Partner retirement is a watershed event, particularly when the partner has originated a large portion of the business or is dominant in the firm’s management or practice development.
Many firms go through a wrenching period of adjustment when a partner retires. Often the fallout is lost clients, unsettled management and even the breakup of the firm.
Retirement is a sensitive issue but for the firm’s survival, it has to be faced head-on and well in advance of the actual event, even as much as three years ahead of time.
The firm has to prepare other attorneys to take over the client matters. It has to transition the clients into the change. It also has to set up a system for passing on the partner’s management authority.
It is easy to deal with retirement when an attorney is still healthy, vigorous and productive. But in the twilight of their careers partners have difficulty coming to grips with it. They don’t want to face it. They don’t want to thinking about being out of the mix.
The firm, therefore, needs not only to settle the issues but also to create an atmosphere of helping the partner leave a good legacy.
First, protect the client base
The planning begins with keeping the clients. As soon as a partner announces plans to retire, compile a list of that partner’s clients and decide which attorney is best suited to succeed in the representation of each matter.
Then both partner and designated successor need to meet with each client to discuss the turnover of the work. They should tell the client, “There are no immediate plans for change,” but that the firm is simply ensuring an orderly transition into new representation of the matter.
Explain that the firm wants the client to have an attorney who is familiar with the business and can continue to provide the same quality representation.
Approaching clients so far in advance may seem risky. But wait until the last minute and there’s a great risk of losing them. A change of attorney is far less unsettling when the client knows the partner is taking control of what happens. Gradually include the successor in the representation and encourage the client to speak with the new attorney when the partner is not available.
You should be careful with billing. If the new attorney does substantial work, bill for it. Don’t double bill for that attorney’s on-the-job training. And tell the client that won’t happen. Conversely, explain to the attorney that he or she will have to spend some time that’s not billable.
Then throughout the transition the partner needs to assess the client’s comfort with the new attorney and ask how the client feels about the change. It may be necessary to move to another replacement.
Now who’s in charge?
There’s also the issue of management to settle. It may be difficult or even impossible to replace the partner’s management position exactly. Power in a law firm comes from the ability to bring in business. If the retiring partner plays a dominant role or is the benevolent dictator there may be no one who can exert the same leadership who will have the same clout. The firm may have set up an entirely new management structure. Things will be different. The firm has to decide whether it will be managed by full partnership or by the committee, how the voting power will be determined and so on.
Those decisions are best made while the partner is still on board. In fact the new management should be in place before the retirement. Wait until the last minute and expect a power struggle and possibly a break-up.
Plan for the staying-on time
Still another issue to resolve is the timing. Will the partner retire immediately or slow down to part-time work?
No partner wants to be arbitrarily cut off on a particular date. In most cases, the choice will be a slowing down and the firm will need to set up some kind of reasonable schedule.
Usually the decision is to allow the partner assume an of-counsel position. In that case, decide for how long the firm will provide office space and how much support staff will go with it. Also set up a compensation amount comparable with the number of hours the attorney wants to work. If the choice is to move to half-time work, for example, compensation might be half the salary averaged over the last several years.
As to announcing the change, the firm will have to change its stationery and possibly the title on the door. But other than those places, don’t advertise it. To do so all but tells clients the partner is over the hill and no longer able to meet their needs.
Throw out a safety net
The transition process and all the financial arrangements need to be spelled out in the partnership agreement.
Cover every aspect of the move. If the partner plans to assume an of-counsel position, say so, and lay out the working hours and the fees. Determine the overhead costs the new position will entail and tell what percentage of his or her own fees the partner will keep.
Then add a safety net. Put in a provision that the transition agreement will be reviewed every year by both the partner and the firm. That gives the attorney the right to leave earlier than planned or even stay longer. But more it gives the firm the right to cut off the arrangement. It is not unknown for a retired partner to lose competence without realizing it, leaving the firm stuck with an of-counsel person who is a financial drain. The clients could leave. Worse, the retired partner could subject the firm to malpractice claims. Without the review provision, that situation could go on a long time.
There’s also the issue of staff
Finally, there’s the question of what to do with the partner’s staff. Often a long-term attorney as long-term support staff as well. In the best of worlds, those employees can retire with the partner. But if that is not an option, the firm has to place them with other attorneys. That may not go smoothly. Long-term staff tend to be excessively loyal to their attorneys and often don’t adjust well to new bosses. For that reason, their job changes need to be addressed well before the retirement so they know what to expect.