October 24, 2005
Law Firm Succession and Continuity
I have made the point in the past that law firms with long-term prospects for success must go through a metamorphosis from an eat-what-you-kill personal service company to a more corporate culture with a life expectancy beyond that of those partners currently involved. When that happens, continuity of the business as a management objective moves much higher on the list of strategic priorities.
There are several aspects that have to be considered. Here is a short list:
Client Retention
Legal Expertise
Brand or Firm Image
Business Development
Management and Leadership
Capital Requirements
Partner Income
While not on the above list, I personally think a prerequisite for continuity management is the obligation to counsel marginal fee earners out of the firm. These individuals have the opportunity for a successful and productive career in other environments. If you miss the window by failing to face such situations early on, the firm will gradually own the problem for the duration. That leads to dissatisfaction and defections among the firm’s brighter and younger partners, depleting the firm’s next generation of leaders and managers. Without that pool of talent, the firm cannot have a sound succession or continuity plan.
Continuity covers more than just the succession of particular retiring partners. Retirement isn’t the only risk of losing an important member of the firm. Partners can leave the firm at any age. They leave for greener grass. Firms can lose them temporarily due to illness or accidents. You can wake up one morning to learn that a top performer has become disabled or died suddenly. Continuity planning takes all of those risks as well as retirement into consideration.
Continuity management begins by developing a culture where clients belong to the firm and not to individual attorneys. Many firms pair multiple attorneys with each significant client. They establish procedures for a partner other than the responsible rainmaker or supervising attorney to visit each client one to four times during the year to ask the questions “How are we doing and what else do you need from us?” Some firms often have formalized plans to rotate the supervising and/or billing attorney. The responsible rainmakers may be required after a time to share or give up credit all together.
Among the top 200 largest firms, partners are retired before the firm acquires a gray hair image. Sixty-two is not an unusual retirement age. When you move to mid-sized firms, compulsory retirement is less prevalent.
To assure continuity, many firms begin a transition in the role a partner plays around age 45 to 50. These mid-career professionals begin picking up more management responsibilities and start a process of gradually handing off direct client contact. Mid-sized firms’ biggest partner-loss risk is pre-retirement loss, including defections. Around 40 to 48, the firm begins to face an increased risk. If an attorney is going to move, this is the point where they have built their book of business. At mid-career, the time comes to do it or forget it.
Around 50 is the time when life changes due to illness or declining energy begins to impact their professional capacity. By then there should be a general understanding between the individual and the firm as to the path toward their retirement or change in the partner’s role from working attorney to manager, mentor, statesman, goodwill ambassador, community mover and shaker, etc. As long as they have the desire and the capacity, there are many ways other than long hours and high-energy lawyering for the older partner to continue as a valuable contributing member of the firm, well up into the seventies and eighties. They are the firm’s brand. They know who is who. They are respected in the community. They can give important clients top-level attention to cultivate the firm’s relationship with those key clients and while at it, cross sell services. They can publish, speak on behalf of the firm, and fulfill the firm’s obligations for community and charitable duties.
The key is to begin to shift the partner’s role to more management and rainmaking and gradually decrease their lawyering role starting between 45 and 50 in age. And for the firm to have in place a mechanism for rewarding a lawyer for handing off business and origination to the younger partners.
In addition to the issue of client retention and the role of maturing partners, the firm must also look to its talent pool. It must be hiring and training to sustain its practice specialties. It must pro-actively identify and cultivate the future leaders and practice managers talent in the firm.
For some, the issues involving continuity may be unpleasant to confront. For the firm as an institution, they must be approached openly as a matter of routine business planning.
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Filed under Planning, Risk managment by Tom Collins