But enough about Gen X and Gen Y.
As urgent as the issues of associate retention can be, with the human costs and the financial repercussions front and center, it’s time to focus on the other end of the generational spectrum: Partners nearing retirement. How do we handle these, both humanely and with economic good sense?
Across the pond, a fine dust-up highlights many of the issues at stake.
For those of you who may not have been following Bloxham v. Freshfields, which just finished playing out before a London employment tribunal, herewith a recap. If your firm hasn’t faced these issues yet, count yourself lucky. And count those days numbered.
As often, the FT has the best coverage. Peter Bloxham is a former bankruptcy partner at Freshfields who claims that Freshfields’ overhaul of its partner pension program effectively forced him to retire last year, at age 54, and accept a 20% discount on the six-figure annual pension he had expected. By contrast, partners aged 55 could retire with the full entitlement. His claim is that, under Britain’s new anti-age discrimination laws, that is impermissible.
Freshfields’ rebuttal is first to simply deny age discrimination was afoot, and second to argue that the changes to the pension plan were justified and proportionate in response to otherwise unsustainable future obligations. Finally, in amelioration, it points to transitional arrangements it allows for partners approaching retirement.
The case was heard for about a week and a decision is expected in a few months’ time.
But to say this has been watched closely by the City firms is a great understatement. Aside from the voyeuristic fascination of hearing about internal partner politics, with senior management on the witness stand (including Guy Morton and Ted Burke), the wider implications of the case are unmistakable.
To begin with, there is assumed to be a fairly large cohort of senior professionals and managers in their fifties and a bit beyond who have both the financial wherewithal and the limited alternatives offering comparable salaries and lifestyles that, together, give an incentive to pursue such claims. The outcome of the Bloxham case will be seen as a bellwether for others waiting in the wings.
Another aspect has to do with a peculiarity of the new British anti-age discrimination law. It’s this: Age discrimination is not illegal per se, but is expressly justified if
it is shown to be "a proportionate means of achieving a legitimate aim." Now, if you think those words are squishy, join the club. What counts as a "legitimate" aim and how that is weighed against the discriminatory impact are, at least until the Bloxham decision comes down, virgin territory.
Stepping aside from the British law and Freshfields’ own pension plan reform scheme, here are the issues this saga highlights for me:
- How do we humanely treat individuals who have given, in many cases, their careers, to a firm but who are now on the declining curve of productivity? What do we owe them?
- Since few if any firms introduced their senior partners to the new world of 401(k)’s and self-guided defined contribution retirement planning in time for those partners to actually take their own future economic well-being in hand, how do we manage the transition to the inevitable? How short is that transition?
- There are senior partners and then there are senior partners. We have the beloved, inspirational, profoundly respected, wise elders handing down orally and by example the finest traditions of the firm and of the profession; and we have the lingerers, the misty-eyed nostalgic, the rusty practitioners. We all know the difference. How do we handle the difference if equity demands disparate treatment and the law may require identical treatment?
Law firms, no less than nations, face intergenerational pressures and the pull and tug of cohorts with different time horizons. We need to simultaneously pave with incentives the path of opportunity for our rising stars and ease the way through the door for those whose contributions primarily lie in the past.
This is equal parts an economic question and one of simple humanity. Our firms will not be competitively robust, and places of intellectually creative ferment for clients, if they are shackled to interminable payment streams for services already rendered. At the same time, senior partners are the embodiment of how we achieved our status today.
Balancing our obligations to the past, and our responsibilities for the future: Never again wonder why you’re paid as handsomely as you are to help run the place.
Update (25 July 2007): A regular reader from the UK writes that in his view it’s important "to ensure that long serving partners are retained as consultants [so that] they may pass on their expertise to the organisation and its staff." He also suggests that their knowledge should be captured within the firm’s knowledge management platform and makes the inarguable observation (which I perhaps did not sufficiently stress in my initial piece) that "How we treat our people at the end of their working lives…demonstrates our values as a caring firm."
He was also kind enough to point me towards an article in The Economist, "Accounting for Good People," describing the efforts of the Big 4 accounting firms to husband their precious professional resources and the knowledge they embody. Among the initiatives they’re undertaking:
- Talent is becoming increasingly scarce (America’s baby boomers are retiring; Europe is chronically greying; and while India and China may have huge numbers of graduates, this "masks [the] low numbers of truly high-quality candidates"). Sound familiar? One answer is:
- To break an old taboo and bring in more outsiders straight as partners.
- Re-hiring "boomerang" former employees, now accounting for up to one-quarter of one firm’s recruits in America.
- Ramping up alumni programs in general, and instilling a sense of loyalty and connectedness.
- Accomodating the career needs of women, although more clearly needs to be done. (Women are half of new hires but barely one-quarter of partners; our own track record is actually worse.)
- Offering more international assignments to attract new graduates.
Intriguingly, the article concludes by mentioning McKinsey partner Lowell Bryan’s new book "Mobilizing Minds: Creating Wealth from Talent in the 21st Century Organization," which purportedly argues that the ideal organizational form would combine elements of the armed forces, a conventional company, and professional services firms. From the armed forces comes delegation to front-line managers to make tactical decisions on the spot; from conventional companies comes the inevitable hierarchy, but with a hard and fast limit of no more than four layers from top to bottom; and from professional services comes an expanded "partner-like" group of senior managers responsible for, among other things, recruitment, retention, and professional development.
Maybe we’re not as organizationally dysfunctional as it sometimes appears.
