Baby-Boomer Partners In Transition

The ranks of law firm partnerships include tens of thousands of “baby-boomer” partners (BBPs), born between 1945 and 1955. These attorneys are now ages 50-60. Surprisingly, little has been written about the expectations and needs of BBPs or the expectations, needs and strategies (if any exist) of their law firms and fellow partners as to BBPs. (Your author falls into both camps: he is age 55 and is actively involved in the administration of a large multi-state law firm.) Moreover, law firm partners both younger and older than their BBPs may be substantially affected by their law firm's strategies for and treatment of the baby-boomer generation.

This two-part article illustrates the expectations, intentions – and tensions – of baby-boomers and their firms, respectively, by using two models. Of course, there can be as many variants as there are BBPs, with numerous potential responses to each unique situation.

Let's begin with Model 1, which involves Partner A, a full-share BBP equity partner who is a classic business generator with a substantial clientele in X, a modest or mid-sized law firm. “A” is a litigation lawyer, experienced and respected by A's colleagues and the community. Over the years, A's friends have become A's clients and A's clients have become A's friends; other than business-generating and business-related activities (many of which A enjoys), A has few hobbies or diversions. A is 58, and has given little thought to retirement. Indeed, A resists even thinking about transitioning clients and retirement for the foreseeable future.

A's expectations are as follows:

• To continue to practice law as long as A can;
• To continue being fully compensated for business A brings in. If and when A ever retires, A wants to be adequately compensated for those clients that remain at the firm, which may occur largely as a result of A's personal efforts to transition those clients to younger partners;
• To become a senior counselor and mentor to other firm attorneys (akin to an oracle);
• To reduce A's current work pace by 20%-40% in A's later years with the firm (those “later years” probably being at least 10 years or so off, in A's view), and
• In A's sunset years, to keep a large office with secretarial support, perquisites and other benefits commensurate with someone of A's current status in X.

In sum, A expects to be an important cog in X's profitability and success wheel for many years to come. A expects a soft landing in A's wind-down years (far down the road, A thinks).

X's managing partners have a somewhat different vision of A's sunset years. Although A is currently an admired and profitable attorney, most of A's clients are themselves at an age where they (and possibly their businesses) are or soon will be going through transition. Indeed, many of A's clientele currently in power or control of their businesses may be approaching retirement or planned succession, and in 5 years or so may have a substantially reduced role in their companies' day-to-day operations (including the selection of legal counsel). A's ability to retain those clients (and the loyalty of the next generation of management of those businesses and companies) is by no means certain. Moreover, if A and X fail to make inroads with the next generation of those clients' management, A may find that A's friends/clients have moved on, leaving A (and X) with a greatly reduced client base. X views (and likely will continue to view) A's experience as a litigator to be valuable but not priceless or irreplaceable. X has given little thought to A's expectations or desires, and has not broached the subject of a long-term game plan, including transition, with A. X likely would retain A's services (for the right price) as long as they remain valuable to X. On an ongoing basis X's future compensation will not materially reflect A's prior years' contributions.

X's partners more senior than A have moved toward or into full retirement, but X recognizes that A's situation (like most modest and mid-sized firms) is in some ways different from that of other (older) current or retired partners. X recognizes that for its long-term success, it must continue to be profitable and at least stay competitive with other comparable law firms (while recognizing that firms larger and smaller than X also cut into X's potential client base and market share). So long as A remains profitable to X, A will be welcome as a partner of X; A's competence as a litigator is not currently an issue, and indeed X's prior experience with litigators who preceded A is that some retain their expertise well into their 60's (or beyond).

Some of the questions that A (and other BBPs in somewhat similar situations) and firms like X must consider include the following:

• Has A communicated A's intention to remain on as a partner indefinitely, and if so, under what type of arrangement?
• When does A expect to reduce A's workload and/or go to part-time status? What is X's response to that?
• Does X have a policy, guideline or culture as to when X's senior partners are expected to transition from equity partner to some other status? Has X conveyed that to A? Is there a general understanding between A and X?
• What alternatives does the firm provide for senior partners who no longer meet productivity or performance requirements?

