Why most law firms fail at resolving partnership disputes

I have seen a number of law firms locked in silent and lethal disagreement between co-owners for years.

You spend all day solving problems for your clients. You are doing good work and are well respected. But deep down you know that your law firm isn’t thriving. You have tried to address it but your partners either don’t see the problem or can’t agree on what to do.

Sound familiar?

If you are serious about addressing conflict between the co-owners of a law firm then you need to stop thinking in terms of winners and losers. Unless the conflict is addressed, you will all lose as the business stagnates.

Causes of conflict in law firms

There are some common causes of unacknowledged conflict between co-owners of a law firm (whether partnership or ILP).

It may be:

  • Under performance (actual or perceived)
  • A belief that someone is no longer suited to the firm
  • A lack of ability to rise to the challenge of growing
  • A struggle adapting to external change, putting pressure on a traditional source of work
  • A belief that a non-financial contribution to management or past rainmaking contribution is being undervalued

Whatever the cause, it’s common for people to become entrenched in self justification of their own behaviour. It’s all too easy to just avoid controversial topics and bury yourself in day-to-day work, desperately hoping that something will change.

Sometimes simmering tension is brought to a head – whether through a discovery of misconduct, a serious complaint by a client, or accusation of inappropriate conduct by an employee.

The discovery of objectively unacceptable conduct can make it easier to finally draw a line. Saying “I can’t work with someone who harasses staff” is much easier than “I can’t work with someone who doesn’t know what Bitcoin is”.

But underlying both complaints is a divergence of values. A lawyer who is unfamiliar with Bitcoin is demonstrating they don’t value adapting for the future.

Importance of shared values

Numerous studies have shown that organisations who share common values and are purpose-driven significantly outperform their competitors . It is also fundamental to a successful organisation to have the right people in the team. Working with people who don’t share your values will create constant aggravation and perpetual conflict.

“In fact, leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats” Jim Collins, Good to Great.

The key to resolving disputes

Most business owners first sit down together to try to address conflict. But that approach is usually doomed to failure.

As a lawyer you are an expert at identifying solutions to complicated issues for your clients – but it can be very hard to be objective about your own conduct.

Each person is burdened by deep-seated anxiety about their own self worth, financial security and reputation. When the conflict has been long standing, there can be a maze of hurt feelings, misunderstandings and assumptions to unravel.

You need an external person to work past the petty complaints and reveal the core issues. When you have been nursing grievances and rationalising your own behaviour, you need an objective voice to help shift perspective.

Where there has been a dominant personality in the mix, an external adviser can help address the imbalance in bargaining power, allowing everyone to feel heard and to overcome distrust and defensiveness.

You need to be realistic about timeframe. One meeting is probably not enough time to work out a lasting solution – genuine dispute resolution is a process that takes some time.

An ultimatum might seem like a quick way to bring things to a head, but it will inhibit the cooperation needed for constructive dialogue. It is essential that once the conversation gets started, it continues to a mutually acceptable resolution.

Involving an external adviser will ensure that you keep talking until there are no loose ends and can improve the chance of resolving disputes without resorting to expensive court cases.


Disputes about one co-owner leaving are often prolonged by arguments over value of the legal practice. It is all too easy to over-value your interest in a firm you worked so hard to grow. Involving accountants and valuers can easily blow out the cost of a dispute.

One way to minimise the potential for expensive and prolonged disputes is to have a shareholders (or unitholders) agreement which provides that a majority can ask a minority to leave without a pay out for their interest in the firm.

Bottom line

Unacknowledged and unresolved conflict between co-owners can cripple law firms in an increasingly fast-changing environment. It is hard to force difficult conversations but they are essential for a successful long term business.

Don’t try to resolve deep seated conflict alone, bring in an independent adviser who has the skill and experience to facilitate a constructive long term solution.

Fiona McLay is Special Counsel at Harris Freidman Lawyers and has over 20 years litigation experience. She frequently helps business co-owners navigate disputes over breaking up their business. Read more at www.harrisfreidman.com.au, on twitter @BreakupBusiness or Instagram @breakupbusinesslawyer.

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