The Softer Side of Succession Planning

Some leadership members appear to be staying on board even longer. Separate research from legal intelligence provider Leopard Solutions indicates 40% of managing partners at the top 200 revenue-producing law firms are approximately 61 to 70 years old — and 8% are between 71 to 79.

Firm leaders’ retirement plans can vary for a number of reasons. Partners may, for instance, worry clients will leave if they do — or struggle with retiring because their identity is strongly tied to their career, says Kathryn Scourby, Principal at KNS Consulting, which provides business continuity services to professional firms.

“They've worked really hard over the course of their career; they have a lot of professional accomplishments,” Scourby, a member of the Richmond Chapter, says. “It’s that fear of, ‘Well, I really was an important person as part of this firm, and if I leave, do I then become a previously important person?’”

Law firms, however, can face numerous issues if key members leave earlier or later than expected — ranging from institutional knowledge loss to client relationship and hiring and retention challenges, according to Leopard Solutions Chief Executive Officer (CEO) Laura Leopard.

“When young people just don’t see room for growth, they’re going to go somewhere else where they can see themselves climbing the ranks,” she says. “People coming in, going right back out the door, that’s a very costly thing for firms — [and] partners leaving in midcareer sends a bad signal to the world.”

Bowing out of the workforce can be an emotional endeavor for professionals who have been in the legal industry for decades, and the aftermath can significantly impact a firm’s operations.

To ensure all involved parties share the same view of how — and when — the process will transpire, law firms may want to consider establishing retirement succession planning-related policies and procedures.

MANAGING PERSONNEL MOVEMENT

To build some certainty into succession planning timeframes, some firms set mandatory retirement age or other limits.

Chicago-based Levenfeld Pearlstein’s founders didn’t want all the firm’s decision-making to be limited to one generation or age range. With that in mind, they decided executive committee members and managing partners wouldn’t be over 60 years old.

“If there’s no progression plan, all the power [can] rest with people who are only thinking two or three years out,” Chief Executive Officer Jeremy Gresham says. “They’re going to make decisions to maximize today’s income at the expense of the future firm. You want your leadership always thinking, what’s going to happen five years from now? How are we best situated to meet the future?”

While the firm’s former CEO wasn’t subject to any term limits, she decided to step down after an extended period in the role — and essentially gave the firm five years’ notice.

Continue the conversation about succession planning at our 2024 Annual Conference & Expo as John Mitchell, Managing Director, KM Advisors LLC, outlines how to analyze your firm’s succession strengths and weaknesses and create a plan that you can easily implement, evaluate, and adjust. Register at alaannualconf.org. 

That allowed Gresham, who officially took over the role in 2022, to work with a communications coach to enhance his public speaking and writing skills — which, as a Chief Financial Officer, he says were likely more numbers-oriented. Levenfeld Pearlstein also added a chief learning and development position. The firm’s overall succession planning strategy involves working to continuously identify leadership candidates, Gresham says, and provide chances for them to ascend to management roles.

“[With] intentional succession planning, there’s fewer surprises,” he says. “You can analyze your possibilities, what someone might need. You should always be looking at how to get your future leaders ready to be the leaders you want them to be. It’s one thing to identify high-potential [employees] — but if you’re not doing anything to develop them, you’re missing an opportunity.”

An external consultant may be able to offer a fresh perspective on talent evaluation, according to John Mitchell, Managing Director at KM Advisors, a consultancy specializing in professional service provider-based leadership development.

Establishing an internal succession-focused committee that’s able to supply an array of viewpoints may also help a firm effectively identify and begin preparing candidates for subsequent positions.

“Some firms have very sophisticated leadership development programs,” Mitchell says. “They don’t know who is going to be their managing partner 10 years down the road, but they know if they don’t develop multiple people, they won’t have the right person ready at that time.”

Leadership decisions at K&L Gates LLP are made by members of a management committee who serve staggered terms, which prevents a significant number of new appointees from stepping into their role at the same time.

Firm members with diverse tenure, practice area and other professional experience are chosen to serve on the committee, according to the firm’s Chairman Michael Caccese, who also leads its Asset Management and Investment Funds practice.

“[As] a global law firm, that’s really important,” Caccese says. “We have 48 offices — so we really have to have a very good view of what’s happening around the world in the different markets we operate in, and in different practice groups.”

“When young people just don’t see room for growth, they’re going to go somewhere else where they can see themselves climbing the ranks.”

Previously, one person served as the firm’s chairman and global managing partner. Due to K&L Gates’ growth over the years, when he stepped down in 2017, the firm split the function into two roles. Their terms are also staggered to ensure, during transitions, one person will be well-situated in their role.

