In an earlier blog, Law Partner Retirement in Place—Solving Won’t Work/Won’t Leave (Part One), we presented the vexing problem of having a partner that slows down workwise but still draws a full partnership share. Unfortunately, this upsetting situation exists at more firms than are willing to admit. While eliminating the awkwardness the abuse represents can be one objective, excising the potentially significant and precedent setting financial hit is more important.
Tackling Won’t Work/Won’t Leave seldom is easy, but it becomes especially difficult if it is not recognized until the offending owner has throttled back into a semi-retired routine all the while drawing a full partnership share. Smart firms deal with WW/WL prospectively while favorable negotiating power exists. Dealing with the issue prospectively also minimizes the angst, turmoil and hurt feelings that can come from confronting the problem later. But preventative medicine is not always possible.
Thus, dealing with WW/WL falls into two stages: Advance Preparation and The Here and Now.
Advance Preparation. Before a firm’s partner population has reached the age to create the WW/WL problem, a firm should consider at least three measures to negate its risk, including:
Institutionalize Mandatory Retirement. The idea of mandatory retirement, typically articulated in a firm’s constituent documents, may seem like a simple solution and for years many firms used it at least partially to avoid WW/WL. Yet mandatory retirement can implicate age discrimination issues that can morph into a bigger concern than the WW/WL challenge. For that reason, experienced employment law counsel must be involved if mandatory retirement is an avenue that is going to be pursued.
Institutionalize Relegation. A firm can prospectively address WW/WL by adopting policies that will cause a partner to be converted to some other status if there is a consistent and prolonged drop off in performance. For this to work, the firm should establish clearly understood criteria that if met will result in a change in status. Ambiguity is the hobgoblin of this strategy so a carefully constructed and understood set of standards is essential.
Institutionalize Acceptable Behavior. A firm’s culture can protect against WW/WL if such conduct within the firm is known to be unacceptable, unprofessional and unseemly. As an initial matter, a strong firm work ethic is an essential ingredient to establishing an understanding that expecting a “free lunch” is unthinkable. With a strong work ethic being a part of a firm’s culture, having a partner take advantage of the firm by attempting WW/WL is much more unlikely. If that culture does not already exist or it has not been tested, it will be aided by taking strong action (intervention, vote to expel) the first time a partner attempts to stay without giving a fair contribution. Once such action is taken, later attempts at WW/WLincreasingly will be unlikely.
The Here and Now. Unfortunately, advance preparation is not always an option because it is not until a partner is uneconomically hanging around does leadership see the problem. This can be a difficult situation, especially if the firm has not institutionalized mandatory retirement (subject to legal restrictions), or relegation. In that circumstance, a firm typically has two options:
Intervention. While its effectiveness can be uneven, an intervention with the older partner can cajole, shame or otherwise persuade him or her to end retirement-in-place. Having the message delivered by a trusted long-time colleague or a respected member of the firm can help greatly. But in all instances, the message delivered must be carefully calibrated to avoid igniting a war that nobody wants. And depending on the situation, a financial easing may be the key to gaining a voluntary retirement and ending WW/WL. Moreover, ending the first attempt at WW/WL swiftly sets the needed precedent and hopefully institutionalizes acceptable behavior.
Vote. A vote to expel the retired non-retired partner is the last resort. By the time a vote to expel is considered, all efforts at persuasion should have been attempted. Voting out a long-time colleague can be ugly, hurtful, destabilizing and unfortunately, sometimes ineffective. But despite the downside, it may be the only option. If carefully planned so that expulsion is successful, it sets a precedent at the firm that soon can become its part of its culture.
WW/WL is a problem for everybody except the person intending to cruise on the firm’s nickel indefinitely. Recognition and action are required to avoid the practice becoming commonplace. In the unenviable world of WW/WL, where is your firm?