Would your firm survive? When thinking about law firm succession planning, it’s important to remember that it is not just about partners/lawyers retiring from your firm when they reach “retirement age.” Unfortunately, over the last few years, law firms of all sizes have experienced sudden, unexpected deaths of partners, illness-related deaths and groups of lawyers leaving firms without warning. In some instances, these circumstances have thrown law firms into a tailspin from which they could not recover.
A LAW FIRM’S TRUE STORY
Picture this situation: A 30-attorney firm with three offices in the Mid-Atlantic went from flourishing and successful to out of business within a year due to the sudden death of the managing partner. Imagine if you were the law firm manager (an ALA member) having lunch with your managing partner on a Friday and then finding out that this same partner had very suddenly passed away that night.
At the same time, one of your successful partners had been diagnosed with cancer. You can only imagine the scramble that this firm was now facing with no one leading the firm or at the helm. The law firm manager found herself in the position of having to manage the firm herself and trying to hold it all together. It soon became clear that many of the lawyers started to disengage with working with firm clients and wanting to be a member of this firm. Within five months, a group of five lawyers left in one day. Over the next several months, other firm lawyers started to move to other firms and just one year later, the five attorneys who were left notified the law firm manager that they had decided to close the office doors.
Within one year, this once flourishing firm had shuttered its doors. The law firm manager spent the next several months working hard to help find other employment for the remaining staff, close the office, and then retired from her decades-long professional career as a law firm manager.
This true story — sad as it is — is not unlike stories that we hear of in the law firm world from other firms from small to midsized to large, global firms. One thing that these firms most likely had in common: no written, well-thought-out succession plan.
“One of the key areas in a firm that lawyers who are moving toward retirement can contribute to, is helping the firm with mentoring newer and younger lawyers.”
So, what does succession planning in a law firm look like and why are succession plans needed? These plans allow firms to prepare for transitions of key positions and major client relationships when shareholders or key partners leave the firm and help firms be prepared for any untimely loss of a critical firm leader. When partners leave a firm (whatever the reason), there needs to be an effective transition of knowledge and expertise of the senior partners/lawyers via training, mentoring and knowledge management systems. There also needs to be an effective transition of client relationships from retiring lawyers to other lawyers in the firm.
WHEN IS A GOOD TIME TO START THINKING ABOUT LAW FIRM SUCCESSION PLANNING?
The best time for law firms to be thinking about succession planning is far in advance of lawyers retiring. It’s critical to have plans in place in case of an unexpected situation that may happen to a key leader in the firm. Less than 13% of lawyers surveyed by the Remsen group in 2021 had documented plans in place, and there were very few firms that had plans in place for sudden departures.
“Begin the succession planning conversation and process with your manager/director-level reports,” says Terri J. Oppelt, CLM, SPHR, SHRM-SCP, Director of Operations at Johnson Shapiro Slewett & Kole LLP, and a member of the Greater Los Angeles Chapter. “This proactive approach demonstrates your commitment to the firm’s stability and work continuity and shows you have the firm’s best interest in mind. It also prepares you for this task and makes you more knowledgeable when starting a conversation about strategic planning for the firm with your managing partner. You will be able to explain its significance, required efforts and goals. Managing partners, and generally most attorneys, often prioritize client work over critical firm projects, sometimes due to uncertainty about how to start or concerns about time and energy demands.”
Neglecting the issue of succession can be detrimental to the overall productivity of current lawyers in the firm, so the optimal time is when managing partners and other key partners/shareholders can have meaningful discussions and put plans in place before something happens unexpectedly.
PROFESSIONAL RESPONSIBILITIES OF LAWYERS
Succession planning in law firms is no longer just a “nice-to-do” exercise that law firms say they “should” do to make their firm better. In fact, succession planning is considered part of the overall professional responsibilities of lawyers and those that manage their firms. The ABA Model Rules listed below define the rules that lawyers must follow in working with and maintaining relationships with their clients, including if they are leaving their firm or withdrawing from an engagement with a client:
- Model Rule 1.4 — Communications with Clients
- Model Rule 5.1 — Responsibility of Partners, Managers and Supervisory Lawyers
- Model Rule 1.6 (c) — Duty of Confidentiality
- ABA Formal Opinion 489 — Joint Communication to Clients Regarding Departing Lawyers
- Applicable state laws
Interestingly, the ABA has a section on its website on law firm succession planning and provides a chart that shows four states (Florida, Iowa, Maine and Michigan) currently have mandatory requirements for lawyers and their firms to have written succession plans. Many other states have recently begun proposing rules that would require lawyers to file written succession plans to protect clients in the event a lawyer needs to withdraw from a client representation due to death, illness or a departure from a law firm.
