I was born in 1946 and thus am among the earliest Baby Boomers. While it is true that many lawyers continue practicing into their 70’s and 80’s, most of my contemporaries and other, younger Baby Boomers have already retired from the active practice of law, or are in the midst of a transition plan where they are practicing on a part-time basis. Almost all others in their 60’s are thinking about retirement and asking themselves when the time for retirement or semi-retirement will be right.
As I speak to these Baby Boomer lawyers, either as a lawyer or an Executive Coach, I have observed that the firms, where the lawyers have flourished as partners and often important rainmakers, are frequently unprepared for their retirement. Based on my empirical observations, there are several reasons for this.
First, at times a law firm can be caught off-guard by the imminent retirement of a partner. That partner may have failed to disclose his plan to retire until it is too late for the law firm to appropriately plan for the event.
Second, law firms consistently fail to adequately plan for a partner’s retirement by not engaging the retiring partner in transitioning clients to younger partners and transferring knowledge regarding those clients to the next generation of partners.
Third, law firms often fail to consider the financial aspects of a succession plan, notwithstanding the existence of a partnership agreement with provisions for compensating a retiring partner.
Fourth, law firms often fail to effectively transition leadership positions from retiring partners to the next generation of partners, and this is especially true when the retiring partner is a founding partner of the law firm, having occupied a leadership position perhaps for decades.
Therefore, to be successful, a law firm succession plan must carefully address each of the four subjects described above, which this article will now discuss generally. Each of these subjects, however, merits a much more extensive discussion than appears here. Moreover, law firms may want to consider engaging an independent Succession Coach, preferably with substantial law firm experience, to help guide them through the succession process.
Effective Retirement Communication
As noted above, law firms are often caught off-guard when partners, and especially key partners, fail to give the law firm substantial notice of their plan to retire or semi-retire. Frequently this may occur because the older partner may not be entirely sure of his or her plan, or the partner may simply not want to disclose what they are thinking, perhaps fearful of the firm’s reaction to their possible retirement.
As a result, it is important that retiring partners be encouraged to share their plans and, perhaps even their preliminary thoughts early on with younger key law firm partners. It is a shame when a partner, for example with $2.5 million of business, walks into the office one day and announces her retirement without providing the firm with the time required to transition the business to younger partners, and to take proactive steps to achieve an effective succession plan. Law firms should create an environment where partners contemplating retirement are comfortable in sharing their thoughts without fear of recrimination. If this can be accomplished, the chances of a law firm being caught off-guard by the imminent retirement of a key partner will be significantly reduced. In instances where the retirement is voluntary, and not the result of death or disability, serious discussion early on between the older partner and his colleagues can materially aid in the succession plan and the smooth transition of clients and business to the next generation. A suggested time period for the deliberate transitioning of clients, which is discussed below, is six months.
Transitioning Clients
A key component of a law firm succession plan is the careful creation of procedures to effectively transition clients from the retiring partner to other partners. At a minimum, this transition of client business requires that the retiring partner (a) introduce other lawyers, as early on as possible, to his or her clients and that the younger partners begin to work on client matters while the older partner is still practicing, (b) download to the younger partners who will assume the client’s important information about them, including information about their businesses, their likely legal needs, the personalities and interests of key client employees, billing histories and other facts and observations that will increase the ability of the younger partners to quickly take over and meet the clients’ needs in the same way that the retiring partner did successfully. This needs to be a highly-structured process and should not be left to a series of ad hoc conversations in the hallways of the firm. In transitioning clients to a new partner, knowledge will be power, equipping the new partner with the tools necessary for making the clients feel comfortable with the transition and satisfied with the services of the new partners servicing it.
Financial Planning
Almost all law firms have partnership agreements that provide how retiring partners will be paid. Such payments will likely include repayment of a capital account, payment of earned but unpaid compensation, the continuation of benefits, and perhaps payments under an unfunded retirement plan that many firms have. This financial analysis should be done in advance of the actual retirement date so that the law firm does not find itself in financial distress and, perhaps, unable to meet its contractual obligations to the retiring partner.
In addition, the law firm and the retiring partner must have a plan to render bills and collect accounts receivable for clients for whom the retiring partner is responsible. Furthermore, the retiring partner should agree to assist in billings and collections even after retirement, and while the partner still has goodwill with the client. This, too, must be the subject of careful planning by the law firm and the retiring partner.
Leadership Transition
In many instances, the retiring partner held a position of leadership in the law firm. He or she may have been the managing partner, the branch office managing partner, a department chair, or a practice leader. Long before the retirement date (perhaps one year), other partners should be designated as leadership successors to the retiring partner. Sometimes the partnership agreement provides procedures for leadership succession. Usually, not all leadership positions are covered by such agreements, in which case a firm must decide how to select succeeding leaders.
Furthermore, it is not enough for a law firm simply to designate a successive leader. That new leader needs to spend time with the retiring leader to gain the benefits of his leadership knowledge and experience, including not just the retiring leader’s successes but the failures as well.
What leadership challenges exist? Who are difficult people and how do you deal with them successfully? What can the new leader do to be even more effective than the retiring partner? These are important questions that must be discussed at length between the retiring and new partners to pave the way for an effective transition of leadership.
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In conclusion, the retirement of a law firm partner creates many challenges for a law firm. As noted in the title of this article, the key to effective law firm success planning is planning. As Benjamin Franklin wrote, “By failing to prepare, you are preparing to fail.” This is certainly true for law firm succession. To be successful, a law firm must have a detailed, multifaceted succession strategy and plan that is completely understood by all the law firm’s partners and even its administrators. And as noted above, frequently a Succession Coach can assist in developing the succession plan and in helping the law firm and its partners and administrators to execute the plan.
[1] Marc S. Friedman is a Senior Counsel with Dentons, the world’s no.1 global law firm. He has served as a law firm managing partner, a New York office managing partner, and a practice Chair. Marc is also an Executive Coach and a Senior Consultant to Loeb Leadership Group.
© 2016 Marc S. Friedman
