crucial for the firm’s operational success. His departure may leave a considerable knowledge gap that could be challenging to fill.
    2. Short-term Stability: Victor’s presence maintains the status quo, ensuring continuity in ongoing projects and minimizing disruptions.
    3. Client Relationships: Over the years, Victor has forged strong client relationships, contributing significantly to the firm’s revenue. Retaining him might help sustain existing client partnerships.

Cons of Keeping Victor:

    1. Toxic Work Environment: Victor’s behavior negatively impacts team dynamics, leading to a decrease in overall productivity and employee satisfaction. This could result in long-term consequences for the firm.
    2. Talent Retention: The high turnover attributed to Victor’s leadership style can lead to the loss of other valuable team members, compounding the firm’s talent retention challenges.
    3. Reputational Risk: Continued association with a toxic leader like Victor can tarnish the firm’s reputation, potentially deterring potential clients and future employees.

Pros of Terminating Victor:

    1. Improved Work Culture: Removing Victor from the leadership team can help foster a healthier work environment, leading to higher employee morale, increased collaboration, and enhanced productivity.
    2. Talent Attraction: Demonstrating a commitment to employee well-being by addressing toxic behavior may attract top talent seeking a positive workplace culture.
    3. Client Confidence: Taking decisive action against toxic leadership demonstrates the firm’s dedication to high ethical standards, potentially boosting client confidence and trust.

Cons of Terminating Victor:

    1. Knowledge Loss: Victor’s departure may create a temporary vacuum in operational expertise, causing potential disruptions in ongoing projects.
    2. Client Relations Impact: Losing a key figure like Victor may strain existing client relationships initially, possibly leading to uncertainties about project continuity.
    3. Internal Resistance: Some team members might be apprehensive about the change and could resist the decision to terminate Victor, creating internal conflicts.

The Decision: Walking the Tightrope

After evaluating the pros and cons of keeping Victor versus terminating him, Excelius Consulting’s leadership team convened to reach a well-informed decision. While some members argued for immediate termination to prioritize employee well-being, others emphasized the need to explore alternatives to retain Victor’s expertise.

The CEO, Sarah, decided to adopt a multifaceted approach. Instead of immediate termination, Sarah chose to confront Victor about his behavior, emphasizing the necessity for transformational change in his leadership style. She encouraged him to enroll in Collective 54 to learn how to lead a professional service firm.

Over the following months, Sarah closely monitored Victor’s progress, providing constant feedback and support. Victor’s willingness to read, listen, and watch surprised everyone, and his interactions with the team gradually improved. The toxic work environment slowly transformed into a more positive and collaborative one.

While the decision to retain Victor came with risks, it paid off in the long run. Victor’s expertise, once overshadowed by his toxic behavior, became an invaluable asset as he learned to lead with empathy and emotional intelligence. Excelius Consulting not only retained its specialist but also gained a leader capable of fostering a thriving work culture.

Conclusion: Striking a Balance

Dealing with a toxic member of the senior leadership team is a challenging and nuanced endeavor. The decision to retain or terminate such an employee requires careful evaluation of the pros and cons associated with both options. The case of Victor at Excelius Consulting demonstrates that with effective role models, mentors, coaches, and peers, and a commitment to change, it is possible to transform a toxic leader into an asset for the firm. However, there are instances when termination remains the only viable solution to preserve the firm’s long-term health and success.

In the end, each situation is unique, and professional service firms must navigate these difficult decisions with a clear understanding of their specific context and the impact on their employees, clients, and overall organizational culture. By prioritizing the well-being of their workforce and remaining committed to fostering a positive work environment, boutique professional service firms can ensure sustainable growth and continued success.

