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Difference Between Partner, Principal & Director

Oct 03, 2019

There can be a lot of confusion surrounding the titles of officers in a business setting. This article clarifies the differences and compares the roles of partners, principals and directors.

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Comparing Partner, Principal and Director Roles

Partners, principals and directors are all important and high-paying roles in business firms. These titles are often found in companies that specialize in law, accounting, finance, investment, or consulting work. While all three titles are linked to top-level management roles, there are important distinctions in their rank and responsibilities. The following table presents the educational requirements and salaries for these three positions. It is important to note that the salaries below are general averages; salaries can vary greatly between specific industries.

Job Title Educational Requirements Average Salary (2019)
Partner Demonstrated success in the business
Demonstrated investment in the company's future
$82,237
Principal Bachelor's degree
Industry-specific experience
$134,454 (for principal managers)
Director Bachelor's degree
Industry-specific experience
$96,613

Source: PayScale.com

Responsibilities of Partners, Principals, and Directors

Principals are the top-level executives of a company, while partners own part of the company. Someone could be both at the same time; in fact, principals are often also partners. In some cases the principal is the owner or founder of a firm. In other cases the business owner hires a principal to manage client relationships. Directors are employees hired to run day-to-day operations. If they opt to accept a share in the company in lieu of part of their salary, they can also become partners.

Partner

A partner owns a percentage of the business, so they have a vested interest in the company's growth because they share in profits. In a business firm, a partner is typically someone who worked their way up through the company's ranks, bought a fair amount of shares in company stocks, and now has the authority to vote on major company decisions. Some businesses offer successful employees opportunities to accept equity instead of part of their salary in order to become partners. Although owning a certain amount of a company may informally increase a partner's authority on company decisions, the title is not linked to corporate hierarchy. A partner could be someone within any tier of the company's management structure, from a top-level executive to mid-level manager, as long as they share in the company's profits.

Job responsibilities of a partner include:

  • Attending meetings for business owners and partners
  • Helping bring new clients and business to the company
  • Voting on major company decisions
  • Being jointly-liable for the actions of their company or fellow partners

Principal

The title principal means something different depending on the business setting. For example, a principal in an accounting firm has a completely different role than a principal in a law firm. In the most general sense, a principal is someone with executive authority in the company. They are at the top-tier of the management structure. Principals can make decisions about company goals, finances, hiring and firing. Principals generally work in an office environment. They may be expected to work over 40 hours a week, however, successful principals can advance in the ranks of upper-management to become presidents or CEOs.

Job responsibilities of a principal include:

  • Managing relationships with their clients
  • Networking in the community with potential clients
  • Designing and implementing their company's long-term goals and growth strategy
  • Fostering a company culture
  • Making executive decisions about the company's direction

Director

A director is someone with a significant amount of authority to run the day-to-day operations of a company. While principals focus on managing relationships with the outside world, directors are inward facing. They manage employees and company resources. They must have strong leadership skills to lead multiple teams to success. They carry out the long-term company vision established by principals and partners. Directors generally work in an office setting. Because their position is mid to upper management, they work hard (often over 40 hours a week) and seek advancement to higher positions like CEO, principal or partner.

Job responsibilities of a director include:

  • Writing and negotiating contracts with clients
  • Building and overseeing the budget
  • Hiring and firing personnel
  • Creating and monitoring a plan to meet company goals
  • Helping foster a positive company culture

Related Careers

If you want to reach partner status, a director of strategy position is a great job because it comes with the authority to impact your company's overall value. If you would prefer to work up through corporate hierarchy to become a principal, why not pursue a CEO position, the top principal in a company? If you are more interested in the responsibilities of a director, consider a career as a director of operations and use your executive decision-making skills to oversee the daily operations of a company.

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