Clifford Chance reviews underperforming partner arrangements

Clifford Chance is planning to abolish an arrangement that allows underperforming partners up to a year’s grace before they are forced to leave, in a move aimed at allaying the negative cultural impact of axing partners.

The magic circle firm’s partnership council has agreed to scrap the ‘improvement’ period of between nine and twelve months that currently exists for partners who have received a formal performance warning from management. The new policy could also enable the firm to remove members from the partnership quicker.

At the same time, it plans to extend the termination period that the firm currently gives partners who are asked to leave, from 14 days to at least three months.

Under the existing scheme, global managing partner David Childs or an office managing partner can issue an underperforming partner with a warning that gives him or her between nine and 12 months to improve. If the firm still is not satisfied at the end of this period, it can dismiss the partner by issuing him or her with a 14-day termination notice, after which the partner leaves.

The firm said in a statement: “From time to time the firm reviews all of the policies in the partnership agreement. At present we are consulting with partners on possible changes to how partner performance is managed to bring the firm into line with best practice elsewhere in the industry.”

Clifford Chance plans to replace the improvement period with a longer termination period of at least three months, with a partner then potentially serving the usual six-month notice period for members who are leaving.

Partners who are issued with the three-month termination notice and then serve the full six-month notice period will in practice not be out of the door much faster than under the current scheme. However, the new setup would give the firm the opportunity to remove members from the partnership quicker, as the old scheme could potentially have led to a year and 14 days passing between the warning and the final exit.

One partner told The Lawyer the plans are less about getting rid of underperforming partners faster and more about the cultural benefit of shortening the period during which partners are fully-fledged members but are under a formal performance warning. The new scheme would scrap this limbo period, but it is understood that an option under consideration would allow partners who are issued with a termination notice to opt for the old improvement period instead.

The partner said: “What it changes is it gives another mechanism which is a better and less destructive mechanism for getting a partner to go. Having people in an organisation who are not at all positive about the organisation is destructive.”

Clifford Chance has said that it is not planning to axe partners as part of a restructuring as it did in 2009 (4 February 2009). However, a firm spokesperson said it does “continue to manage performance across the firm, as we have always done, including amongst our partners”, and it is understood that it has been doing this actively recently.

The partnership council informed partners about the plans in a memorandum last month that asked for feedback as part of a consultation. It is thought that the changes, if finalised, could be in place by the summer. The firm is also separately looking at its appraisal scheme as part of the process.

A partner said the changes do not require a partnership vote because they are a policy issue rather than a change to the partnership deed. The current partnership agreement makes explicit reference to the 14-day termination period but not to improvement warnings.