Your Keys to Succession Success
This is the third post in a three-part series on succession planning. You can find the first post here and the second post here.
Many senior lawyers are not receptive to the notion of retirement, which makes the succession/transfer of clients to younger partners difficult to say the least. As I noted in a previous post, the reasons for that can vary greatly but often are because the partner still enjoys the intellectual challenge of the work, still needs to work for financial reasons or doesn’t want to leave close relationships with colleagues and clients.
The primary challenge law firms confront is balancing the unique nature of each partner’s specific circumstance with policies and expectations of the partnership as a group, particularly the long-term health of the firm’s client portfolio. Many firms suggest—or require—their senior partners to begin a “countdown” or similarly-titled period, which commences when each reaches a certain age. The three- to five-year window encourages a senior partner to gradually transfer client responsibilities to younger partners. Initiating the countdown and succession discussion is a critically important first step in the retirement/succession process.
Many partners will struggle with the very personal nature of retirement itself. “What will I do that will bring meaning and fulfillment to me in my life?”
Earlier this month, the newest Wicker Park Group partner, Sanju Kripalani, spoke on the topic of happiness to a small, impressive group of law firm CMOs. I was particularly struck by the notion that “Individuals in all industries equate being busy as a sign of success, whereas having time to spare is often perceived as shameful—a sign of laziness or incompetence.” This is particularly true when busy (or not so busy) partners confront the eventuality of retirement.
Some partners will also face fears related to changes in compensation, which is an important way to acknowledge the contributions senior attorneys make to their firms. The successful transfer of client relationships and responsibilities hinges on a clear compensation agreement between the firm and the retiree. Financial rewards should be tied with the successful relationship transfer, of course, with acknowledgment and approval by the client. Successful transfers might trigger a fixed payment to the retiree or a percentage of collections in the future (say, three years). Consider additional opportunities to compensate the retiree for non-billable, firm-related work such as conducting client interviews, attending ABA or other bar associations on behalf of the firm, managing charitable contributions, leading an alumni effort or mentoring associates and new partners. Consider non-money compensation as well—office, phone, computer and secretarial support, continuation of benefits and participation at firm functions.
With all of this in mind, what specific actions might a firm do to provide and promote healthy retirement and succession options to its senior attorneys?
- Recognize and embrace that succession through retirement demands individual solutions that address different, meaningful goals shared by both the individual and the firm.
- Then start with a candid, compassionate, evolutionary discussion that begins with the needs of the individual senior attorney. With so much emphasis in the legal press on lateral moves, it is important for the firm to start the discussion early. We’re talking years in most situations. There are a number of retirement/succession planning tools, including interview questions.
- Involve the client decisionmakers and influencers when exploring succession. Clients, when given the opportunity to participate in the process, often become “champions of the firm” during the transition.
- Offer and encourage (or require) all partners to understand and have an established estate plan to provide financial security in retirement. Require all partners to attend regular (annual) estate planning classes as part of the partnership agreement.
- As part of the compensation system, and unless otherwise negotiated, direct a percentage of every draw into a retirement account.
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