1. Confronting the Under-Productive Partner Issue Copyright © 2007 by TAG Academy, LLC and Peter Giuliani. ALL RIGHTS RESERVED. This course material may not be reproduced in any form without the permission of TAG Academy LLC or Peter Giuliani. Exceptions are made for personal research and study by the purchaser. Publications are distributed and programs presented with the understanding that TAG Academy does not render any legal, accounting or other professional services. The contributing authors to this publication have exerted their best professional skills to assure the accuracy of its contents. All original sources of authority presented by this publication, or orally, should be independently researched in dealing with any clients or your own specific legal, financial or business matters. October 19, 2007 Peter A. Giuliani Partner Smock Sterling Strategic Management Consultants Westport, Connecticut pgiuliani@smocksterling.com (203) 341-0601 www.smocksterling.com

2. 2 Under-Productive Partners Who are they? Why do we have them? Why must we deal with them? How can we help them? What do we do if they cant (wont) be helped? How do we prevent it from happening again?

3. 3 Partners whose economic contributions fall below firm standards –Physical/emotional/external issues –Collapse of business base, e. g. Loss of key client End of big case –Drop or disappearance of demand for a unique specialty –Loss of another partner who was key developer Lone wolves and others who are not team players Aging partners who choose to scale back Partners who retired without telling the firm Who are they? IMPORTANT POINT: Do not confuse under-productive partners with counter-productive partners.

4. 4 Why do we have them? External or unforeseen events outside firm control Commoditization; loss to in-house departments Poor partner selection in the first place –Expedient choices –Laterals –Mergers Lack of effective succession planning Firm culture that avoids accountability; laissez faire management Client/business conflicts Practice economics that dont fit firm requirements Etc.

5. 5 Why must we deal with them? Long-term erosion in competitive position of the firm –Reputation for stale capabilities Not fair to productive/committed partners –Greshams Law applied to partnerships Not fair to up-and-coming associates –Clogging the lane Malpractice risks –Risky intake –Lack of attention –Personal distractions Not fair to the under-productive partner Firm economics

6. 6 How can we help them? Retooling/reassignment Formal succession planning Professional counseling Reinforcement of expectations –Business development/practice growth –Service partner responsibilities Realignment of compensation Change of status/alternative career Outplacement with or without career counseling or other assistance Other means, depending on circumstances

7. 7 What do we do if they cant be helped? Temporary punitive compensation measures –May not work if message is unclear –Words, not numbers deliver the message. –Must be applied for short period; not a permanent solution Reasonable time to address issues, then exit agreement if unsuccessful –External/personal/emotional issues –Internal/personality issues or conflicts Creative outplacement –Other firms where partners practice will fit –Referral to client as in-house lawyer –Bench/teaching positions

8. 8 How do we prevent it from happening? Clearly define and communicate partner performance expectations Hold all partners accountable for performance standards In larger firms, engage practice group leaders in the process of partner performance evaluation Require partners to develop practice succession plans when they are in their late 50s Spend time communicating with partners about the message behind compensation decisions Manage

9. 9 Final thoughts for firm managers Good management can and does prevent under-productivity from happening. Therefore, it pays to invest time and money in good management. Good managers are made, not born. Invest in training them and yourself. Compensation, by itself, is a result, not a management tool. You still need to talk to people – early and often. If you dont, they will make up their own messages. Good managers strive to get the best out of people. When that isnt enough, they have to make and carry out tough choices. Most of the time, doing so takes courage. It does get easier with experience, so dont let the first one daunt you.

10. 10 TAG Academy Watch for future announcements of TAG Academy webinars and other training opportunities.