A retiring partner must put in a lot of work to successfully transition clients to junior partners. It isn’t always easy to get them to do it.
As an advisor to law firms about retirement succession, I share the strategies and initiatives I executed to transition my $6 million practice to younger partners. I worked hard to make this happen, as required by the partnership agreement I signed when I joined my AmLaw 100 firm, Barnes & Thornburg.
A firm’s partnership or shareholder agreement expresses partners’ duties to each other. Many retiring partners do the work of succession to satisfy what we learned in law school is their common law fiduciary duty to each other and their firms. Some retiring partners, by the end of their careers, have only a dim recollection of this rule of law. A good way to remind them, and to express the firm’s expectations of them with respect to succession, is to make their partnership and shareholder agreements explicit on this issue.
Many such agreements express a retiring partner’s duty to transition clients to the next generation broadly. A typical provision states:
In anticipation of retirement, each Partner shall undertake an orderly transition of client responsibilities to other Partners, as approved by the Management Committee. Upon retirement, any remaining clients for whom the Retired Partner had primary and/or billing responsibility will be reassigned to other Partners. Throughout this process, the retiring Partner shall act loyally to advance the best interests of the Firm and its clients.
This kind of provision suffices for most retiring partners, who know that it takes work to execute “an orderly transition of client responsibilities to other Partners” and do this work because that’s what they agreed when they signed up. But some shrink from tasks that aren’t specifically required. For this reason, I recommend that partnership and shareholder agreements include more explicit succession provisions. I like this one:
When a Partner decides to retire, that Partner shall inform the Management Committee of the Partner’s retirement date no later than two years prior thereto. During the two-year period prior to the Partner’s retirement date (“Retirement Transition Period”), the Partner shall transition all client responsibilities to other Partners in conformity with guidelines approved by the Management Committee. These guidelines shall require a retiring Partner to (1) prepare, and submit to the Management Committee for approval, a written transition plan for each of the Partner’s clients; (2) prepare and submit to the Management Committee periodic reports on the status of and timelines for client transitions during the Retirement Transition Period; and (3) take all actions reasonably required by the Management Committee to effectuate client transitions consistent with the Partner’s duty to act loyally to advance the best interests of the Firm and its clients.
This kind of specificity is not necessary for most retiring partners. They work to ensure that their clients get uninterrupted service not just because they have a contractual and/or fiduciary duty to do so, but because it’s what’s best for their clients. But being crystal clear about what is required of retiring partners reduces a recalcitrant partner’s ability to argue that substandard performance complies with contractual obligations. Still, a partner who is uncooperative about doing transition work probably does not care much about clients’ needs for continuous service. This may be reflective of poor client relationships, or just an apathetic partner. The revenue streams for which these people are responsible may be vulnerable just because the partner is indifferent to what is best for the clients.
My work to transition my practice to junior partners had nothing to do with my obligations under the Barnes & Thornburg partnership agreement. I did this work out of gratitude. Six months after I joined B&T, one of our children died. What followed was the hardest couple of years of my life. I had not yet formed the friendships at the firm that I have now. Back then, no one knew me. Yet everybody, from the managing partner down to the folks in the mail room, treated like I had been their partner and colleague for thirty years.
I can never repay these generous people for their many acts of kindness and support. I worked very hard transitioning my clients to younger partners. This work resulted in the retention of a $6 million revenue stream. I did this work not just because I signed a partnership agreement. I did it as a thank-you to B&T, and to the younger partners who are serving my clients – now their clients – so well.
Retiring partners who plan and execute retirement transition plans will calibrate the work required based on their individual priorities. Hopefully, no one ever does this work for the reason I did. Partners’ promises to each begin with what they sign, so making firm expectations about retirement succession contractual is an inherently good idea. This alone will not prompt all retiring partners to do the work of transitioning clients, but it will be a good start. Other ways to motivate retiring partners to do this work will be the subject of future posts.
