The long goodbye

September 19, 2014

Can firms expedite partner exits?

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Recent years have seen law firms shift to more performance-based appraisal and remuneration models for all levels of staff, from junior associates to partners. The theory is sound: reward your best and penalise underperformance and you’re left with a firm fine-tuned to make profit.

Problem is that while firms may be doing okay at the reward bit, they still struggle when it comes to tackling poor performance, particularly at partner level. This then clogs up the whole system, preventing high performers from rising to the top, and often resulting in their premature departure. Meanwhile the crud stays on and on top, fuelling bad feeling and stunting a firm’s growth prospects.

Firms may spend an age refining performance systems to better address this problem. And sure, the clearer the performance appraisal model and process, the easier it should be to support those who are merely going through a bad patch while pushing consistent underperformers towards the exit. Except that it doesn’t work like that at partner level because it’s often not the performance model that’s at fault.

Structural problems

The problem is far more fundamental. It lies in a governance model that allows the whole partnership to have the final say on the fate of one of their own. When faced with the prospect of exiting a fellow partner, collegiality and loyalty – combined no doubt with a strong instinct for self-preservation – win out over good business sense.

In the end, firms can’t get rid of senior partners who have long since had their day – regardless of what performance measures they have in place.

It is refreshing, therefore, to see that one firm is tackling this problem head on. Berwin Leighton Paisner (BLP) is in the midst of a partnership consultation process aimed at expediting the partner exit process.

It has given its partners three options to consider including reducing the numbers of votes needed to sign off a partner exit (from 75% to 50% of the partnership), setting up an independent committee to take charge of partner exits, or giving the decision-making power to the firm’s managing partner and executive chairman.

Success in such measures would be a boost for the leadership team, giving them more corporate-style power for speedier decision-making based on business, not partner, objectives.

Avoiding the blame

Nor would it necessarily be bad for the partners. There must be many who see the prospect of voting to exit a colleague as little short of knifing them in the back. Passing the buck to a leadership team, their decisions safeguarded and backed up by a sensible and transparent performance model, must surely be preferable?

It appears, however, that this is wishful thinking. A former BLP partner told Legal Week that the proposal is ‘meeting resistance from partners’, while another said, ‘Partners do not seem to have been given the appropriate level of respect.’

The obstacles ahead are also evidenced by the fact that a recent vote on the first option, ie, to reduce the voting threshold, is understood to have been abandoned when the firm failed to achieve the necessary number of partner votes to pass the motion. It seems unlikely the partnership will therefore leap to accept either of the other options, which promise an even greater transfer of power to the leadership team.

What is certain, though, is that BLP has taken an important and brave step to addressing a critical performance issue. It is one that other firms will have to follow, if they are truly serious about making performance-based models work for attracting and retaining talent at all levels. The alternative isn’t just a career-development blockage but performance models that lack all credibility.

What this may mean for the partnership model is as yet unclear, and some resistance, at least, seems inevitable. But as performance models gain ever more adherents, it will increasingly be a battle that leadership teams have to win. CP

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