Let’s begin with a slightly different perspective on the currently hot area of succession.  When we talk about the need for succession and transition within a law firm, we tend to focus on individuals age 60 and over and their role.  Today let’s focus on one position where a younger partner is more and more likely to find him or her self — Managing Partner. 

Managing partner used to be the final act.  Retirement afterwards was common.  But today we see more and more fifty something managing partners who are ready to step down from that post, having held it for five to ten years.  Still in their 50s, most do not seek to leave their firm or the practice of law.  Yet for many, particularly those who have left the practice for ten years to serve the firm’s interests, the return presents some challenges and questions.  One of those questions is:  “What happens to my compensation?”

The common refrain on this (if there really is one) is one year for every two years as managing partner with up to three years protection of current compensation.  We prefer a slightly more nuanced approach to this:  One year of no downward adjustment from the average of the last three year’s compensation position for each two years as managing partner up to a maximum of three years protection.  Position is different from compensation.  Position considers where the managing partner has been compensated relative to average, top, median and entry level partners.  The protection seeks to maintain the “sustained position” (hence the average of prior three years) as a floor for compensation of the managing partner during the post-managing partner protection period.  It does allow for the compensation to go down if the overall profitability of the firm declines, which we hope many would find a reasonable position.

But when a specific program is being developed, the common refrain or even my twist on it becomes a bit tricky unless the firm just wants to provide an unencumbered entitlement to the departing managing partner (which may be fine as well, if it is deliberate).  We believe there is a more fundamental question:  ”What do you do with a managing partner, when he stops being a managing partner?”.  The answer to that guides you on the answer to the program specifics.  And the answer to our question is driven by a number of variables: firm size, incumbent age, firm governance charter, practice area, clientele and the like.  What might make sense for the 70 year old managing partner of a ten partner firm who is retiring at the end of term may make no sense for the fifty year old managing partner who after ten years as managing partner of a two hundred partner firm is very much interested in returning to the practice of law.

• So it is helpful to engage in a dialogue about the following. The exact wording and scope will vary depending on the answers (some of which may already be well known by all parties).
• Is this for someone about to step down or is a new candidate requesting this before signing on for the job?
• How old is this person?
• How long has the managing partner been in the position?
• Was the position full-time (turn over of client relationships and cease practicing law)?  If not, how much did the managing partner position intrude on practicing law, business generation and market presence?
• What kind of practice and client following did this person have?  How permanent was the relationship transfer?
• How visible was the position in the market (i.e. did it have a high-profile public CEO face or was it more of an internal COO orientation)?
• What is the role of an ex-managing partner upon leaving the post (is there any transition, formal or otherwise expected of this person)?
• What kind of compensation program is used for the general population of partners?
• What compensation program is used for the managing partner position?
• What does this person want to do – We know the managing partner often says that he/she wants to return to the practice of law, but there are varying degrees of that statement and it helps to understand what each aide is thinking.

The best program is one that works to meet the managing partner and firm’s interests and considers the challenges and timeframes to transition from the formal leadership role of managing partner into the next role — whatever that may be.

This entry was posted on Tuesday, October 16th, 2007 at 7:48 am and is filed under Partner compensation. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.