Millennials' emergence as a prominent demographic has highlighted the need for many workplaces to prepare for a generational shift. Law firms are no exception, particularly those founded by dynamic Baby Boomer rainmakers. If firms are going to survive and thrive, they must think about how to transfer management and primary client relationship responsibilities from senior partners to their younger colleagues. In other words, law firms need to engage in comprehensive and formal succession planning.
Advantages of Succession Planning
Despite the growing wave of Baby Boomers nearing retirement, it is not unusual for succession planning to fall through the cracks at many businesses, including law firms. Some firms are too consumed with drumming up and servicing clients to spare the time or effort. At others, partners may resist such planning, fearing it signals instability to clients and staff, or believing it will happen organically as younger attorneys climb the ladder and join partners in the ranks.
These reluctant partners might feel differently once they see a breakdown of firm revenues. When they realize the amount of revenues tied to certain clients who are serviced only by senior attorneys, they may be more open to the need for succession planning. The risk of losing clients due to the departure of "their" attorneys jeopardizes the remaining partners' bottom lines.
Those bottom lines are also threatened when talented mid-level or young attorneys leave the firm. A succession plan may boost retention of these individuals; in the absence of clear planning, these attorneys may have doubts about the future of the firm, including their futures with it.
One other reason to succession plan? If you do not, your clients might do it for you. If clients do not see younger attorneys pitching in, they may grow concerned. If, for example, a business client has been sending an aging senior partner 20 matters every year, it could reduce that load to three or four, sending the rest to another firm seen as more vital and cutting edge.
Tips for an Effective Succession Plan
So, what should you do if your firm is without a succession plan for your senior partners? Here are tips on how to begin:
- Start Now
An effective succession plan should already be in place before succession is needed. Do not wait until the long-time partner's departure is imminent.
- Include Provisions for Emergencies
Unfortunately, law firms do not always have lead time; partners can pass away or become disabled unexpectedly. Account for these possibilities in your plan.
- Secure Buy-in from Partners
It is no surprise that powerful partners can find it uncomfortable (or offensive) to think about life after they leave the firm they have devoted much of their lives to for years. They might resist transferring power, or, worse, undermine their successors. They may need convincing that succession planning is the best way to preserve their legacies. One way to start is by involving them in the selection of their successors. Offer them different status (for example, emeritus, of counsel or semi-retirement) that allows them to stick around without the hassles that can come with full partnership.
- Prolong the Transition
Experts advise firms to allow five years for smooth hand-offs of client business and wind-downs to retirement.
Alternatives to Succession Planning
It may sound counterintuitive, but not every law firm needs a succession plan. For example, a law firm losing multiple partners or its founding partner could be better off merging with another firm. Or, a law firm may sell its practice, or areas of its practice — including goodwill — if the firm satisfies certain conditions under the American Bar Association's Model Rules of Professional Conduct Rule 1.17 (and similar state bar rules). Finally, as unthinkable as it might seem, some firms might consider simply closing shop.
A law firm contemplating the loss of significant leadership needs to take a realistic look at its place in the market. Does it have a lucrative niche in which to compete? Do the remaining partners like each other and work well together? Or is the firm ill prepared to deal with the changing legal landscape, with some partners already phoning it in and long-brewing resentments beginning to boil over? When such questions are answered honestly, it could turn out that the firm has no good reason to stay afloat.
Start Planning Now
With advance planning, law firms can dramatically increase the odds of successful transitions as senior partners head out the door. Take note, however, that succession planning is an ongoing process, with adjustments made as necessary when the firm, its clients and their respective industries undergo change.
Sidebar: Replacing a Managing Partner
The retirement of a managing partner generally is more significant than other departures. As with the replacement of other partners, however, the transition from one managing partner to another should be progressive, where possible. Over time, the departing attorney can shift decision making and other power to the successor, until they naturally reside there when the departure finally occurs.
It is usually best to look inside for a successor to the managing partner. Successors brought in from outside the firm may be eminently qualified but still have a hard time breaking through. This is especially true in firms with strong cultures, where they can have a hard time shaking the "outsider" label.
That said, do not select internal successors solely on the basis of rainmaking ability. Rainmaking and management are very different skills, and success in one area does not necessarily translate to success in the other. "Management material" for a law firm means possessing demonstrated legal, leadership, management and client relations skills.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.