Do they change to fixed share or non-equity partner status? “Of counsel” status? Retired partner status with no further formal affiliation with the firm?

• What is the firm's compensation system, particularly for senior partners in transition?
• Are there prior examples or precedents at X which provide guidance for A's transition?
• Does X and each partner in transition reach an understanding of a transition program sometime prior to its implementation?
• How will X and A best transition clients originated by A to other partners?
• How will X continue to provide incentive to A to help the firm retain A's old clients and generate new clients? Does X's culture establish an expectation that A will be expected to wind down prior to the time A would prefer? If so, is there a risk that A will reject that approach, and either insist on a special arrangement at X or end up going to a competitor firm or opening A's own practice?
• How does X discourage A from leaving the firm before X wants A to leave? Does X provide a meaningful nonqualified retirement benefit, coupled with a restriction on A's ability to practice law elsewhere? If so, is the restriction in compliance with Model Rules of Professional Conduct Rule 5.6 or its equivalent in the jurisdiction in which A practices? See, eg, Sheldon I. Banoff, “NJ Upholds Non-Competition Agreement,” Law Firm Partnership and Benefits Report (June 2004), pg. 1; Sheldon I. Banoff, “Illinois Developments Are Good News for Multi-State Law Firms Across the Country,” Law Firm Partnership and Benefits Report (Nov. 2002), pg. 5.
• Which X attorneys will assist in transitioning A's clients and matters? Will those attorneys themselves be transitioning just a few years later down the road? Are the transitioning attorneys strong enough to retain A's client base? Or are A's clients unique to A's own abilities and personality, and effectively non-transferable to any other X partner?

Obviously, no one solution fits all. Most BBPs do not anticipate full-time second careers outside of law (although some go in-house with a client, in a legal and/or business capacity, and perhaps while retaining some client practice as counsel to the firm). Creative solutions with adequate flexibility are often required, particularly in modest to mid-sized firms where successful BBPs are and (for several more years) may be an important part of the firm's ongoing success.

In Part Two, next month, a look at a model in which a 55 year-old partner who is not an acclaimed rainmaker or litigator, but is well-respected and has excellent technical skills.

The ranks of law firm partnerships include tens of thousands of “baby-boomer” partners (BBPs), born between 1945 and 1955. These attorneys are now ages 50-60. Surprisingly, little has been written about the expectations and needs of BBPs or the expectations, needs and strategies (if any exist) of their law firms and fellow partners as to BBPs. (Your author falls into both camps: he is age 55 and is actively involved in the administration of a large multi-state law firm.) Moreover, law firm partners both younger and older than their BBPs may be substantially affected by their law firm's strategies for and treatment of the baby-boomer generation.

This two-part article illustrates the expectations, intentions – and tensions – of baby-boomers and their firms, respectively, by using two models. Of course, there can be as many variants as there are BBPs, with numerous potential responses to each unique situation.

Let's begin with Model 1, which involves Partner A, a full-share BBP equity partner who is a classic business generator with a substantial clientele in X, a modest or mid-sized law firm. “A” is a litigation lawyer, experienced and respected by A's colleagues and the community. Over the years, A's friends have become A's clients and A's clients have become A's friends; other than business-generating and business-related activities (many of which A enjoys), A has few hobbies or diversions. A is 58, and has given little thought to retirement. Indeed, A resists even thinking about transitioning clients and retirement for the foreseeable future.

A's expectations are as follows:

• To continue to practice law as long as A can;
• To continue being fully compensated for business A brings in. If and when A ever retires, A wants to be adequately compensated for those clients that remain at the firm, which may occur largely as a result of A's personal efforts to transition those clients to younger partners;
• To become a senior counselor and mentor to other firm attorneys (akin to an oracle);
• To reduce A's current work pace by 20%-40% in A's later years with the firm (those “later years” probably being at least 10 years or so off, in A's view), and
• In A's sunset years, to keep a large office with secretarial support, perquisites and other benefits commensurate with someone of A's current status in X.

In sum, A expects to be an important cog in X's profitability and success wheel for many years to come. A expects a soft landing in A's wind-down years (far down the road, A thinks).

