The legal profession is not accustomed to being on the front page of the business section. Earlier this month, the partners of Heenan Blaikie LLP announced that they had voted to dissolve their firm. The death of Heenan Blaikie is largely attributable to the migration of top lawyers to other firms.
Sometimes, however, law firms force the departure of some of their most skilled people. In January, three prominent partners from Blake, Cassels & Graydon LLP made waves by deciding to join rival firms. They did so to avoid compulsory retirement at age 65.
The issue of mandatory retirement is likely to cause more movement, and more friction, in the legal industry in the years ahead. Baby boomer demographics have had a huge effect on how we perceive age and the workplace. Twenty five per cent of practising lawyers will be 65 or older in 2014, according to U.S. projections.
Sixty-five is not as old as it used to be. Good physical and mental health makes the prospect of retirement unattractive for many people in their 60s. Many enjoy what they do, are as sharp as ever and find daily golf a boring substitute. They have invested much of their energy over the past 40 years on their law practices and haven't developed interests as compelling as the thrill of their work. For many, working past the age of 65 isn't about money, but about continuing to be engaged.
For law firms, mandatory retirement is a Catch-22. Forcing out the major fee earners is bad for total revenue, especially when there are plenty of competing firms that welcome these very productive lawyers into their partnerships. On the other hand, how does a firm attract and retain rising stars without being able to make room for them by requiring older stars to leave? The result is a growing intergenerational tension. Younger talents want their turn to lead, while many established lawyers feel as vital as ever and believe they have the experience, wisdom and energy to continue to be productive.
To further complicate the issue, mandatory retirement, even for partners, has been challenged in the courts and may be considered age discrimination. The Supreme Court of Canada has just heard an appeal of a decision of the BC Court of Appeals, and may agree with a B.C. lawyer that ending his time as partner at 65 was age discrimination. The American Bar Association has called on firms to end their retirement policies.
Forcing individuals out at 65 is illegal in most occupations, so permitting it for lawyers sounds like discrimination. However, law firms argue that the partnership model is not "employment;" partners knew the rules when they joined. If all law firms, or at least all of the major firms, were to practise compulsory retirement, individual lawyers would have no choice but to comply.
So what are some of the takeaways from the current turmoil?
At a minimum, the legal industry needs to revisit mandatory retirement policies. The important and difficult question, however, is how to make room for new rising stars without forcing partners out at some pre-determined age.
The problem is that partnerships are collectives that rely on reaching consensus. (Heenan's demise, while not related to the issue of mandatory retirement, is a reminder of how fragile such partnerships can be when consensus breaks down.) Corporations like IBM and General Electric Co. don't run like that; they treat people as individuals. Some businesses part company with the bottom 10 per cent of staff each year. The employee's contribution is always being evaluated.
One possibility is for law firms to act more like these companies and to use performance measures to help determine who stays and who doesn't. That would help create room for new leaders to emerge without forcing out high performers who happen to have reached 65.
Law firms are well known to be ruthless in eliminating underperforming interns and new employees. But in Canada, there is little culling of partners. Perhaps all partners should not be treated equally; partnership should not be a guarantee of lifetime employment. We all know that some people like to work, and can, sometimes to the age of 80 and beyond. They want to keep working, learning and mentoring and have tremendous knowledge to share. But some people don't want to continue working, or want to but cannot sustain a high level of performance.
As an organizational psychologist, I find that many hard-driving Type A's fear retirement because they worry it will bring a personal vacuum. Forcing them to leave seems like a missed opportunity for their firms. The current way of treating law partners who reach "retirement age" is inefficient and, ultimately, inequitable. That's bad for both the firms and bad for individuals, not to mention the implications for society.
Eva Klein is a professor at McMaster University and teaches compensation at the DeGroote School of Business