California
Partner Departure Law

January 18, 2024

Managing Partner Departures So They Are Not Bad for Business

The first quarter of every year tends to be a time of change and transition. Law firms are not immune from that phenomenon. For a variety of reasons, partner departures happen more often in the first quarter. For those planning to depart, this often occurs once they are paid bonuses and true-ups from prior year’s profits. If the firm’s past year’s performance does not meet partner expectations, this can also stoke departure plans.

For law firms, the effects of partner departures are rarely positive. But, strictly speaking, if the right partners leave, the firm should be better off. Few at the firm would lament the departure of unproductive partners, unprofitable partners, or abusive partners. And indeed, law firms should review partner ranks and metrics on a regular basis to determine whether certain partners fall into those categories. But even if the right partners leave — partners that the firm wants to leave — if not properly managed, partner departures can be bad for business.

If it’s bad, it’s bad. Start with the obvious. When a high-ranking partner, highly profitable partner, or highly productive partner leaves the firm, it’s bad news. Revenue tends to go with partners who fit this profile. The same is true for departing partners who are leaders at the firm. What do they know that you don’t? Ditto for partners in the firm’s core practices, or desired core practices. It’s hard to build a firm on shifting sands.

Even if it’s good, sometimes it’s bad. If you are managing a law firm, it may seem counterintuitive that even the departure of unwanted partners could damage the firm. But despite the increase in attorney mobility and the increasing prevalence of partner or group departures, law firms are still law firms. That means that the firm’s reputation is one of its primary assets, and the way that people — clients, competitors, remaining partners, associates, and staff — perceive the firm in many ways dictates reality.

Clients don’t like it. Law firm clients tend to value stability at the firm very highly. Partner departures, especially those that make the news, tend to convey to clients that all may not be well at the firm. That may not be true, but departures that directly involve clients, as most do, often constitute an unwelcome and unappreciated distraction for clients. Suddenly, the firm that was hired to solve problems has become one. And clients have to solve that problem in the first instance by deciding whether to go or to stay, and on what terms.

Then there are the logistics of transferring matters to a new firm or to a new partner at the old firm. For some clients, that may require significant internal review or approval, sometimes going far up the chain of command, putting a spotlight on the client’s relationship with the firm in the cruel light of day. During the transition, will something get missed, or will an opponent seize an opportunity, or sense weakness? These are not questions the firm wants its clients to have to ask. More to the point, ask most clients, and they will tell you that any of this is at the bottom of their list for how they want to spend their time. Clients who are unphased by this have likely already grown unhappy with the firm or their current representation.

Competitors do. Law firm competitors generally view partner departures as a sign of opportunity to tempt other partners at the firm to jump ship. Or to convey to that firm’s clients that they have the stability they seek. Or to poach staff. Or whatever. When the firm’s competitors sense an opportunity, most likely, it’s bad news.

That’s no real insight. But it can be a surprise for some firms to realize just how vulnerable their business can be when a partner or group departs. Clients, remaining partners, associates, and staff are all susceptible to messages of comfort from your competitors, and never more so than when departures occur.

Remaining partners start to think. Remaining partners should know the truth, but because they are humans, it doesn’t always work that way. On an intellectual level, the remaining partners know or should know the specific reasons why the partner or group left and be able, objectively, to determine whether the firm is better off as a result. That may happen. Sometimes, remaining partners view the situation objectively and focus on the benefits that can accrue from partner departures, including increased opportunities with clients, promotion at the firm, or better profitability.

But just as often, even the remaining partners might take the opportunity to wonder whether there might be greener pastures out there for them, too. Or to evaluate more critically the factors that may have led to the departure. Shouldn’t the firm be more profitable, a better place to work, more dynamic, more supportive, more whatever? And what happens when the departures hit the bottom line? The list of questions goes on.

Associates and staff get skittish. The firm’s associates and staff can view partner departures as a sign that the firm is unstable or that it may not be as successful as they had hoped. Law firms tend not to be the best at sharing information with associates and staff, or putting details about the firm’s business in context, and associates and staff typically are left to piece together what information they can gather to draw their own conclusions. They also tend to share their conclusions with others at the firm, and quickly.

The good news. So, if it’s bad, it’s bad, and even when it’s good, it’s sometimes bad. That’s not very heartening. But thankfully, all of these effects of partner departures, real or just perceived, can be managed and mitigated with proper preparation and messaging. That requires anticipating departures to the extent possible and candidly assessing the effects either before departures occur or soon after they do. With the right preparation, a well-run firm will have a departure contingency plan in place to implement when necessary. That plan will address the real effects, the likely-to-be-perceived effects, and the steps and message that will mitigate both in a way that benefits the firm.

Partner departures can present great risks for the firm—but also great opportunities—if you are prepared.

Dena M. Roche
Managing Partner
O’Rielly & Roche LLP
dena@oriellyroche.com

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