Let’s face it, the hugely important issue of law firm succession has a lot to do with senior attorney retirement.  Recognizing that, more law firms have prepared for coming retirements by infusing new leadership, transferring existing client relationship responsibility, and coaching the next generations to be business developers. When succession is done right, a firm enjoys continued strength while orchestrating a seamless and gracious retirement of its senior attorneys.

The retirement of a senior attorney typically results in a significant change to the financial status quo.  It can mean a cessation of monetary rewards for the long-time contributor.  Or it can mean a limited and reduced financial payment, either lump sum or declining over a period of time, along with reduced or eliminated work expectations.

From a financial standpoint, the difference between being a fully recognized partner or a retired partner can be dramatic—less money to no money received.  For that reason, even when the appetite to work hard has long passed, some senior attorneys defer announcing their retirement and seek to prolong their partner status-hoping to extend indefinitely the receipt of full partner compensation.  This “retirement in place” can be a vexing problem for law firms.

How does a firm deal with the partner insisting on full partner benefits when by all measures he or she has already retired? Understanding and addressing this issue is examined best through assessing the depth of the problem (Part One) and considering the curative steps available (Part Two).

Part One-Assessing the Problem

 Retirement in place as a problem depends greatly on the firm, its culture, and leadership.  It can range from being barely a concern to representing a looming earthquake.  Five factors determine where your firm sits on the retirement in place crisis continuum.

The Partner with Power. Coaxing a partner to retire can be exponentially harder if he or she is willing to wield institutional power to stay. That power can come in the form of political status in the firm’s management hierarchy.  In some cases, power may not be political but based on charisma or personality.  Urging a powerful partner to retire can be a difficult proposition.

Documentation. What do the firm’s constituent documents say about forcing retirement?  If the firm’s applicable documents and policies are silent about a mandatory retirement age or requiring retirement after individual performance falls below some objective threshold, the firm may be left to the potentially unpleasant option of forcing retirement through ownership vote (but consider the voting power of the subject partner).  Forced retirement by vote is neither pleasant nor risk free.  And in some cases, a firm’s documentation may be unclear whether the unpleasant option even exists.

Have Book Will Travel. By definition, retirement in place is not much of a concern where the partner is productive from a working and business origination standpoint.  Yet some partners will leverage their book of business to cover for reduced activity as a working attorney.  Even the slowed down partner forced to retire could blow a hole in the firm’s succession plan by bolting for another firm with client relationships in tow.

Firm Culture. For the firm that has never had to address the partner who has retired in place, the first time the issue is tackled can send shock waves through the firm’s culture.  Although aged, the partner in question may be fixture at the firm, revered and loved by all.  A successful action plan that forces the retirement of the clinging icon may disquiet a harmonious place.  Even so, taking no action runs the risk of normalizing unwanted behavior that others may emulate later.

Time.  Like in the case of many situations, time is an important factor when addressing retirement in place.  If the problem has already manifest itself because one or more partners have already taken this approach, the firm’s challenge will be great.  But if retirement is a future risk, greater flexibility exists to prevent the problem from occurring.   Prevention can be far more effective than a fix.

These five factors impact a firm’s ability to solve retirement in place.    In Part Two to follow, the available solutions to retirement in place will be considered.