Even when amicable, the breakup of a partnership can quickly come off the rails if it is not meticulously planned, carefully executed, and negotiated with diplomacy and goodwill. To ensure a smooth transition, all parties must communicate openly to resolve a wide range of issues, including legal and financial settlements; client, project, and staff allocation; and messaging to clients.
Discuss the Reasons for Separating
First and foremost, firm partners should be clear on the grounds for splitting up. “I like people to get a big picture so they don’t lose the underlying reasons [for why they are going through the process] when they start getting caught up in the details,” says Peter Piven, FAIA, principal consultant of Peter Piven Management Consultants, in Philadelphia. He advises establishing a detailed vision for life post-separation.
Consult an Attorney Immediately
A lawyer can help translate provisions in the original business contract that address departures or firm dissolution. According to Brad Tomecek, AIA, principal of Denver-based Tomecek Studio Architecture and former co-founder of Studio H:T, having such a provision in his previous firm’s bylaws was “the silver lining, so we didn’t find ourselves in a situation of, ‘What are we going to do?’ ” In the case of one partner leaving a practice, both Piven and Larry Gainen, a founding partner of New York–based law firm Ingram Yuzek Gainen Carroll & Bertolotti, recommend that the departing leader speak to an attorney independent of the firm to avoid any conflict of interest.
Establish a Robust Agreement
Having a comprehensive agreement in place will minimize problems later on. Work with an attorney to make sure the agreement “reflects the nature of your firm and partner relationship,” says Dan Maginn, FAIA, principal of Draw Architecture + Urban Design in Kansas City, Mo., who left El Dorado in February. “It’s never too late to do a partnership agreement or redo an existing one,” says Warren Friss, also a partner at Ingram Yuzek. Avoid contract templates and boilerplate text. Also important is a buy–sell clause.
Develop a Sunset Plan
Whether winding down a firm or a partner role, Maginn recommends “design[ing] the transition from beginning to end.” Tomecek suggests developing a sunset plan that prioritizes “all the necessary discussions,” from transfer of contracts and division of assets to assignment of rights to projects completed by the firm and attribution. Attach a timetable to the plan, and as decisions are made, Gainen recommends “memorializing” them in a termination agreement.
Transitioning clients and ongoing projects will require open and honest communication, as well as a desire that all parties “come out with their fair share,” says Michael Farewell, FAIA, principal of Princeton, N.J.–based Farewell Architects. If the partners work in separate markets with little or no overlap, client allocation may be more apparent but should still be decided unanimously. If firm leaders cannot reach an agreement on a client, designate a separation date after which a departing partner or the partners may solicit them, Gainen says. Clients ultimately reserve the right to work with whomever they so choose.
Notify Clients and
Firm leaders must decide whether all partners will be present to tell the clients or if the partner with the working relationship makes the call. A consistent message should be agreed upon and delivered to reassure clients that their projects will not be negatively affected. Clients should be informed soon after staff notification to prevent them from hearing the news from a third party.
“All staffing issues should be on the table,” says Hadrian Predock, principal at Hadrian Predock Architecture in Los Angeles, and former co-founder of Predock Frane Architects, which disbanded in August. Employees often sense that change is afoot prior to the formal announcement, so inform them as soon as a sunset plan is in place. If embarking on a new business, “you're trying to protect its viability, which means having good employees,” Gainen says. “You don’t want key people leaving to work elsewhere.” Exercise “diplomatic care” because “you’re dealing with people’s emotions and expectations,” Farewell says. And, as with clients, recognize employees have the last say on choosing to work with whomever they wish.
Consider Hiring an
A management consultant can guide a firm through the process, especially its thornier aspects, while a public relations specialist can help craft messaging and a media plan. When Maginn left El Dorado, not only was a public relations expert involved, but both firms had the opportunity to review a draft of the press release before it was issued. “I truly believe change is good but messages can be easily interpreted in different ways,” he says. “So you have to get on top of that.”
A myriad of issues also require resolution, including firm finances, loans, liabilities, and office leases, which may or may not be terminated during a separation, Gainen notes. Some leases are difficult to break, resulting in former partners temporarily cohabiting a space. Untangling a partnership can take a year, say both Farewell and Maginn. And even when the split is friendly, there may not be immediate agreement on everything. After the separation, things such as lingering contracts may still have to be addressed. According to David Dowell, AIA, a principal at El Dorado, having a history of honest communication among partners helped ease the departure of Maginn, who cofounded the firm. Equally important, Dowell says, is acknowledging that separation “is part of life and it’s going to happen at some point.”