Don't be too tolerant when dealing with problem partners

At the heart of the so-called partnership ethos, which underlies the traditional partnership relationship and which the members of most LLPs are keen to preserve, lies a philosophy that partners should be mutually tolerant and supportive of each other.

Historically, this has meant that partners have not been ejected from their firms at the first signs of underperformance or other unacceptable behaviour. With ongoing recessionary pressures, firms have had to become less tolerant than they once were, but still the tendency to ignore or excuse poor behaviour is rife.

All too often, partners are heard to say: “Well we know partner X made his secretary cry, but he has always been like that. What is important is that he brings in the bills”.

We live in an age where junior partners and staff are increasingly aware of the protections afforded to them by discrimination and employment laws and are no longer quite so reluctant to use them. A partner prone to abusing staff may represent a ticking time bomb for the firm, which it will ignore at its peril.

Partners don’t change

It is a sad fact that, despite the recent vogue for coaching, a problem partner’s behaviour will rarely change in the long term. Many promises are made and, however much coaching and mentoring they may receive, established patterns of behaviour tend to reappear over time.

Firms which believe otherwise are naïve and likely to face disappointment or worse. Unless they confront a problem partner, they will be back to dealing with him within six months, by which time the situation will be more serious.

Appraisals

When addressing the issue of how to deal with a problem partner, the first question will usually be whether his underperformance or other conduct has been raised with him.

It is not uncommon to find that the other partners ducked the issue, to avoid arguments and a bad atmosphere. From one point of view this is understandable, as many problem partners are litigators who are not wont to hold back from a counter-attack when criticised.

More seriously, this hands-off approach will also have been carried through into the firm’s appraisal system, so that the problem partner can point to a series of laudatory appraisals which show no hint of concern as to the most unacceptable facets of his behaviour.

Crisis point

Sooner or later, of course, the firm will be unable to avoid facing up directly to the impending crisis which the problem partner represents. On the assumption that coaching has been tried and failed or is regarded as pointless, the only real option may be to part company with that partner.

Unless a ‘voluntary’ retirement can be negotiated (always the preferred course), it will often be necessary to resort to a compulsory retirement (otherwise known as no-fault expulsion) under an express power in the agreement. This will usually entail a partnership vote and the voting threshold for removal may have been set at a high level.

The immediate question will then be: can we achieve the required majority? If the problem partner can point to a series of uncritical appraisals and a complete failure on the part of management to raise any matters of concern with him, the attitude of the general body of partners may be unpredictable.

A failed attempt to remove a problem partner is unthinkable and may have serious long-term implications for the whole firm.

The solution

I am not advocating taking partners to task every time there is a minor infraction nor keeping a running record of all their misdemeanours. But, when a potential problem partner has been identified (and the firm’s management will be best placed to do this), his behaviour should be kept under informal review.

Any genuine concerns should be recorded and promptly raised with the partner in question, not merely swept under the carpet and ignored. When the need for positive action has already arisen, it is too late for regrets.

The position may be even more difficult if an LLP conversion has taken place or a new partnership/LLP agreement has been introduced at a time when management or the other partners already knew there was a problem partner in their midst. After all, they went forward with their eyes wide open and affirmed that partner’s status, warts and all.

rciab@partnershipcounsel.co.uk