Successful Succession Planning For Law Firms

Succession planning is one of those management issues that rarely gets much attention until a senior partner or rainmaker announces plans to leave or retire ' and then the firm goes into crisis mode.

A smart law firm will plan for a broad spectrum of issues associated with the departure from practice by senior-level partners before that crisis occurs. These issues may include: client service and client relationships, practice skills and expertise, firm governance and leadership roles, functional management roles, and experience. Many of these issues are long-term in nature. It can take years or decades to build new client relationships, replace outgoing expertise and develop new people for key governance roles.

A Difficult Subject

Because most lawyers routinely consider the long-term perspective when counseling their clients, one would think that taking the long view would come naturally to them when contemplating their own firms' future. Not so. Many firms do little in the way of long-term succession planning from management, practice and client-service perspectives. Even law firms that have broached the financial aspects of retirement planning may avoid an expanded view of succession planning.

Individual lawyers also tend to avoid thinking of retirement planning because it is uncomfortable or leads to uncomfortable issues. Many lawyers believe they will practice until the day they die. In reality, most are likely to experience a gradual reduction in time or energy devoted to practice. Or, as studies show, the onset of illness or disability may alter an individual's plans.

Law firms are just as prone to collectively avoid the subject as individuals. If a senior partner alludes to his/her plan to work actively until retirement, no one wants to tell him or her to delegate, ease up or slow down in advance of that date.

Such issues can be even more excruciating in small and mid-sized firms because the issues seem so personal. It's not a policy decision, it's telling a friend and colleague that it's time to plan to “hang up his/her spurs.”

Planning for Succession Planning

For the preceding reasons, firms of all sizes should seriously consider establishing a broad-based, formalized view of succession planning. Properly formulated, the approach itself may make it easier to broach sensitive subjects, using planning methodology and long-term planning horizons.

Using a long-range-planning protocol, the implications of a senior lawyer's phase-down or retirement can be identified and translated into critical planning areas. For example, using a planning horizon of five to 10 years, a firm's thinking should include the effects on:

• Substantive legal expertise and range/blend of specialties;
• Client retention;
• New business development;
• Firm management and leadership;
• Practice/departmental management and leadership; and
• Profitability and cash flow.

Legal Expertise. Advanced training may require many years. One or more lawyers should receive active, high-level mentoring in anticipation of a particular partner's retirement. Because not all lawyers are interested or adept at training, the firm may need to provide incentives to partners to mentor more junior lawyers or provide junior lawyers with particular substantive training to make it happen.

If a senior lawyer approaching phase-down has a blend of specialties that is unique to the firm ' for example, a corporate lawyer who specializes in tax matters – the firm may need to consider adding a lawyer, in addition to training.

Client Retention. All client transitions are not created equal. Depending on the relationship, transitioning lawyers should consider the following planning approaches to client retention:

Clients that can be transitioned relatively easily. In such situations, one meeting may be all that is necessary. At the meeting, the transitioning lawyer should say to the client, “Here is Joan Smith, an experienced lawyer who has been with our firm for many years, and in whom I have complete confidence. You'll be in good hands. And of course, if you have any questions that I can help with, I'll be available during the next two years”.

Clients that are perceived to be ultimately amenable to a transition to another lawyer or lawyers in the firm but that will require some time to feel comfortable. In these instances, it is important for the transitioning lawyer and the firm to begin the process earlier rather than later. That way, if there is initial resistance, or if the chemistry between client and the “new” responsible lawyer is problematic, the ongoing relationship may still be salvageable.

Clients that identify so closely with the transitioning lawyer that it may be difficult to achieve a new ongoing relationship, even over time. In such circumstances, it is important to identify the elements of the client's reliance on the particular lawyer and then seek to replicate those elements with another highly qualified lawyer or team.

New Business Development. The stature, ability, and drive to develop new business are a precious combination. With the range of styles, contacts and abilities of many rainmakers, it may not be accurate to state that these can be “replaced.” Nevertheless, firms need to: 1) anticipate the sometimes major changes that can result from the retirement of a principal business developer; and 2) develop (generally) long-range plans to retain the contacts, the clients, the abilities and even the vitality, that is departing the firm. Retention of contacts and clients can be approached using the client-retention strategies described above.

Firms should strongly consider ongoing training of lawyers in professional marketing and business-development techniques to achieve maximum marketing strength and know-how at an institutional level. Done properly by experts knowledgeable about law firms and their clients, such training can also impart the philosophies and vitality necessary to really make business development happen in the firm.