X's managing partners have a somewhat different vision of A's sunset years. Although A is currently an admired and profitable attorney, most of A's clients are themselves at an age where they (and possibly their businesses) are or soon will be going through transition. Indeed, many of A's clientele currently in power or control of their businesses may be approaching retirement or planned succession, and in 5 years or so may have a substantially reduced role in their companies' day-to-day operations (including the selection of legal counsel). A's ability to retain those clients (and the loyalty of the next generation of management of those businesses and companies) is by no means certain. Moreover, if A and X fail to make inroads with the next generation of those clients' management, A may find that A's friends/clients have moved on, leaving A (and X) with a greatly reduced client base. X views (and likely will continue to view) A's experience as a litigator to be valuable but not priceless or irreplaceable. X has given little thought to A's expectations or desires, and has not broached the subject of a long-term game plan, including transition, with A. X likely would retain A's services (for the right price) as long as they remain valuable to X. On an ongoing basis X's future compensation will not materially reflect A's prior years' contributions.

X's partners more senior than A have moved toward or into full retirement, but X recognizes that A's situation (like most modest and mid-sized firms) is in some ways different from that of other (older) current or retired partners. X recognizes that for its long-term success, it must continue to be profitable and at least stay competitive with other comparable law firms (while recognizing that firms larger and smaller than X also cut into X's potential client base and market share). So long as A remains profitable to X, A will be welcome as a partner of X; A's competence as a litigator is not currently an issue, and indeed X's prior experience with litigators who preceded A is that some retain their expertise well into their 60's (or beyond).

Some of the questions that A (and other BBPs in somewhat similar situations) and firms like X must consider include the following:

• Has A communicated A's intention to remain on as a partner indefinitely, and if so, under what type of arrangement?
• When does A expect to reduce A's workload and/or go to part-time status? What is X's response to that?
• Does X have a policy, guideline or culture as to when X's senior partners are expected to transition from equity partner to some other status? Has X conveyed that to A? Is there a general understanding between A and X?
• What alternatives does the firm provide for senior partners who no longer meet productivity or performance requirements?

Do they change to fixed share or non-equity partner status? “Of counsel” status? Retired partner status with no further formal affiliation with the firm?

• What is the firm's compensation system, particularly for senior partners in transition?
• Are there prior examples or precedents at X which provide guidance for A's transition?
• Does X and each partner in transition reach an understanding of a transition program sometime prior to its implementation?
• How will X and A best transition clients originated by A to other partners?
• How will X continue to provide incentive to A to help the firm retain A's old clients and generate new clients? Does X's culture establish an expectation that A will be expected to wind down prior to the time A would prefer? If so, is there a risk that A will reject that approach, and either insist on a special arrangement at X or end up going to a competitor firm or opening A's own practice?
• How does X discourage A from leaving the firm before X wants A to leave? Does X provide a meaningful nonqualified retirement benefit, coupled with a restriction on A's ability to practice law elsewhere? If so, is the restriction in compliance with Model Rules of Professional Conduct Rule 5.6 or its equivalent in the jurisdiction in which A practices? See, eg, Sheldon I. Banoff, “NJ Upholds Non-Competition Agreement,” Law Firm Partnership and Benefits Report (June 2004), pg. 1; Sheldon I. Banoff, “Illinois Developments Are Good News for Multi-State Law Firms Across the Country,” Law Firm Partnership and Benefits Report (Nov. 2002), pg. 5.
• Which X attorneys will assist in transitioning A's clients and matters? Will those attorneys themselves be transitioning just a few years later down the road? Are the transitioning attorneys strong enough to retain A's client base? Or are A's clients unique to A's own abilities and personality, and effectively non-transferable to any other X partner?

Obviously, no one solution fits all. Most BBPs do not anticipate full-time second careers outside of law (although some go in-house with a client, in a legal and/or business capacity, and perhaps while retaining some client practice as counsel to the firm). Creative solutions with adequate flexibility are often required, particularly in modest to mid-sized firms where successful BBPs are and (for several more years) may be an important part of the firm's ongoing success.

In Part Two, next month, a look at a model in which a 55 year-old partner who is not an acclaimed rainmaker or litigator, but is well-respected and has excellent technical skills.