Succession Planning

Classify Clients

Transitioning clients can be time-consuming and expensive. An effective first step in the transition process is to classify a retiring partner's clients: evaluate benefits vs. cost, special needs of each client, and other considerations such as status of the current relationship. By taking the time to categorize the retiring partners' clients, you'll be in a better position to determine the successor partner. Generally, all clients can be sorted into three categories.

A “Tier 1″ client is among the retiring partner's biggest, most profitable clients. You'll want to put the bulk of your succession planning efforts into this group. One caveat: Occasionally there may be a client who, no matter what you do, won't be amenable to a transition. Such a client can eat up a huge amount of time and money, so try to identify such a situation early in the planning process.

“Tier 2″ clients include those who have a stronger relationship with the firm than with an individual partner, and will therefore be more likely to easily accept a change in their day-to-day contact.

“Tier 3″ clients are those for whom you'll put forth minimal effort into transitioning ' that is, clients who are small enough that they don't warrant much investment. The retiring partner simply needs to set up a meeting to introduce them to the replacement partner. In the case of very small clients who don't have any matters currently in progress, a letter to the client may be sufficient.

Select the Right Successor

The next step is to assemble a list of possible partners to take over each relationship. Expertise and practice area are critical, but personal factors, such as age, personality and temperament, and hobbies and interests, play a major role in the success of an attorney-client relationship and must be considered as well. If the partner with the right technical expertise isn't a good fit for the client in terms of personality and interests, consider having two partners team up to take over the client ' one to manage the relationship and one to do the legal work.

Build the Relationship and Assess Its Success

Once the successor partner has been chosen, the retiring partner should introduce him or her to the client as soon as possible. The best way to do this depends on many factors, such as the client's personality and how long it will be until the senior partner retires.

If the partner is still a few years from retirement, it may make sense to start the relationship more informally, such as by letting the new partner and client get to know each other on the golf course, at sporting events, or during other client-relationship activities. If the personal relationship is developing on a positive note, then it should be easy to start getting the new partner involved in the client's legal matters.

If the partner is less than two years from retirement, it may be better to introduce the successor partner at a regular client meeting and get him or her involved in the client's matters right away.

As the retiring partner begins to transition out of the client relationship, he or she needs to honestly evaluate how the new relationship is working. Are the new partner and the client getting along? Is there mutual respect? Are the legal matters progressing as they should be?

For the first several months, the senior partner should periodically check in with both the partner and the client, separately, to see how things are going. If things are going well, the senior partner should slowly phase out the calls to fully transition the relationship management to the new partner.

If things aren't going well, the senior partner needs to assess whether the relationship can be improved or if it would be better to transition the client to a different partner. It's important to keep in mind that it takes time to build up a client's comfort level, so you shouldn't give up on the new partner just because of a few small glitches. On the other hand, if there are issues that will likely be difficult to resolve ' such as a personality conflict ' then it is better to be proactive and change the partner assignment than to let the relationship languish, ultimately costing the firm the client.

A well-planned and well-executed transition plan can help ensure continued strong relationships, client retention, and goodwill. It will reinforce confidence among clients that the firm as a whole is committed to successful, fruitful, long-term partner-client relationships. Putting a plan in place now and beginning a relationship transfer well in advance of a partner's retirement is a solid measure for retaining clients and growing relationships even after their lead partner has left the firm.

Richard Puzo, CPA, is a J.H. Cohn LLP partner and practice director of the firm's Law Firm Industry Practice. He can be reached at [email protected] or 877-704-3500.

Many firms believe that their reputation, expertise, and history will help them sustain their client base even after key partners retire. In an industry that relies so heavily on personal relationships, this is a dangerous assumption to make. To help ensure client retention, firms need to put in place a long-term, multipronged client transition plan at least two years before a partner's retirement. With the eldest of the baby boomers turning 65 in 2011 that means such planning must begin now.

