Re-Engineering Under-Utilized Partners to a Firm's Benefit

by Joel A. Rose
 

In the current recession, partners whose practices depend on transactional areas of the law have experienced a significant decline in business. Some firms may have the resources and client work to carry them. Others may not. “Re-engineering” underutilized partners, although not the easiest solution, could be the least objectionable.

Your firm may be faced with the dilemma of dealing with underused partners for a couple of reasons. Perhaps the firm recently lost a large client, and now there’s not enough of a particular type of work to go around. Or maybe the firm made a strategic decision to alter its practice areas, and certain partners work in a department that will cease to exist.

As difficult as it may be, given friendships among partners, the firm needs to come to grips with the fact that it probably can’t afford to keep those partners around at their current status. The options are few:

(1) Ask the partner to leave;

(2) Decrease the partner’s compensation to reflect his or her current contribution to firm revenue; or

(3) Re-engineer the partner by training and moving him or her into another practice area.

Many factors must be taken into account as a firm considers whether re-engineering a partner is the best alternative.

Re-engineering of partners, as a practical matter, has received mixed reviews from managing partners of firms that have attempted it. Depending on age, experience and personality, certain partners may be able to re-establish their positions as major contributors to their firms by obtaining training in other substantive areas.

However, embarking on this course of action is a complex and sensitive issue that requires considerable planning and discussion.

Ongoing Need:

It is essential to determine the extent to which there will be an ongoing need for the expertise to be developed and whether the firm can continue to pay the partner’s direct and indirect costs during this training.

It makes little sense for a partner to invest his or her time to develop a narrow specialty to satisfy the needs of a casual client unless that specialty has the long-term potential for retaining and attracting potential clients and proving profitable.

Other issues that must be addressed during the planning process include:

(1) The effects on the firm’s philosophy, objectives and current guiding principles - generally referred to as firm culture;

(2) The manner and method of organizing substantive practice areas, and the need to identify to whom the partner to be re-trained will report for supervision, training and review of work product;

(3) The firm’s economic resources and substantive capabilities, strengths and weaknesses;

(4) Current and potential client requirements, to assess how the political, economic and social trends relating to the new specialty will affect the firm and its clients;

(5) The willingness and ability of an attorney to sell legal services and cultivate prospects in the new specialty, combined with the confidence other partners have that the retrained partner will master the new specialty and relate positively to clients; and

(6) The partner-associate relationships in the practice area that the partner is entering, that is, the ratio of associates to partners, criteria for admission to partnership and the perceptions of the senior and profitable associates about their career opportunities with the firm.

The firm’s desire to retain under-used partners notwithstanding, care must be taken not to encourage the experienced, more profitable senior associates to seek employment with other firms because of perceived career limitations.

Youth and Pliancy:

Re-engineering partners into new specialties has been most successful when the individuals are relatively young and pliable, both personally and professionally. Retraining of mid-level and older partners has been most successful when they can learn a specialty that is related to their areas of interest. This requires an accurate assessment of that partner’s aptitude and interests, as well as the demands of the new area of law.

Sometimes a partner may not be amendable to changing his or her practice areas. An established litigator may be intellectually capable of learning corporate law but may not be interested in doing so. On the other hand, a partner may not be able to make changes. A partner who practices general corporate law may not have the temperament to become an effective litigator.

Much of the relearning cannot be done on the partner’s own time. During the time that a partner is learning a new area of law, firms usually lower their production and billing targets for a specified period. The partner’s compensation should not be appreciably altered during this learning period.

In addition, the partner usually receives an increase comparable to what other partners at the same level receive. However, if the firm’s income level shows only a slight increase or remains the same, the base salary or draw may continue, but that partner may not be permitted to participate in bonuses at the same level as other partners.

In the end, it may be unrealistic for the firm to expect an established or older partner to be willing to learn an entirely new area of the law. If a partner is not willing to make the effort, then some difficult decisions will have to be made about modifying his or her status.

©1999-2015 Joel A. Rose & Associates