Professional Services Accounting ARTICLE -
Cover Your Bases: Succession Planning For Your Law Firm

Target Audience: Legal Professionals, Professional Service Firms, Law Firm Partners, Nonequity Partners

Transitioning leadership from one partner to the next takes more time than most law firms realize, especially if multiple partners will be retiring in a short period — a situation many firms are beginning to face as baby boomers start entering their 60s.To ensure that your firm continues to operate as seamlessly as possible, it’s important that your succession plan address areas such as leadership preparation, client retention and compensation. Without such a plan your firm’s future is open to question, forcing you to make last-minute decisions.

Leadership

Planning for retirement can be a sensitive matter for aging partners who aren’t yet ready to hand over the reins. You don’t want to institute mandatory retirement for partners, but you do want to have a succession plan that addresses how to transfer leadership when partners are ready to retire.

Associates and younger partners want assurances that your firm will train, develop and groom potential leaders to take the helm when the time comes. Passing the torch can take several years, so it’s wise to identify early on those attorneys who demonstrate the skill, ability and personality to become effective managers.

It’s also critical to prepare qualified associates and partners for leadership roles. You can do so by:

• Involving them in significant management decisions,
• Allowing them to head certain committees or projects,
• Sharing detailed information about operating costs and expenses,
• Assigning them to oversee support staff or paralegals, and
• Including them in client meetings.

Also, be sure to ask this next generation of leaders about what areas they want to be involved in or skills they want to develop.

Client Retention

Firm succession also affects your clients. You can help ease this transition for them by introducing younger partners and associates early on. Also, ensure clients that the retiring partner will be available for a specified period of time during the transition to nurture the relationship with the new attorney and monitor service.

You can encourage retiring partners to stay involved in this process by offering incentives, such as paying membership dues for professional associations. If even after retirement these partners occasionally attend lunches, seminars and social events involving their former clients, it will reiterate to clients that they’re in capable hands and demonstrate your firm’s continued appreciation for its retired partners.

To determine how well your clients’ needs are being met, solicit feedback regularly.

Compensation Agreement

For a retiring partner, you’ll want to create a detailed transition plan that includes a proposed workload reduction and a compensation agreement that breaks down the percentages of client fees that the firm, retiring partner and working partner will receive during the transition.

The retiring partner’s compensation typically is reduced according to the proposed workload reduction. The firm should start working on a plan with the partner in advance of retirement to ensure the transition is complete when the partner leaves the firm.

Also, determine whether the partner will perform work after retirement. If so, compensation will need to be negotiated, and the partner will still need to be covered under your firm’s malpractice insurance policy. (For information on malpractice coverage, see “Reviewing your malpractice insurance needs” at right.)

Business Development

As baby boomers retire, many organizations, including law firms, could suffer from the loss of knowledge that will accompany those exiting the workforce. Before partners in this group retire, ensure they pass along historical information about your firm and the expertise they possess in one or more specialized areas of the law.

Develop formal training and development programs, including mentoring for younger associates and younger partners, and discuss coaching techniques and group teaching methods. Informal meetings over coffee and lunch should also be viewed as opportunities to impart important firm information.

For instance, if the retiring partner is one of your firm’s rainmakers, be sure he or she imparts to associates and younger partners the wisdom necessary to cultivate key relationships and win new business. The partner should provide a list of referral sources and other key contacts.

You may not be able to completely replace the retiring rainmaker’s skills and talent, but you can develop these abilities in associates and younger partners through business development training and by encouraging them to hone their own style and techniques.

Ensuring Success

Every law firm has to deal with partners retiring. Having a documented succession plan in place and implementing it now helps ensure your firm’s success when the transition occurs.

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