May 08 National Newsletter   Managing Your Partners By Graeme McFadyen, CEO Trilby Misso Lawyers, Brisbane Graeme is the President of the ALPMA Queensland division and is vice-president of the national ALPMA

 

 

If you asked managing partners what was the issue that most often caused them to lie awake at night, the response almost certainly would be pondering how they could get better engagement and compliance from their partners.

 

 

Of all the issues which can have adverse consequences for a practice, probably none is more harmful than having a partner (or partners) whose attitudes, values or work ethos puts him or her visibly out of step with the other partners. Whether partners like it or not, their authority within a firm means that their behaviour and the manner in which they conduct themselves are invariably the subject of intense scrutiny and comment by their fellow partners, their staff, by interested third parties and now, more so than before, by regulatory authorities.

 

Unacceptable partner behaviour or performance can fall into four broad categories:

a) personal conduct in which a partner behaves in a socially disreputable manner which either reflects poorly on the partnership or exposes the firm to legal action, eg bullying and offensive language or offensive conduct
b) the partner behaves in a professionally shabby manner which, if discovered, will likely diminish the firm’s reputation, eg charging unjustifiably large amounts of time on certain client files and increasing the cost to the client with no commensurate increase in value
c) poor financial performance in which the partner fails consistently over time to achieve even modest financial targets set by the firm.
d) non-conformance with firm ideology in which the offending partner simply fails to cooperate or is dishonest in his dealings with the other partners.

 

The first condition is readily identifiable as unacceptable although there are still rogue partners within some firms who expect staff to tolerate their aberrant behaviour simply because they are partners. Regrettably not all the dinosaurs died out in the last ice age. We suspect that many managing partners may choose to look the other way as “only a few people are offended” and a confrontation with a partner who simply does not understand that the world has changed is an unpleasant prospect.

 

The second condition is a bit of a sleeper in that not all partners may be aware of the occurrence and, even if they are, they may elect to tolerate the situation if the partner concerned is a consistently high biller. As an example let’s say a high billing specialist tax partner with a relaxed life style is in the habit of “value billing” which involves dumping time on large matters for the firm’s blue chip clients. While the specialisation may justify some premium in fees, there is discomfort felt by other partners that this practice jeopardises their client relationships and resentment at the tax partner’s crude methods to achieve billing targets. The managing partner has to decide what is more important – the partner’s high fees, the reputation of the firm, the relationship with the clients affected or the avoidance of the drama of a partnership dispute? While the managing partner may rationalise in favour of the high fees, I suspect that the real issue may be the prospect of an unpleasant confrontation.

 

The third condition is perhaps the most common and, more often than not, seems to be accepted as a regrettable but tolerable condition. The corrosive effect under-performance can have on the practice as a whole is either not properly understood or is just ignored as too hard.

 

The fourth condition is likely to manifest itself in regular ways which, in isolation, are mere annoyances but which collectively cause considerable angst amongst the other, generally compliant partners.

 

None of these behaviours can be tolerated in a practice that wishes to grow. Growth contemplates having new quality solicitors emerge through the ranks. These practices are hardly likely to encourage aspiring future partners to want to spend their best years with an ill-disciplined and potentially fractious group of partners.

 

McKenna and Maister argue that it is necessary to have a standard of behaviour that all partners must observe. “It can be very disruptive to your entire group when one person is being difficult. Indulging that individual can diminish standards and foster resentment.” For this reason I argue that partners should be held more accountable than other staff for their behaviour. And that makes sense, doesn’t it? As the leaders of the firm it is up to them to set the tone of the practice and to be accountable to their fellow partners.

 

So what needs to be done to avoid these sorts of problems? First, there needs to be clear expectations of acceptable performance and behaviours and a clear definition of unacceptable behaviours and the consequences arising. Accountability cannot occur where the rules or expectations are unclear. While a partnership agreement is the obvious place to articulate these house rules, there is no reason why they cannot be adopted quite discretely from any partnership agreement if amending or drafting a partnership agreement is regarded as too onerous.

