why throw them out?
by august j. aquila
what makes a great partnership
there has been a lot of debate about the lack of future partners and how firms are going to survive from one generation to the next. and, at the same time, many firms may have an asset that they are getting ready to retire – their older partners. firms are so worried about generational differences in the workplace that they tend to forget about the value of their senior or older partners.
more: how to deal with underperforming partners | when ‘quiet quitting’ hits the partner ranks | 12 points of a good compensation plan | ten steps to a new managing partner | what managing partners must be doing | do your partners pay their own way? | how to create firm accountability
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i am not suggesting or recommending that unproductive partners should be kept in the firm. these partners should be dealt with immediately, no matter what age they are.
however, i am suggesting that we look at senior partners as valuable assets and determine how we can best employ them.
senior partners possess a wealth of knowledge about the firm, client relationships, long-term referral sources and the firm’s oral history. retaining this intellectual capital makes any firm stronger. however you decide to use senior partners, make sure it is a win for the firm and the partner.
getting started
make sure that your partnership agreement clearly lays out the retirement process. while you will want to keep some retiring partners on board, you do not want to have to keep all of them, if you do not want to.
key partnership agreement issues
all firms need to have a clearly stated retirement process in place. this permits the firm to proactively plan for succession, secures the transfer of client relationships from one generation to the next, and allows younger professionals to move up through the ranks. today, many partnership agreements have a mandatory retirement age, which is usually 66. at that point in time, the firm, not the retiring partner, has several options:
- let the partner retire and leave the firm,
- let the partner stay on for an additional year as an equity owner or
- let the partner stay on for an additional year as an employee.
at the end of the additional year, the firm determines the role of the partner for the following year.
client transition
retirement should not be a time when the firm and the retiring partner are at odds with each other. they both have a mutual interest and can greatly benefit each other by working together. a smooth client transition is critical for the firm and the partner. to ensure that this occurs, make certain that your compensation and retirement plan does not conflict with what you are asking the retiring partner to do – transition his or her clients to another member of the firm. if there is an inherent conflict in this situation, the partner will not transfer the clients and the firm misses out on a great opportunity.
creating options
there are many meaningful ways to employ senior partners. the top three are:
- revenue-generating options
- non-revenue-generating options
- options outside the firm
revenue-generating options
while there are partners who do not relish the daily grind when they get into their mid-60s, there are others who have the stamina and desire to continue working well into their 70s. for marketing purposes, the partner retains the title of partner but now works under a new compensation plan because he or she is no longer an equity partner or shareholder. the new compensation plan can be structured in many different ways. for example, some firms will base it on a percentage of cash collected from his or her personal production. the percentage is usually between 30 percent and 40 percent. other firms will hire the partner on a project basis and pay a flat hourly rate.
finally, many firms develop a part-time or flextime arrangement in which the partner takes off most of the year, but works during the busy season. the key to making all of these options work is to ensure that the retired partner is not controlling clients who should have been transitioned to someone else in the firm.
non-revenue-generating options
there are several ways that a former partner can add value to the firm other than billing clients. if you are lucky, your senior partner has developed a true expertise in a specific area and will be willing to develop younger professionals by acting as a coach or mentor. other retiring partners might have a database of referral sources that can be used to continue to send new clients to the firm. and, still others might enjoy campus recruiting, searching for merger candidates or just helping with the firm’s projects. all you need to do is identify specific projects that senior partners could add value to when they are no longer working for the firm in a full-time capacity.
if you pursue this option, partners are usually paid on an hourly or flat rate to lead certain areas in the firm. for example, one firm is using its retired managing partner to become the chief rainmaker in the community, while another firm has hired one of its retiring partners, who teaches at a local university, to head up recruiting. once older partners are relieved of the pressures of being full-time producers, they often embrace these new roles with renewed passion. instead of feeling disconnected because they are leaving a firm where they spent the last 30 years, they feel good because they are making a real contribution to the firm and to their community.
options outside of the firm
many older partners serve as good-will ambassadors for their firms. if your retiring partner does not want to continue with the daily grind of client service, that does not mean that he or she has to stop being an asset to the firm. many firms have outstanding alumni programs where former partners and employees continue to promote the firm.
the secret is that both parties develop a winning outcome. firms have been able to place senior partners in a variety of positions, including:
- on boards of local non-profit organizations
- on boards of privately held companies or hospitals
- in full- or part-time positions with one of the firm’s clients or prospects
it is important to ensure that the retiring partner continues to be a loyal supporter of the firm. there is no better marketing tool than to have as many people as possible in the marketplace saying good things about your firm. why not make some of those people your former partners?
make it happen
good things happen because we take the time to plan them out. often, a retiring partner will want to ignore the fact that a life-changing event is on the horizon. take the initiative and start talking with your senior partners today. let them know that the firm wants to support them during this time of transition. as i mentioned earlier, all partners need to feel good about the pending changes. being honest and upfront regarding what the senior partner can expect in his or her new role will make it easier for a smooth transition to take place. remember, retiring partners are valuable assets. you just need to find a way to make use of their full potential.