Engine Group – partnership in substance or only in form?

The disclosure that the Engine Group has created a limited partnership comprisng 68 of its senior executives is an intriguing development.

The creation of a partnership culture is entirely appropriate to a people business like Engine and should help to reinforce the sense of shared ownership that is so important.

What we don’t know yet is whether the Engine initiative was initially motivated by tax savings that can be obtained by using such a structure or whether it started with a desire to ensure that all the key people felt part of the business in every sense.   Chairman Peter Scott has offered an eloquent explanation of his motives that focus primarily on the benefits of the partnership culture.  But even he admits that there are financial benefits as well.

There are two types of financial benefit – the simple “cash in the pocket” gain from a tax avoidance device and the less tangible, but nonetheless real, benefit of binding a team together in a profit-sharing co-ownership structure that improves motivation. Clearly Engine is hoping for both.

But if the arrangement is nothing more than a tax saving device, it will soon be discredited and fail as a meaningful motivational tool.  The culture of a genuine partnership has characteristics that go far beyond profit-sharing alone.

Time will show whether all those benefits can be realised, but it must have been worth a try.

Bob Willott is editor of “Marketing Services Financial Intelligence” (www.fintellect.com)