To enable younger firm members to possibly assume a leadership role someday, Caccese says he and the current global managing partner try to give candidates ample exposure to decision-making within the firm.

“We make sure we get people involved in different efforts, whether it’s task forces, training programs — and we share a tremendous amount of information,” he says. “We work closely with different groups so hopefully, when the decision is made that somebody’s term will not continue, we can have a stable of people that will be skilled and available to take over those roles.”

FURTHER PROFESSIONAL ADVANCEMENT PREPARATIONS

Term and other directives can help demystify employees’ career path plans within a firm; yet they aren’t always celebrated policies.

“Anger, we see a lot,” Mitchell says. “[And] tons of pouting and denial as firms that have retirement procedures and mandatory retirement ages try to enforce them.”

If law firms don’t want to institute that type of system, they could instead proactively ask partners to draft a hypothetical plan for their departure long before it occurs — including a list of who might be able to take over their current clients — which Scourby says can help clarify salary expectations and when certain roles will need to be filled.

“By the time a shareholder reaches 65, it’s way too late to introduce thinking about succession planning and whether they want to ease out of the firm,” she says. “If you start that conversation with every lawyer in the firm at a particular time — such as when a lawyer turns 50 — these plans can be reviewed every couple of years. They don’t have to be set in stone, but at least you’ve got something in writing.”

Attorneys at Steptoe LLP fill out a series of career-related questions when they reach a certain age, which are embedded in the online performance planning form the firm distributes annually.

Partners review their plan with the firm’s CEO and department heads, according to Director of Professional and Staff Development Jennifer Trippett, who is an Independent member and a member of ALA’s Professional Development Advisory Committee.

“If there’s no progression plan, all the power [can] rest with people who are only thinking two or three years out. They’re going to make decisions to maximize today’s income at the expense of the future firm. You want your leadership always thinking, what’s going to happen five years from now? How are we best situated to meet the future?”

“It’s driven by a policy, but it also is something that is so deeply personal that it’s not as simple as just saying to someone, ‘Oh, you’re thinking of retiring; here are the steps you take,’” Trippett says. “It’s a constantly moving target, and it touches on so many areas. There are financial and business implications to the firm; talent development implications — also how certain departures are going to impact culture in an office or specific team.”

Firms may benefit, Trippett says, from examining how previous partners leaving played out.

“It’s about having a strategy and proven pathways,” she says. “You need to take account of what’s worked and what hasn’t in some of these transitions, study that, [then] debrief on it so you can guide decision-making going forward — saying, ‘We had a similar situation with someone else who worked in a like practice area,’ or ‘They had a client who had similar needs; this is what worked in that situation’— and then model around that.”

If, despite the schedule that’s been discussed, a firm member isn’t quite ready to leave the workforce as the time approaches, Scourby suggests presenting alternative ideas.

Partners who are reluctant to retire could, for example, plan to mentor younger lawyers in a certain practice group who would benefit from client development and relationship guidance.

Experienced attorneys might otherwise enjoy contributing to the community by sitting on a corporate or nonprofit organization’s board.

“In my former firm, some of the partners that were heading toward retirement decided they didn't want to take on new clients, but they wanted to maintain their law license and still practice law to some degree,” Scourby says. “The firm discussed options they might want to consider. A good option, from a practice perspective, was to handle pro bono work in the firm.”

Facilitating a meeting with a financial planner as retirement nears, Mitchell says, might also prompt firm members to solidify their plans.

“They often will find out their views of what it would take to retire and live a lifestyle they want to live [they] could have done five years ago,” he says. “The planner will tell them, ‘You’ve already made enough money.’ That’s another way you can try to help manage some of the psychological fears — giving, or at least encouraging them to get resources that will help them understand the financial opportunities.”

With the risks management continuity issues can pose, firms may understandably be concerned about the way leadership members’ exits will ultimately unfold.

Succession planning, however, doesn’t have to only involve attorneys. Pinpointing other employees’ retirement plans can help law firms avoid other similarly debilitating unexpected departures — and potentially uncover valuable additional resources.

“We often see partners retire who have been supported by the same person for sometimes decades,” Trippett says. “Maybe that person is following a similar timeframe, or maybe they’re not. You can actively leverage staff in this situation to be an integral part of the process and keep things moving and organized.”

No attorney wants to think about what happens when they stop practicing, but it’s crucial to have those conversations now. Debbie Foster, Partner at Affinity Consulting, recently joined ALA’s podcast to discuss how to bring up those difficult conversations and why it’s important to not only your firm, but your clients, to have a solid plan in place in case a lawyer retires or has to stop working. Tune in today!