For example, the Texas State Bar is urging law firms to evaluate their contingency plans in the face of ever-growing amounts of unexpected losses of lawyers and has created a succession planning toolkit to provide comprehensive resources to law firms to ensure they have written plans in place. The first step in creating a comprehensive plan is to designate a plan “custodian” who will have responsibilities in the event an unthinkable event happens in a law firm.
LAWYERS LEAVING THE FIRM THROUGH RETIREMENT
Creating law firm succession plans is not only critical due to an unexpected loss or departure of lawyers, but also because the complexion of law firms can change when lawyers are considering retirement or being encouraged to retire from their firms. There has been a plethora of articles written on this topic and one thing is clear… this topic can be the “elephant in the room” that no one wants to address.
“Begin the succession planning conversation and process with your manager/ director-level reports. This proactive approach demonstrates your commitment to the firm’s stability and work continuity and shows you have the firm’s best interest in mind.”
Many lawyers who have spent years practicing law and are nearing the time for either mandatory retirement or voluntary retirement have fears and often face and experience a “retirement” version of a midlife crisis. Their fears include:
- Fear of becoming a “previously important person.”
- Fear of losing their “personal identity” and self-worth that has connected them for years to their law firm, practice of law and their professional accomplishments.
- Fear that clients will leave if the lawyer retires. Who will take care of my clients?
So, how can law firms best tackle these lawyer fears and create viable succession plans? Having conversations with lawyers at a certain point in their career can help with decision-making far in advance of the time they are considering retiring. Discussions should include asking partners to consider their future and how they might feel about the following:
- Would the partner want to leave the law firm entirely?
- Would the partner want to step back on their law practice but still practice law with fewer hours and less compensation?
- Would the partner want to take on an administrative role in the firm?
- Would the partner want to take on a mentoring role in the firm?
If partners determine that they might want to keep some sort of role within the firm, the following are things to consider when creating a role for “retiring lawyers” within the firm. This will help keep the partner engaged, yet moving toward retirement from the firm and ultimately from the practice of law:
- Pro bono work
- Civic and charitable activities
- Nonprofit/for-profit boards
- Mentoring younger lawyers
- Teaching at law schools
- Administrative work within the law firm
MENTORING LAWYERS: WHAT WILL MAKE SUCCESSOR LAWYERS SUCCESSFUL
One of the key areas in a firm that lawyers who are moving toward retirement can contribute to is helping the firm with mentoring newer and younger lawyers. Partners who have been rainmakers in bringing clients to their firms can begin working with associates or newer partners to introduce them to their clients so that working relationships with the clients can continue once the partner has retired from the firm.
“All firms should consider requiring partners at a certain age to complete a succession plan document/template that would provide details of their potential plans.”
Mentoring these lawyers in the firm, if done correctly over a series of years, can help these lawyers develop qualities that will be critical for lawyer/client success once the partner shifts their relationship away from direct client relationships.
These qualities should include:
- Good leadership abilities
- Excellent management skills
- Contributing to the culture of the firm
- Participating in the orderly plan for transition of retiring partners
- Being proactive in developing relationships with clients early on
FIRM FINANCIAL REVIEW AND CREATING WRITTEN SUCCESSION PLANS
The partnership and executive management of a firm should be asked to consider a review of a firm’s financial information. This review should consider the following questions:
- What would firm revenue look like without the current top three to four key equity partners?
- What would firm revenue look like without the current top three to four key clients (if partners left and took clients with them)?
- Could the firm sustain these losses?
All firms should consider requiring partners at a certain age to complete a succession plan document/template that would provide details of their potential plans. The individual succession plan document can be updated as necessary every few years. As part of this plan document, partners would be asked:
- To provide details of when they want to consider retirement and if they anticipate full retirement or want to continue working at the firm on some level.
- To identify potential successors based on suitability, commitment, skills and experience and their plans to work with and mentor potential successors.
- To identify current clients and identify potential successors for each client.
- To identify risks in their practice if the succession plan is not in place or fails. What is the partner’s contingency plan?
NOT EASY, BUT NECESSARY
The topic of law firm succession planning is clearly not an easy one for lawyers to wrap their arms around. But avoiding the topic and not implementing a plan in a law firm can only lead to possible chaos, loss of revenue, loss of reputation or drastically — as in the case of the small law firm described above — closure of the law firm’s doors.
Having a well-thought-out plan that all lawyers in the firm can understand and buy into will go a long way to keeping a law firm resilient and successful and one that clients will keep turning to for their legal work. Plus, it’s an opportunity to showcase the vital skills you bring to the table.
“By successfully managing your project and now this one, you showcase your skills and ability to lead such initiatives effectively,” says Oppelt.