Simplifying Gross Margin Calculation in a Boutique Professional Service Firm

Simplifying Gross Margin Calculation in a Boutique Professional Service Firm

In the world of boutique professional services, understanding and calculating gross margin is essential for evaluating business performance and profitability. However, traditional approaches involving complex operating expenses can be time-consuming and prone to errors. By harnessing the potential of two key metrics—Revenue per Employee (RPE) and Profit per Employee (PPE)— boutique professional service firms can streamline the gross margin calculation process while gaining valuable insights into their financial standing. This article explores how RPE and PPE can simplify gross margin calculation and offers an illustrative example to demonstrate their practical application.

The Importance of Gross Margin in a Boutique Consulting Firm

Gross margin serves as a vital financial metric, illuminating the core profitability of a firm’s operations, excluding non-direct costs and overhead. For a boutique firm, monitoring gross margin is crucial for evaluating efficiency, pricing strategies, and overall financial health.

Understanding Revenue per Employee (RPE)

Revenue per Employee represents a fundamental performance indicator that gauges the average revenue generated per staff member. Calculating RPE is straightforward:

RPE = Total Revenue / Number of Employees

This metric provides crucial insights into the revenue-generating efficiency of the firm. A high RPE indicates that each employee significantly contributes to the firm’s revenue, while a low RPE may signal the need for improved resource allocation or a reevaluation of sales and marketing strategies.

Exploring Profit per Employee (PPE)

Profit per Employee is a metric that evaluates the average profit generated per employee. The formula for PPE is simple:

PPE = (Total Revenue – Total Expenses) / Number of Employees

By focusing on profitability per employee, boutique professional service firms can assess how effectively they utilize their workforce to achieve profits. A rising PPE indicates a more productive and cost-effective business operation, while a declining PPE may prompt cost management or process optimization measures.

Simplifying Gross Margin Calculation with RPE and PPE

By utilizing RPE and PPE, boutique professional service firms can simplify gross margin calculation significantly. The formula for deriving gross margin using these two metrics is as follows:

Gross Margin = RPE – COGS per Employee

    • COGS (Cost of Goods Sold) per Employee: In the context of professional services, COGS includes direct costs related to delivering services to clients, such as software subscriptions, research materials, and project-specific expenses.

By subtracting the COGS per employee from the RPE, boutique professional service firms can obtain a straightforward and accurate gross margin figure without involving operating expenses.

Illustrative Example

Let’s consider a boutique consulting firm, Elite Consultants, with 30 employees. Over the course of the year, the company generated a total annual revenue of $6,000,000, and the COGS for client projects amounted to $2,400,000.

Step 1: Calculate Revenue per Employee (RPE) RPE = $6,000,000 / 30 = $200,000

Step 2: Calculate Profit per Employee (PPE) PPE = ($6,000,000 – $2,400,000) / 30 = $120,000

Step 3: Calculate Gross Margin per Employee (GMPE) = $200,000 – $80,000 = $120,000

In this example, Elite Consultants achieved a gross margin per employee of $120,000 for the year.

Is $120,000 of gross margin per employee a lot or a little? To find out, become a member of Collective 54 and access our Pro Serv Benchmarking Database.


Gross margin calculation in boutique professional service firms can be significantly simplified by leveraging the power of Revenue per Employee (RPE) and Profit per Employee (PPE). By eliminating the complexities of operating expenses from the equation, businesses can obtain a clearer picture of their financial performance and profitability. Armed with these valuable insights, boutique professional service firms can make data-driven decisions, optimize resource allocation, and ultimately, position themselves for sustainable growth and success in a competitive market.

Maximizing Bench Time Productivity in Boutique Professional Service Firms

Maximizing Bench Time Productivity in Boutique Professional Service Firms

Maximizing productivity in boutique professional service firms is not just about the billable hours, but also about making non-billable or ‘bench time’ productive. Bench time refers to the period when professionals are not engaged in revenue-generating tasks. Despite its non-billable nature, effectively utilized bench time can significantly enhance the productivity and value of your firm. Here are some strategies to optimize bench time productivity.

