With Succession, Timing is Critical
This is the second post in a three-part series on succession planning. The first post was published in May.
When is the best time to retire? It’s a complicated question with no cookie-cutter answers. Timing may be the most important ingredient in a successful retirement—and client transfer—recipe. This is particularly true for law firms.
Many years ago, I listened to a sermon about the importance of every stage in life: the wonder of the young child, the challenges of adolescence, the complexities of adulthood and the wisdom of the elders. That sermon often reminds me that everyone is in transition in one way or another.
Helping lawyers comfortably understand and explore the idea of retirement isn’t just important to successfully transfer clients. It is a statement reflecting the culture of the firm. In most firms, succession is subject to partnership policies. Many recommend retirement at a specific age, often incorporating prescribed wind-down periods and extension options.
The process begins with a discussion. Who are the best individual(s) in the firm to participate with the retiree in a discussion? The three-part discussion should address:
- The attorney’s plans for the coming year(s);
- Identifying clients with the best potential to be transferred into the care of other partners; and
- How the firm and attorney might work together on a succession plan acceptable to both.
Two years ago, I was asked to help develop a strategic succession plan for a mid-size firm facing what seems more and more to be a typical “succession via retirement” scenario. Of the approximately 85 attorneys in the firm, more than half are 50 or older and 25 are 60+. Those in the 65+ age group had little or no interest in retiring (for a variety of reasons we will discuss in greater detail in our next post). The firm is not an “eat what you kill” partnership, but the compensation system rewards personal production far above all other criteria. As such, it offers few incentives for senior attorneys to introduce their clients to younger partners or senior associates.
We drafted and conducted a survey of all attorneys, asking questions related to firm operations and culture and including questions on succession through retirement. The responses served as the starting point for a small committee comprised of partners and associates tasked with drafting a set of “succession recommendations” and sharing them at the firm retreat. The committee presented a number of recommendations.
- The managing partner and executive director will meet annually with every attorney to discuss the next one and five years.
- Each partner 60+ is expected to develop a detailed succession plan, giving the firm a five-year window on each attorney’s thinking, and review the plans with the executive committee.
The results from the first year were mixed. Some of the 60+ partners viewed the planning requirement as a veiled attempt to “push them out” of the firm. Last year, in response, each partner invited a confidant to his/her meeting with the MP and ED, resulting in more candor and greater trust. No doubt after this year the firm will make additional tweaks.
- Develop a communication process that is—and is perceived to be—fair to every partner.
- Provide an opportunity for all partners, particularly those closer to retirement, to comment on the process.
- Be flexible and make modifications as necessary.
- Start early.
Our third and final post in a few weeks will focus on compensation strategies associated with client transfer through retirement.