Firm Management and Leadership. Because senior-level partners tend to be centrally involved in management, law firms should consider managerial gaps that may occur when a senior lawyer leaves the firm. Training, outsourcing and/or acquisition of knowledge and skill-sets may be critical. For example, in a situation where the outgoing senior partner is also the chief financial officer, there may be a need for lawyer financial-management training, elevation of the legal administrator's role and/or greater reliance on input from the firm's accountant.

The many tangibles and intangibles comprising leadership are more difficult to address in assessment and planning. Law firms may be appropriately concerned that a retiring senior partner's leadership will be sorely missed and, in that sense, irreplaceable. This may be increasingly acute with smaller firms.

While the planning protocol is not a magic wand, the process can help firms assess and deal with the change. In addition, the awareness generated during the planning may help to identify others able to assume greater leadership roles, some of whom may not step forward without being asked.

Practice Management and Leadership. Generally, the same planning approach as that described above can be applied to management and leadership in practice management.

For assessment and planning, it helps to define the scope of law firm practice management, which can cover a broad area including: professional responsibility and ethics, client service, client acceptance procedures, case administration, work distribution and allocation, delegation and supervision of legal work, recruiting, orientation and training (including continuing legal education) of lawyers and paralegals, performance-evaluation systems for associates, peer-review systems for partners, use of specialties, plus, training in any of the above disciplines.

A senior lawyer who is a strong practice manager may continue to contribute to the firm during a phase-out, or less often after retirement, in an of counsel capacity. For example, if the senior lawyer is gifted at training associates, he/she may be able to contribute in a reduced role through training.

Profitability and Cash Flow. Obviously, it is important for law firms to anticipate the impact of departing lawyers on profitability and cash flow. Depending on circumstances, this may not require long-range planning. Exceptions would likely include small firms, where the proportion of revenues and expense sharing would be dramatically affected.

Conclusion

Law firms, like other organizations, can benefit from an expanded view of succession planning. Planning can greatly assist a firm in addressing the major gaps that may occur from the phase-down and retirement of key senior members.

The formulation of strategies that address these gaps will not only ensure the firm's success as its personnel changes, but will also create an environment in which it is far easier to broach the subject to aging partners.

Succession planning is one of those management issues that rarely gets much attention until a senior partner or rainmaker announces plans to leave or retire ' and then the firm goes into crisis mode.

A smart law firm will plan for a broad spectrum of issues associated with the departure from practice by senior-level partners before that crisis occurs. These issues may include: client service and client relationships, practice skills and expertise, firm governance and leadership roles, functional management roles, and experience. Many of these issues are long-term in nature. It can take years or decades to build new client relationships, replace outgoing expertise and develop new people for key governance roles.

A Difficult Subject

Because most lawyers routinely consider the long-term perspective when counseling their clients, one would think that taking the long view would come naturally to them when contemplating their own firms' future. Not so. Many firms do little in the way of long-term succession planning from management, practice and client-service perspectives. Even law firms that have broached the financial aspects of retirement planning may avoid an expanded view of succession planning.

Individual lawyers also tend to avoid thinking of retirement planning because it is uncomfortable or leads to uncomfortable issues. Many lawyers believe they will practice until the day they die. In reality, most are likely to experience a gradual reduction in time or energy devoted to practice. Or, as studies show, the onset of illness or disability may alter an individual's plans.

Law firms are just as prone to collectively avoid the subject as individuals. If a senior partner alludes to his/her plan to work actively until retirement, no one wants to tell him or her to delegate, ease up or slow down in advance of that date.

Such issues can be even more excruciating in small and mid-sized firms because the issues seem so personal. It's not a policy decision, it's telling a friend and colleague that it's time to plan to “hang up his/her spurs.”

Planning for Succession Planning

For the preceding reasons, firms of all sizes should seriously consider establishing a broad-based, formalized view of succession planning. Properly formulated, the approach itself may make it easier to broach sensitive subjects, using planning methodology and long-term planning horizons.

Using a long-range-planning protocol, the implications of a senior lawyer's phase-down or retirement can be identified and translated into critical planning areas. For example, using a planning horizon of five to 10 years, a firm's thinking should include the effects on:

• Substantive legal expertise and range/blend of specialties;
• Client retention;
• New business development;
• Firm management and leadership;
• Practice/departmental management and leadership; and
• Profitability and cash flow.