    1. Employee Engagement and Skill Enhancement

The first key to converting bench time into productive time lies in employee engagement and skill enhancement. This period provides a golden opportunity for firms to focus on professional development programs. Enhancing the skills of your professionals not only increases their market value but also equips them with new tools and capabilities to better serve your clients.

Leveraging technology can be a significant game-changer here. From online courses to webinars, numerous resources can be utilized to improve employees’ skills during their bench time. For example, check out Collective 54’s podcast here, and the YouTube channel here. It also enhances their readiness to take up complex projects when they return to billable time, effectively increasing their utilization rates.

    1. Strategic Business Development

Bench time can be an excellent period for business development. It’s the perfect time for professionals to network, identify potential clients, and create strategic plans for securing new business opportunities. Regularly focusing on such initiatives during bench time can lead to long-term revenue generation. Want to know how? Read this.

    1. Research and Innovation

In the world of professional services, innovation and staying updated with the latest industry trends is critical. During bench time, professionals can dedicate their efforts towards conducting market research, exploring industry trends, and developing innovative solutions. This way, boutique professional service firms can stay ahead of the competition and maintain a position of industry leadership.

    1. Internal Project Participation

Bench time also presents a valuable opportunity to engage professionals in internal projects. These could range from process improvement initiatives to technology integration. It not only adds value to the firm but also provides the professionals with a broader perspective of the business operations, thus enhancing their overall effectiveness.

    1. Client Relationship Management

Bench time can be utilized to strengthen client relationships as well. Professionals can reach out to current clients, understand their needs better, and receive feedback on delivered services. Such activities enhance client satisfaction and contribute to customer loyalty and revenue growth.

By transforming bench time into an opportunity for skill enhancement, business development, innovation, and strengthening client relationships, boutique professional service firms can significantly enhance their overall productivity. It’s about viewing bench time not as downtime but as a unique opportunity to create value and prepare for the future.

Remember, bench time is an investment in the future productivity of your firm. Utilizing it effectively can lead to enhanced professional capabilities, a broader client base, and a reputation for innovative service delivery. So, take the initiative today to optimize your firm’s bench time and make the most out of every moment.

With the right strategy in place, even your bench time can become an engine for your boutique professional service firm’s growth. In the competitive professional services landscape, it’s the firms that make the most of every opportunity, including bench time, that will stand out and succeed.

Here is a tool to help you implement this idea into your firm.

PSA (professional service automation)

PSA is a comprehensive project scheduling and time tracking tool that can help boutique professional service firms maximize bench time productivity. It is designed to provide real-time insights into your team’s availability and capacity, making it easy to identify who’s on the bench and for how long.

Here’s how PSA helps:

    1. Scheduling and Assigning Tasks: PSA allows you to schedule tasks for your team during their bench time. From skill enhancement activities to internal projects, tasks can be assigned to ensure bench time is utilized efficiently.

    2. Tracking Time: With PSA, tracking how your team spends their bench time becomes a breeze. The tool offers detailed time reports, helping you understand how time is being spent and whether it aligns with your productivity goals.

    3. Insightful Analytics: PSA generates comprehensive reports that provide insights into utilization rates, productivity levels, and how effectively bench time is being used. These insights enable leaders to make informed decisions on how to better manage bench time.

    4. Seamless Integration: PSA integrates seamlessly with other tools like project management and HR systems, enabling a holistic approach to managing bench time.

In a nutshell, PSA offers a practical and efficient solution for tracking and maximizing bench time productivity in boutique professional service firms. By offering real-time insights into team utilization and productivity, it enables firm founders to ensure that even non-billable time is used to drive value and growth.

By adding PSA to your suite of management tools, you’re investing in an instrument that brings visibility to bench time usage, ultimately leading to better productivity, skill development, and growth for your boutique professional service firm.

In conclusion, in a boutique professional service firm, making bench time productive is essential to maintain high utilization rates, foster innovation, and promote consistent revenue generation. Rather than being perceived as a non-revenue generating period, it should be seen as a strategic opportunity to drive the firm’s long-term growth and sustainability.