Although succession planning involves common sense, it poses many challenges that must be recognized and managed along the way. Read Part I (intro) of our blog series here.
A Comprehensive Succession Plan: What Is It?
Succession planning, or transition planning, encompasses several different components: business transition planning, leadership transition planning, and disaster planning. Each component is essential to a comprehensive plan.
Business Transition: Holding On to the Business That You Have
We all know that acquiring new business is generally a long-term and expensive process of building relationships, demonstrating expertise, and positioning to be in the right place at the right time to get the work. We all also know that our best source of business is our current clients. Despite these two truths, we are more likely to spend time and resources on developing new clients than we are on positioning our firm to maintain our existing clients after the originating partner or relationship partner departs. Investment in developing, implementing, and shepherding a business succession plan significantly increases the likelihood of a firm’s long-term success.
Leadership Transition Planning: A Rudderless Boat Goes Nowhere Fast
Leadership transitions can be fraught with problems, sometimes resulting in a reduction in firm profitability. Unplanned transitions compound the difficulties exponentially. A new leader must be identified quickly, increasing the likelihood that the wrong person will end up in the position. In a smaller firm, the pool of candidates may be extremely limited, and identifying the “right” candidate is not always easy. Most law firm leaders seem to agree that individuals who are anxious to serve as a firm’s managing partner often are not the best candidates for the job. A lawyer with a well-established, profitable practice is seldom excited at the prospect of giving up some or all of his or her practice to make time to lead the firm (or of experiencing the resulting hit to his or her originations and collections, and perhaps ultimately compensation, that sometimes occurs after assuming a leadership position). While arm-twisting may result in a reluctant agreement to serve, a leader who does not want to lead is not likely to be effective.
A leadership void can be particularly problematic in today’s legal environment. To remain profitable and competitive, firms must be more efficient and effective and find ways to give their clients more bang for their legal-spend buck. To do that, firms must change the way that they do business, which requires leaders who have vision and can drive that change. No one is irreplaceable, but a boat with no rudder goes around in circles, something that many firms cannot survive in today’s legal environment. Having a well-thought-out leadership transition plan is crucial.
Disaster Planning: It’s Not Just About the Tsunami
A firm must have a disaster plan in place to assure the continuation of the business if a disaster occurs. Hopefully, most firms have developed some type of plan to deal with a physical disaster—such as the firm’s building being destroyed (e.g., 9/11) or becoming inaccessible (e.g., Hurricane Katrina). But other types of “disasters” can derail a firm as well, such as the unexpected passing of a key administrative staff member, and firms need to have contingency plans for these types of events, too. If your accounting manager is the only person who knows the ins and outs of your billing system, how do you keep your practice going if he or she is hit by the proverbial bus? Depending on whether your firm has prepared in advance, accidents and other events can be a mere blip on the radar or huge time and revenue drains.
Coming Soon – The Challenges of Succession Planning
This blog series has been excerpted from an article that originally appeared in the November issue of the Defense Research Institute’s (DRI) “For The Defense” magazine, which can be found here.