 

If a partner consistently fails to meet the firm’s financial standards then there should be clear consequences. The usual and most effective, in my experience, is a reduction in drawings commensurate with performance. Alternatively, perhaps all partners receive a base draw and those that meet or exceed their targets are paid a monthly bonus. Either way, there needs to be a clearly identifiable consequence of under-performance.

 

Continuing to reward under-performing partners with full drawings creates two problems. It sends the wrong message that financial performance is optional regardless of what may have been said. And it is likely to diminish the enthusiasm of the more committed partners who see that the benefits of their achievements are flowing to partners, who for whatever reason, are not reciprocating. Over time, this can only lead to a diminution of commitment and, ultimately, performance.

 

Second, before anyone is invited to become a partner, there needs to be a careful assessment of that person’s ability to fit in and to meet the financial and behavioural KPIs of the firm. There are civilised procedures for dismantling a marriage that is not working but there are no set rules for dismantling a partnership that is not working. Unless there is confidence that a prospective partner will fit in, there should be no appointment.

 

And finally there needs to be leadership. A mere collection of rules and values is pointless unless the partners in general and the managing partner in particular are prepared to enforce compliance. If necessary the managing partner needs to remind partners from time to time that non-performance or non-compliance is not regarded as a regrettable but tolerable condition. A failure to act when there has been a clear breach of values or a consistent failure to meet financial targets or compliance with firm policies is a failure to lead.

 

Regrettably one of the enduring characteristics of the legal industry is the disinclination of managing partners to actually lead. “In my experience one of the most significant stumbling blocks in improving firm performance is the reluctance or inability of managing partners to demonstrate real leadership. By leadership in this context I mean the ability to secure or enforce 100% compliance by their fellow partners in meeting financial targets, adhering to firm policies or demonstrating reasonable behaviours. Many of the simmering tensions in law firms could and should be resolved quickly by decisive leadership yet this rarely occurs.”

 

Behaviours that should sound alarm bells include:-

• An apparent indifference to office policies or precedents
• Questionable client management practices that favour the client over the firm ie poor debt collection policies
• Persistent assessment of management proposals on the basis of personal rather than firm impact
• Either an indifference to financial targets or a win-at-all-costs mentality
• A determination to practise in areas of doubtful technical competence
• A lack of personal commitment to the firm’s practice ie allows personal business to interfere with firm business
• An indifference to the impact of the partner’s conduct on others

 

The reality is that most managing partners find the prospect of a confrontation with their fellow partners too difficult and tend to avoid the issues until ignoring them is not an option by which time the stakes have increased considerably. I call this the discomfort maxim…..lawyers are notorious for refusing to take any action until the discomfort of doing nothing finally exceeds the discomfort of taking action. By this time of course the passage of time lends legitimacy to dubious practices such that the argument “why change now?” may carry some weight.

 

From my experience it is very useful to have a formal system of annual partnership performance reviews where performance issues can be identified and discussed in a non-hostile forum. One constructive way of managing these reviews is to require partners to complete an annual self-assessment based on a range of responsibilities including

• Client management
• New business development
• Developing people
• Achieving targets
• Practice management
• Developing and maintaining skills
• Conforming to practice ideology.

There needs to be a range of specific performance standards set for each responsibility. The managing partner completes his/her own assessment in respect of each of the partners. During the review, the two assessments are compared and actions agreed where performance is found wanting. The use of external consultants can assist in this process to ensure there can be no suggestions of personal bias.

 

A successful practice is one where the partners work together in a constructive and structured manner to grow the practice and prosper. If that is not occurring then the prospects of long term success are severely diminished.

 

 

1 See McKenna, P.J. and Maister, D.H. (2002) First Among Equals, The Free Press, New York.

2 McFadyen “Leadership” Proctor March 2006

3 I am indebted to Rob Ashley of Ashley Munro, Business Advisors, for sharing his partner appraisal process with me.

 

Reprinted with permission from Proctor