ABOUT PARTNER RETIREMENT PART II: THE CLIFF AND THE HILL STRATEGIES
“Will you still need me, will you still feed me, when I’m sixty-four”, When I’m Sixty-Four, THE BEATLES.
My previous Insights & Perspectives #66 brought a bit of attention in many readers of these articles. I also received very interesting comments that made me think that some additional thoughts on the matter could be useful. One of the main concerns was that the topic of partner retirement is normally overlooked by law firms, and in those cases where there is a system in place it has proven to be insufficient and/or the actual implementation was quite deficient, leaving the firm and/or the retiring partner unhappy in some way or another. Moreover, the common ground in all these concerns left quite clear that the objective of avoiding a breaking bar of soap when it is getting thinner is hard to accomplish.
Many of the firms in the region adopt what I would call the “Cliff Strategy” which basically means that partners continue to operate pretty much in the same way as they have been doing it for years until the very end and when the date of retirement comes they just fall off the cliff by leaving the office completely or taking non-relevant roles that seldom end well. This lack of planning for a smooth transition period before the actual retirement date and a lack of more creative thinking for a role after the retirement date provokes many times the unwanted result of a soap broken in pieces. The “Cliff Strategy” might be simple but many times proves inefficient to solve the complex matter of retirement.
Seek shelter before it gets dark
It would be shortsighted to think that retirement is an issue just connected to the moment a partner retires. The story actually begins long before and is related to culture, strategy and systems in the firm. Firms that are based on strong individuals where their own performance (mostly financial) is the way to measure success and failure are fertile ground to grow big egos. The culture and systems (mainly compensation) run around those individuals and the main goal of any lawyer in those firms is to become one of those “sacred cows”. Since reputation, power, recognition and money is tight to that model, lawyers fight to get there, and then stay as long as possible. As Jaap Bosman and Lisa Hakanson clearly state in their book “A New Dawn: A Manifesto. Redefining the legal profession in the age of the Covid-19 crisis”: “It is a natural tendency wanting to be loved, admired and relevant. Powerful partners are addicted to standing in the center of attention. They cling to power. It goes against human nature to step aside and let someone new be the new star.”
Firms need to understand that among the difficulties of promoting the power of individuals in an exaggerated manner, it will also produce a deficient partner retirement system. Transition will always be difficult since partners will want to retain power and relevance until the very end, and that means hoarding clients, knowledge and billing capacity. The “Cliff Strategy” is based on the false assumption that things can go well until the very end without any preparation, and once the retiring partner is gone the other partners will absorb overnight whatever is left and without harm.
The “Hill Strategy” is a different approach and assumes that a productive transition for both the firm and the retiring partner needs anticipation with smooth changes in the previous years before retirement. There has to be a progressive “letting go” by the retiring partner that is discussed and agreed. That means an open conversation between the firm and the partner with enough anticipation raising all relevant issues related to the retirement. Also, incentives should be clear in both the economic and cultural levels so that partners do not feel threatened or at risk by “giving up” their assets to other partners. In order to accomplish that, partners should understand well before that moment that those assets already belong to the firm and not personally by her/himself. That is why culture and systems are so important in preparing the ground for a smooth retirement.
The “Hill Strategy” works only when the firm deals with clients, talent, knowledge and reputation as something that should belong to the firm, and not to particular individuals. This approach gives sufficient flexibility to prepare in advance the retirement of a valuable partner. Some companies prepare the retirement of their executives way in advance of the effective date, even 10 or 15 years ahead. This would be unreasonable from a law firm’s perspective, but whatever the appropriate time, both the firm and the individual need to anticipate difficult choices and situations when there is yet no tension and immediate interests in play.
What happens after D-day?
The second aspect of the “Hill Strategy” is what happens after effective retirement. The first thought is that an abrupt change of condition is more a legal than a professional or management reality. It is not true that any given partner is valuable until the last day and then turns an idiot the day after retirement. Professional and commercial capabilities change in a slow and complex process, where some skills are replaced by others along the professional life. Understanding that process and setting a plan that would contemplate that reality is the basis of a “Hill Strategy” and the way to avoid a broken soap bar.
Another complex topic is what the individual partner wants to do after retirement. Some may want to continue working in another role, others would like to pursue other interests, and there are some who don’t have a clue. It is hard to start another life when you have given so much to your profession and that defines a good portion of your identity. This involves personal questions of each partner and matters that are out of the firm’s control and it is responsibility of each person to prepare and do the emotional and professional homework to be ready for that moment.
The main conclusions and suggestions on this complex matter are the following:
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- Both the firm and the person need to get involved in the transition process, but it will be difficult to reach a positive outcome if the person is not prepared for the next step.
- A balance should be found between anticipating what the retirement will look like and not become overwhelmed by that situation so that motivation and energy are reduced ahead of time. A three-year period should be advisable in this respect.
- There have to be incentives in the firm, both financial and non-financial, for a partner to start releasing in advance to other partners the responsibility of handling clients’ relationships.
- It is preferable to have financial packages for the retiring partners since that reduces the financial stress in the initial period after retirement.
- It is beneficial for firms to contemplate professional roles for partners after retirement, subject to agreement by both parties and renewals after short periods of time.
- The key for a successful scheme is that the retiring partner can continue to provide real professional value to the firm through her/his work, knowledge and experience.
- Retiring partners should not retain political rights, handle client relationships or expect to bring new clients. Those partners should not compete with current partners in those areas.
The whole purpose of having an adequate scheme to anticipate and deal effectively with partner retirement is to avoid the soap from breaking ahead of time and to be able to benefit from it for a much longer period, for both the wellbeing of the partner and the firm.
