Frustrated With Your Firm’s Succession Planning?

But the world is far from perfect, and no class of leaders knows the complexities of firm politics better than legal administrators. The greater the sensitivity of a strategic objective to be investigated and assessed, the more carefully the lead business executive must tread. Issues surrounding partner retirements are among the most sensitive.

Baby boom partners are reaching their mid-60s to mid-70s and will soon leave their firms. Some will become unable to practice through infirmity or disability. Some will keep working until the day they die. But most — sooner or later — will retire. Whether and to what extent a law firm should regulate the terms and timing of a partner’s retirement, and whether and how to motivate retiring partners to transition their clients to younger lawyers, are controversial questions. How firms resolve them can be messy, and legal administrators must take care to remain neutral and objectively focused on both sides of every proposal — or risk being perceived as partisan.

To do this balancing act, a legal administrator must appreciate that there is a lot of frustration going around. Older partners are frustrated when pressed to talk about retirement — it is a third-rail topic for them. Younger partners are frustrated by what they perceive as poor management and regulation of lawyer retirement. Clients are frustrated with not knowing who will lead law firm service teams when their relationship partners leave practice.

Administrators will be able to do their jobs better when they understand the root causes of these frustrations.

1. Partners Do Not Want to Talk About Retirement

Many older partners with large practices got to where they are by constantly reinforcing the value of their skill and experience. Being at the peak of one’s career is an enviable, hard-earned position. But it carries a vulnerability, too: Once achieved, there is nowhere to go but down. To older partners, talking about leaving law practice can feel like an admission that this inevitable next step in their lives is about to begin.

While no one wants to make older partners needlessly uncomfortable, a legal administrator must gently press them to discuss retirement — even if only provisionally — to protect the partnership’s financial interests. Transitioning clients to younger partners requires a several-year runway. Without knowing when this runway begins, the firm cannot monitor the succession process or help make it effective. Moreover, if several unplanned retirements happen all at once, the firm’s resources may be strained by writing checks for the balances of their capital accounts. Lead administrators can help avoid these stressors by urging discreet conversations about retirement as partners reach their late 50s and 60s.

“While no one wants to make older partners needlessly uncomfortable, a legal administrator must gently press them to discuss retirement — even if only provisionally — to protect the partnership’s financial interests.”

A legal administrator can also propose initiatives for helping older partners prepare emotionally for retiring and honoring their contributions, as a matter of firm culture. There are excellent retirement coaching services that cater solely to lawyers. Retired partners can be paired with working ones to provide mentoring and support. A brief report at a partners’ retreat about the status of key client transitions in progress demonstrates the firm’s commitment to succession. All these measures help break the logjam preventing discussion of retirement.

2. Pressure From Rising Stars

Many junior partners chafe at the negative impact that poor succession planning has on them. When partners retire without transitioning their clients to successors, younger partners must develop new clients and new matters to make up the loss of revenue just to keep profits steady. None of them will make any money from this work — it goes to backfilling a loss resulting from inadequate succession planning. In addition, at some firms, younger partners feel frustrated by unproductive senior partners who continue to earn a share of collections from clients they originated years earlier. If a firm cannot change these conditions, these younger partners will become a flight risk.

3. Pressure From Clients

Clients know that their baby boom generation partners are aging, and they feel nervous that their firms are not making plans to avoid interruptions in service. When a partner suddenly retires with little or no notice, clients feel abandoned and the service relationships immediately fray. At that point, the loss of faith in the retiring partner’s firm may be too acute for the relationships to be saved, even if a qualified successor is available.

This happens often enough that some clients are beginning to ask law firms and practice groups to identify the next-in-command slated to take over when the relationship partner leaves practice. Some are even amending their outside counsel guidelines to require firms and practice groups to disclose this information annually, and to amend this disclosure as team members are added or subtracted over time. Law firms that anticipate these client requests, and proactively propose succession plans before they ask, are more likely to enjoy lasting client relationships.

WHICH PATH WILL YOUR FIRM TAKE?

Law firms differ widely in how and whether they regulate partner retirements. Some place few if any guardrails around when and on what terms a partner retires, making every retirement a negotiation with no baselines (such as a required retirement age and other limitations). Others regulate retirements rigidly, leaving little to negotiation.

Once a firm decides where between these two extremes it wishes to be, it can begin the process of implementing retirement policies that are consistent with its needs and culture. The legal administrators who understand the frustrations of older partners, junior partners and clients around retirement will be well-positioned to take the lead on this important work.

David Wood recently sat down with Legal Management Talk to chat about crafting an effective succession plan and the role firm administrators play in helping the process run smoothly. Listen at alanet.org/podcast or download wherever you get your podcasts.