California
Partner Departure Law

April 28, 2022

Your Law Firm Culture Should Protect the Firm from Partner Departures

In any law practice today, it is critically important to respond to partner departures in the right way. It is equally important to anticipate and manage partner departures proactively. From most firms’ perspectives, the partnership agreement is the primary defense to partner departures. And it can be a powerful tool. If properly drafted, the partnership agreement should include provisions that minimize the incentives for partners to leave the firm and raise the cost of departure to partners or groups in a legal and ethically compliant way.

But like any risk management analysis, it is not enough to put protections in place to react. To manage the firm properly, you also must analyze whether the firm’s culture is aligned with the goal of retaining talented partners in the first place.

Yesterday is gone. In years long past, law firms didn’t have to worry about such things. For those who became partners, they often stayed for life, and whether they remained productive or motivated was frequently an afterthought, because they tended not to leave the firm regardless. That’s ancient history for law firm management, particularly in the wake of the pandemic, where attorney mobility is at an all-time high. That’s good because it means that there are fewer and fewer unproductive partners roaming the halls or the internet, which can make it difficult for talented developing partners to move up at the firm. On the other hand, talented and successful law partners now often have an individualized brand, and a carefully cultivated marketing identity and client relationships, all of which probably are independent of the law firm.

Have practice, will travel. This means that the most talented partners are also highly mobile. Attempting to keep those partners at the law firm with onerous policies or provisions alone typically won’t work, especially in the current market. And if that is your law firm management approach, you may be looking through the wrong end of the telescope. The best starting point to prevent talented partners from leaving is to create a law firm culture that binds them to the firm, gives them things that they cannot get elsewhere, and makes the practice of law — dare we say it — enjoyable and rewarding.

Creating, or fostering, this type of law firm culture sounds easier said than done. But it can be done, and indeed it is being done, by all or some of your law firm’s competitors – especially in the wake of the pandemic. The first step is to ask a few questions about your firm.

What is your law firm’s unique value proposition for partners? This is commonly a trick question for law firms because most generally consider high compensation to be the value proposition for the firm. But compensating law partners fairly and well is not unique to your firm. The best-run firms recognize that partner compensation is necessary but not sufficient. And most partners do not cite more money as the primary reason behind their departure. Yes, you must pay partners well to retain top talent. But to succeed over the long term, and to retain the most talented partners, a law firm also must offer partners something that they cannot easily obtain at a different firm.

That might be a unique mix of personalities and expertise that provide mutual support for partners and practices. That might be policies and procedures at the firm that uniquely facilitate partners’ business success. That might mean a unique approach to strategic planning, to prepare for the changes in the marketplace over time. And in a post-pandemic work world, that might be law firm management that has embraced changes from the pandemic and incorporated the best practices (remote and hybrid options) into the firm’s new normal.

Whatever it happens to be, two things are certain if your firm is going to succeed over the long term: you must have a value proposition for partners, and it must be unique to your firm.

Does your law firm value the right things? The phrase “unproductive partner,” used above, is a common but treacherous phrase for law firms. Many firms make the mistake of equating that phrase to “revenue-producing.” Revenue is great, sure — without it, nothing else matters. But generating revenue in the short term is not the only, or even the most important, way that a partner can be productive. Someone has to run the firm, for example, and that is critical even though it doesn’t generate revenue in and of itself. Similarly, partners with unique subject matter expertise often are not producing the most revenue, but this can be critical to the long-term success of the firm. Long-term training of attorneys and staff is critical, but it doesn’t directly produce revenue. The list goes on.

Does your firm explicitly or implicitly value the production of revenue above all else, or fail to recognize the institutional value of critical non-revenue producing activities? If so, your firm’s short-term future is likely to have a lot of revenue. But your firm’s long-term future is likely to be at risk. In the long run, a law firm has to be more than just a collection of revenue-producing individuals.

Are your law firm’s policies and practices aligned with a successful culture? Even assuming your firm is committed to the right long-term value proposition and recognizes institutional value in the right way, neither will mean much if the firm’s policies and procedures don’t reflect these values. This means you have to view the firm’s functions — recruitment, training, management, compensation, marketing, etc. — in the context of, and in service to, those goals.

Answer or be answered. These are three simple questions, but they are a critical starting point for an analysis of your law firm’s culture and whether that culture is supporting the goal of keeping talented partners. The good news is that with some thought and analysis, the answers to these questions can lead to positive change that positions your firm for long-term success in the new legal marketplace. On the other hand, if you can’t answer these questions, or if you get the wrong answers but do nothing about it, you can be sure that the marketplace will answer them for you.

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

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