Get Partner Buy-In

Successful transition planning requires the buy-in of the retiring partners. In some cases, this may initially be a challenge as vanity and egos come into play, and partners refuse to acknowledge that they are getting older or that a successor will succeed as they have in maintaining positive client relationships. Compensation is another common concern at the start of the succession process, as senior partners may grow concerned that they will see a personal financial impact as a result of the client transition. Giving senior partners a say in choosing their successors, a key role in the transition, and a clearly defined compensation agreement for the transition period may help dissuade some of these concerns.

Classify Clients

Transitioning clients can be time-consuming and expensive. An effective first step in the transition process is to classify a retiring partner's clients: evaluate benefits vs. cost, special needs of each client, and other considerations such as status of the current relationship. By taking the time to categorize the retiring partners' clients, you'll be in a better position to determine the successor partner. Generally, all clients can be sorted into three categories.

A “Tier 1″ client is among the retiring partner's biggest, most profitable clients. You'll want to put the bulk of your succession planning efforts into this group. One caveat: Occasionally there may be a client who, no matter what you do, won't be amenable to a transition. Such a client can eat up a huge amount of time and money, so try to identify such a situation early in the planning process.

“Tier 2″ clients include those who have a stronger relationship with the firm than with an individual partner, and will therefore be more likely to easily accept a change in their day-to-day contact.

“Tier 3″ clients are those for whom you'll put forth minimal effort into transitioning ' that is, clients who are small enough that they don't warrant much investment. The retiring partner simply needs to set up a meeting to introduce them to the replacement partner. In the case of very small clients who don't have any matters currently in progress, a letter to the client may be sufficient.

Select the Right Successor

The next step is to assemble a list of possible partners to take over each relationship. Expertise and practice area are critical, but personal factors, such as age, personality and temperament, and hobbies and interests, play a major role in the success of an attorney-client relationship and must be considered as well. If the partner with the right technical expertise isn't a good fit for the client in terms of personality and interests, consider having two partners team up to take over the client ' one to manage the relationship and one to do the legal work.

Build the Relationship and Assess Its Success

Once the successor partner has been chosen, the retiring partner should introduce him or her to the client as soon as possible. The best way to do this depends on many factors, such as the client's personality and how long it will be until the senior partner retires.

If the partner is still a few years from retirement, it may make sense to start the relationship more informally, such as by letting the new partner and client get to know each other on the golf course, at sporting events, or during other client-relationship activities. If the personal relationship is developing on a positive note, then it should be easy to start getting the new partner involved in the client's legal matters.

If the partner is less than two years from retirement, it may be better to introduce the successor partner at a regular client meeting and get him or her involved in the client's matters right away.

As the retiring partner begins to transition out of the client relationship, he or she needs to honestly evaluate how the new relationship is working. Are the new partner and the client getting along? Is there mutual respect? Are the legal matters progressing as they should be?

For the first several months, the senior partner should periodically check in with both the partner and the client, separately, to see how things are going. If things are going well, the senior partner should slowly phase out the calls to fully transition the relationship management to the new partner.

If things aren't going well, the senior partner needs to assess whether the relationship can be improved or if it would be better to transition the client to a different partner. It's important to keep in mind that it takes time to build up a client's comfort level, so you shouldn't give up on the new partner just because of a few small glitches. On the other hand, if there are issues that will likely be difficult to resolve ' such as a personality conflict ' then it is better to be proactive and change the partner assignment than to let the relationship languish, ultimately costing the firm the client.

A well-planned and well-executed transition plan can help ensure continued strong relationships, client retention, and goodwill. It will reinforce confidence among clients that the firm as a whole is committed to successful, fruitful, long-term partner-client relationships. Putting a plan in place now and beginning a relationship transfer well in advance of a partner's retirement is a solid measure for retaining clients and growing relationships even after their lead partner has left the firm.

Richard Puzo, CPA, is a J.H. Cohn LLP partner and practice director of the firm's Law Firm Industry Practice. He can be reached at [email protected] or 877-704-3500.