Legal Expertise. Advanced training may require many years. One or more lawyers should receive active, high-level mentoring in anticipation of a particular partner's retirement. Because not all lawyers are interested or adept at training, the firm may need to provide incentives to partners to mentor more junior lawyers or provide junior lawyers with particular substantive training to make it happen.

If a senior lawyer approaching phase-down has a blend of specialties that is unique to the firm ' for example, a corporate lawyer who specializes in tax matters – the firm may need to consider adding a lawyer, in addition to training.

Client Retention. All client transitions are not created equal. Depending on the relationship, transitioning lawyers should consider the following planning approaches to client retention:

Clients that can be transitioned relatively easily. In such situations, one meeting may be all that is necessary. At the meeting, the transitioning lawyer should say to the client, “Here is Joan Smith, an experienced lawyer who has been with our firm for many years, and in whom I have complete confidence. You'll be in good hands. And of course, if you have any questions that I can help with, I'll be available during the next two years”.

Clients that are perceived to be ultimately amenable to a transition to another lawyer or lawyers in the firm but that will require some time to feel comfortable. In these instances, it is important for the transitioning lawyer and the firm to begin the process earlier rather than later. That way, if there is initial resistance, or if the chemistry between client and the “new” responsible lawyer is problematic, the ongoing relationship may still be salvageable.

Clients that identify so closely with the transitioning lawyer that it may be difficult to achieve a new ongoing relationship, even over time. In such circumstances, it is important to identify the elements of the client's reliance on the particular lawyer and then seek to replicate those elements with another highly qualified lawyer or team.

New Business Development. The stature, ability, and drive to develop new business are a precious combination. With the range of styles, contacts and abilities of many rainmakers, it may not be accurate to state that these can be “replaced.” Nevertheless, firms need to: 1) anticipate the sometimes major changes that can result from the retirement of a principal business developer; and 2) develop (generally) long-range plans to retain the contacts, the clients, the abilities and even the vitality, that is departing the firm. Retention of contacts and clients can be approached using the client-retention strategies described above.

Firms should strongly consider ongoing training of lawyers in professional marketing and business-development techniques to achieve maximum marketing strength and know-how at an institutional level. Done properly by experts knowledgeable about law firms and their clients, such training can also impart the philosophies and vitality necessary to really make business development happen in the firm.

Firm Management and Leadership. Because senior-level partners tend to be centrally involved in management, law firms should consider managerial gaps that may occur when a senior lawyer leaves the firm. Training, outsourcing and/or acquisition of knowledge and skill-sets may be critical. For example, in a situation where the outgoing senior partner is also the chief financial officer, there may be a need for lawyer financial-management training, elevation of the legal administrator's role and/or greater reliance on input from the firm's accountant.

The many tangibles and intangibles comprising leadership are more difficult to address in assessment and planning. Law firms may be appropriately concerned that a retiring senior partner's leadership will be sorely missed and, in that sense, irreplaceable. This may be increasingly acute with smaller firms.

While the planning protocol is not a magic wand, the process can help firms assess and deal with the change. In addition, the awareness generated during the planning may help to identify others able to assume greater leadership roles, some of whom may not step forward without being asked.

Practice Management and Leadership. Generally, the same planning approach as that described above can be applied to management and leadership in practice management.

For assessment and planning, it helps to define the scope of law firm practice management, which can cover a broad area including: professional responsibility and ethics, client service, client acceptance procedures, case administration, work distribution and allocation, delegation and supervision of legal work, recruiting, orientation and training (including continuing legal education) of lawyers and paralegals, performance-evaluation systems for associates, peer-review systems for partners, use of specialties, plus, training in any of the above disciplines.

A senior lawyer who is a strong practice manager may continue to contribute to the firm during a phase-out, or less often after retirement, in an of counsel capacity. For example, if the senior lawyer is gifted at training associates, he/she may be able to contribute in a reduced role through training.

Profitability and Cash Flow. Obviously, it is important for law firms to anticipate the impact of departing lawyers on profitability and cash flow. Depending on circumstances, this may not require long-range planning. Exceptions would likely include small firms, where the proportion of revenues and expense sharing would be dramatically affected.

Conclusion

Law firms, like other organizations, can benefit from an expanded view of succession planning. Planning can greatly assist a firm in addressing the major gaps that may occur from the phase-down and retirement of key senior members.

The formulation of strategies that address these gaps will not only ensure the firm's success as its personnel changes, but will also create an environment in which it is far easier to broach the subject to aging partners.