May 28, 2021
5 Law Firm Events That Can Trigger Partner Departures
Law firms are often shocked and surprised when a partner or a group of attorneys announces their departure. We preach advance planning for law firms to avoid this element of surprise where possible. Well-managed firms try to anticipate situations that can lead to partner departures, try to actively monitor the signs that a departure may be coming, and — for partners or groups that the firm does not want to leave — to prevent departures, or to manage them. The starting point is to know what can trigger partner departures.
Revenue shocks. If your firm has a significant financial setback, or a revenue disruption, even if only temporary, this can lead to partner departures. Well, duh. It’s no secret that lawyers like to be well and fairly compensated for what they do, especially if they have major books of business. When law firm revenue unexpectedly drops — maybe a new expansion office hasn’t performed as expected, maybe a lateral partner or group isn’t performing as expected, maybe the firm dabbled in a contingent case or alternative fee arrangement that soured — it can have a cascading effect. Partners whose actions and decisions did not lead to the problem, and who may not have experienced any potential upside, likely will perceive that it is unfair for every partner to share equally in the burden.
Revenue shocks that produce partner departures can lead to more revenue shocks, and still more departures. You get the picture.
Strategic shifts. Most law firms have at least some traditional client base. Well-managed firms analyze this client base to determine whether it will grow, or even sustain, over time. If not, it is logical for the firm to target other markets, and focus on other practices, to grow over time. But when that happens, the firm necessarily leaves behind at least some partners, and their clients, who can’t, won’t, or don’t want to, change in the same direction. Without a clear strategic vision for how the firm’s new strategic direction will benefit everyone (or, at least, everyone willing to change in a positive way), a change in the firm’s business strategy is likely to lead to partners or groups heading for the door. The more abrupt the strategic change, the more likely it will lead to departures.
Management changes. Since law firms are made up of people, personalities matter. Well-managed firms create and implement clear succession plans for firm management. Recognizing that running a law firm can be an arduous — and frequently thankless — task, firms are wise to rotate management on a regular basis. And this is especially important in today’s legal environment: to be competitive, firms need new ideas, and must continually improve on old ideas. But when new management takes over, this can also be a source of alienation or frustration for partners, leading them to consider greener pastures. If, for example, the new firm manager is from a different practice area, or a different office of the firm, or a different competing mindset within the firm, or is successful but widely despised (two traits that can be correlated), those partners who don’t see eye-to-eye with the new bosses can be flight risks.
Mergers and acquisitions. Thoughtfully considered, well-executed mergers can be a tremendous boost to a firm’s bottom line, and to its long-term growth prospects. When done well, the merged firm will be greater than the sum of its parts. Recognize, though, that virtually any law firm merger will leave some partners feeling out in the cold. Client conflicts may create a bar to certain practices remaining at the firm. The merged firm may have greater overhead, more billing pressure, or its own strategic shifts. And merging two firms means merging to law firm cultures, which is much easier said than done.
Similarly, partner or group acquisitions can lead to partner departures for the same reasons. This effect is more pronounced when new attorneys are brought into the firm in a way that overshadows the partners already there. Or when the new attorneys make more, or a lot more, than current partners.
Other departures. One of the things that makes it challenging to manage partner departures is that they tend to have a reinforcing effect. When one partner leaves, it can lead to the negative conditions that make it more likely that others will leave. Or a partner departure sparks other partners simply to consider, perhaps for the first time, whether they have the same problems and could, or should, go too. Partner departures can be bad news for a law firm. Cascading departures are worse news for a law firm. The worst scenario creates an existential threat, in which each partner departure makes additional departures more likely, in a pattern that can continue toward crisis.
None of these potential challenges has to become a crisis for the firm. If properly managed, any one or all of these trigger events can be an extremely positive development for the firm. And firms should not resist change of this type solely because it can lead to partners leaving. Candidly, partner departures are not a bad thing in and of themselves. When a partner or group is unhappy at the firm, it benefits them and the firm, in the long run, for them to move on to happier and more productive professional homes. But it is critical for firms to manage the triggering events properly, so the partners or groups that the firm wants to stay are not unintentionally encouraged to leave. The good news is that firms can manage these events successfully with advanced planning.
Dena M. Roche
O’Rielly & Roche LLP