Although succession planning involves common sense, it poses many challenges that must be recognized and managed along the way. Read Part I (intro) here and Part II (what makes a comprehensive plan) here.
The Challenges of Succession Planning (Part I of a Multi-part Discussion)
Significant challenges must be overcome to prepare, implement, and follow through with a comprehensive succession plan.
Conversations about transitions of leadership and clients can be awkward and fraught with emotion, apprehension and fear. Face it, at some point a leadership transition must occur; at some point, your firm will be faced with the need to transition business to the next generation. Transition planning requires law firm leaders and senior partners to think ahead to retirement and life after the law. That can raise financial concerns about retirement and anxiety about giving up their clients and their identities as lawyers and facing their own mortality; it can also create animosity or resentment if lawyers feel underappreciated. These conversations also can raise concern among younger lawyers about the viability of a firm after the senior partners are gone.
Establishing a culture of open communication within a firm will make conversations about transition planning much easier. All the partners within the firm should feel comfortable discussing all business matters with one another. Senior partners should not fear backlash for speaking the word “retirement” or think that their wants and needs will be dismissed by the other partners, nor should they feel threatened or be offended if younger partners or firm management broach the subject. The younger lawyers should not panic or assume the worst if a senior partner announces plans to retire. Open communication allows transition plans to be prepared and adjusted to accommodate the needs of all concerned.
Limited Time and Resources
Similar to strategic planning, succession planning is not a one-and-done prospect. Rather, it requires a long-term commitment, constant focus, and reexamination and tweaking on a regular basis. In short, it takes time and resources away from generating revenue. Generally, smaller firms can less afford to allocate time and resources to “nonessential” activities. If the members are committed to the long-term success of their firm, however, transition planning should be considered a vital activity in any firm.
The best way for firms, particularly smaller firms, to plan for transition with minimal disruption is to begin the process far in advance. Without question, the sooner the firm gets started, the better off it will be. Recognizing that transition planning is a process, not an event, is crucial. Ideally, the process should begin five to 10 years before a lawyer approaches retirement. Smaller firms particularly may not have the resources to transition clients and lawyers if they wait until the senior partners are halfway out of the door or the managing partner resigns. Spending a few hours a month planning for a transition and spending a few hours a month developing the younger lawyers over the course of several years is much easier and achievable, but it requires focus and discipline.
Obviously, buy-in from leadership is crucial to the success of transition planning, but finding time amid the other leadership responsibilities to focus consistently on transition planning issues may prove challenging. Without one or more individuals invested in and driving the process, it will not receive the attention that it needs and deserves. The task of driving the process may fall to the younger lawyers. They should be invested in the process since their long-term success may depend on it. Care must be taken, however, because pushing from a lower level can create friction with the senior lawyers, particularly if generational or communication issues already exist.
Senior Partner Buy-In
Senior partner buy-in to the process of transition planning for their practices is essential. Senior partners often don’t want to even talk about the inevitable need for transition, much less assist in planning or training their successors, and eventually turning over their leadership positions or clients to others. I choose to believe (perhaps naively) that most of our senior partners ultimately have the best interests of our firms at heart and that those who are reluctant to participate in the transition planning process simply find it threatening or don’t recognize the need to start the planning process early. They may not be ready financially or emotionally to think about retirement. They may be concerned that if they start the process of turning their clients over to younger lawyers, they won’t be needed anymore, or the younger lawyers will take the clients and leave the firm.
Firms should consider developing a comprehensive senior counsel program because ad hoc discussions with senior partners about transitioning can create the impression that a particular individual is being singled out because of age or energy level, or that a particular individual is being treated more favorably than others. It should be understood, however, that while the process will be consistent, the specifics will be tailored to each individual lawyers. Allowing for specific tailoring within the program will help the senior partners resolve their individual needs and concerns and will make the process less threatening to the senior lawyers. The program may provide options for continuing to work after retirement from equity status, such as part-time arrangements or consulting on particular matters. Including access to resources to help senior partners plan financially for the period after they give up their full-time status also should be considered.
Coming Soon – The Challenges of Succession Planning, Part II: Compensation Issues, Generational Issues, Client Retention
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.