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Legally Speaking

 

Issue: April, 2005
Author: Ed Wesemann

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Drainmakers: Dealing With Under-Productive Partners

Every law firm has a different name for their problem partners-- “performance challenged,” “retired without telling anyone,” “revenue impaired.” Whatever they are called, partners who are performing below, often way below, firm standards are at the top of the managing partner’s “to do” list in just about every large law firm in the world. Indeed, dealing with unproductive partners is often such a controversial and culturally challenging issue for firms that it clouds management judgment on a variety of other issues that may be of greater significance.

Unproductive partners is not a particularly new problem. Dealing with partners who ran out of steam mid-career was probably on the agenda of the first chambers meeting after the signing of the Magna Carta. But only recently did it became the front burner issue it is today. In part its new priority may be because it was considered ungentlemanly to discuss individual partners until new versions of time and billing software generated statistical reports that highlighted the problems. Certainly the drive for profitability in law firms didn’t truly emerge until the American Lawyer in the U.S. (and similar publications in other countries) began publishing comparative law firm profits per partner. And, despite all this publicity, we still witness frequent debates in firms about whether the practice of law is a profession or a business.

Awareness begs the question of why law firms have this problem to begin with. And there are some highly identifiable causes.

Partner tenure. For many lawyers the only form of organizations with which they have first hand personal experiences are universities. It’s not surprising, therefore, that no businesses other than law firms organize themselves into “departments” that are run by “chairs.” When lawyers created their partnership structures they gave each other effective tenure by making it virtually impossible to ever get enough votes to remove a partner. Take away a firm’s effective power to remove a partner and you remove a partners’ ultimate performance accountability.

Collapsing Practices. The rapidity with which practices emerge, mature and disappear is far faster today than many lawyers can possibly imagine. Most successful lawyers will have four to six different practices over the course of their career. But law firms are in the business of encouraging and rewarding partners to stick in a practice area as long as it is reasonably profitable. Then, when the practice area becomes too unprofitable for the firm, it is too late to refit the lawyer with a new set of skills. When you’re riding a dead horse, the best strategy is usually to get off. But few law firms are willing to support an attorney when he or she is building a new practice.

Ennui. Out of 105 professions studied by Johns Hopkins University, lawyers top the list in the incidence of major depression. The alcoholism rate among lawyers in the U.S. is twice the general population and a Canadian study shows that suicide is the third highest cause of death for lawyers over 48 years of age after cancer and heart disease. In fact, male lawyers at that age are six times more likely to commit suicide than non-lawyers. These statistics should come as no surprise to large firm managers. Start with a group of extraordinarily intelligent and well educated individuals, 40% of whom (according to an ABA study) selected law as an occupation primarily for the intellectual challenge. Then put them in a situation where they do the same job for years with little change of circumstance or prospects for change and we have created the stage for extreme boredom.

Loss of Collegiality. In many firms, the strong sense of warmth and personal relationships among partners has been replaced by displayed respect for financial performance. The ties to the firm are more economic than social, and recognition tends to come more in the form of compensation rewards than ego fulfillment or a sense of supporting the team. As one managing partner described it, a collegial law firm has gone from a band of brothers to a group of people who can tolerate each other sufficiently to avoid open hostility. The first reaction of many firms when a partner’s performance declines is to “put a shot across his bow” with a pay cut rather than to attempt to understand and correct the cause of the problem.


The Answer

The trend in dealing with underperforming partners in most firms seems to involve three actions:

a. Creating a non-equity position where a firm can park unproductive partners until they either revitalize themselves or self-destruct;
b. Change the definition of a partner so the unproductive ones don’t count in the denominator used in calculating profit per partner; and
c. Work to change the partnership agreement to make it easier to fire unproductive partners.

These actions help resolve problems that are sufficiently far gone to be considered by the partners as being beyond correction. However, would it be more productive – not to mention less expensive and disruptive – to create a mechanism that deals with partner’s issues as soon as they show the first signs of a problem -- a proactive rather than a reactive approach?

The answer is probably not for firms to retain a team of psychologists and require time on the couch if a partners’ performance declines (although, come to think about it, that might not be an all bad idea). There are, however, some very specific actions firms can take today, not to handle the existing problem partners, but to avoid creating new ones.

First, establish clear and specific expectations of partner performance. Whether the expectation is objective (a specific number of billable hours or client billings) or subjective (keeping yourself and another person busy), it should represent a minimum below which alarm bells will go off.

Second, create alarm bells. Don’t permit or condone partners to get themselves in a situation where they become unproductive. Although there are situations where a partner’s decline happens almost over night, it is a relatively rare occurrence and, typically, partners’ declines are gradual. Make coaching of partners in decline a primary duty of practice group leaders. Provide practice group leaders with the training to work with partners and the responsibility for giving management an early warning on problems.

Third, don’t swap short term financial interests for long term partner problems. Keeping a partner in the same practice year after year may be a cash cow for the firm but eventually it will catch up with the partner in terms of the practice becoming commoditized or the partner becoming bored. Encourage partners to push routine work, even if it is at full rates, down to younger partners and associates and move forward to new, more challenging work.

Finally, don’t make marginal partners. An attorney’s billable hours virtually never increase when they go from an associate to a partner. An associate who has not developed any business as an associate will probably never be a significant business developer as a partner. Partners who become firm leaders typically showed leadership as associates. In almost every situation, partners who are problem partners today, were “close calls” when nominated for partnership. Conversely, superstar associates rarely turn into problem partners.

The above may seem terribly basic because there simply are no silver bullet solutions. It is fundamentals that drive success and you have to pay attention to them now or deal with the results later.


Ed Wesemann is the author of “The First Great Myth of Legal Management is that it Exists: Tough Issues for Law Firm Managing Partners and Administrators.” He is a partner in Edge International, Savannah, GA, a consultancy working with law firms around the world on strategic, governance and growth issues.


Copyright © 2005 – Wyoming State Bar

     

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