Although succession planning involves common sense, it poses many challenges that must be recognized and managed along the way. Read Part I (intro) here, Part II (what makes a comprehensive plan) here, and Part III (challenges, part 1) here.
The Challenges of Succession Planning (Part II of a Multi-part Discussion)
Significant challenges must be overcome to prepare, implement, and follow through with a comprehensive succession plan. Our last blog post discussed the challenges of engaging in tough conversations, having limited time and resources for which to devote to planning, and the importance of securing senior partner buy-in. We continue our conversation today by discussing the following headwinds one might encounter with regard to law firm succession planning.
One significant issue that arises in making transition plans for equity partners is how their earnings will be affected and when the effect will begin. This issue may prove especially difficult to deal with in smaller firms with more limited resources. Again, the earlier that planning is undertaken, the easier these issues are to address.
As explained elsewhere, “[m]ost compensation systems don’t effectively or fairly address how practitioners will be compensated when it comes to transitioning out of equity status. As one partner eloquently put it, retiring partners are expected to be ‘philanthropic.’” Many senior partners fear that the transition process will leave them with inadequate compensation. This means that “[f]or any client-succession plan to work, the senior lawyer must be provided with some level of income protection that rewards the lawyer for furthering the goals of the plan.” (Roy S. Ginsburg, Successful Succession: Keep Your Best Clients When Boomer Lawyers Retire, 85 Wis. Law., Mar. 2012, at 28, 30.) Consideration also must be given to how the senior partner will be protected if his or her greatest fear is realized, that is, he or she successfully transitions his or her business to someone else, who then departs the firm taking the business. Regardless of the compensation method the firm chooses, it will need to be sufficiently flexible to be tailored to each senior partner’s individual circumstances and needs.
Generational issues may have a significant effect on transition planning. There are many more Baby Boomers than Gen-Xers, so it can be difficult to identify individuals to whom Baby Boomers’ business can be successfully transitioned. Differences in work styles can also create issues. Both older and younger lawyers may feel undervalued or misunderstood. Younger lawyers may believe that they are not taken seriously or are expected to give up too much of their personal time; older lawyers may think that the younger lawyers do not respect their wisdom and years of experience, are lazy, or don’t have their priorities in order. When the generations feel at odds with one another, transitioning is not likely to be successful, so these issues must be resolved before or during the planning process.
Clients need to feel secure in the ability of a firm to meet their needs after “their lawyer” is gone, so they must have relationships with, and confidence in, younger lawyers in the firm. Clients hire lawyers, not firms. Comfort and chemistry are crucial for a successful lawyer–client relationship; it is important to provide a client with the time and opportunities to develop trust in new lawyers while the senior partner is still involved to ensure that the client’s needs are met. If relationships have not been built with younger lawyers in the firm, the client will not remain after “their lawyer” departs.
A good transition plan will encourage the senior lawyers to make younger lawyers more visible and to build the clients’ confidence in them. Including younger lawyers in meetings and phone conferences (at no charge to a client if appropriate), encouraging younger lawyers to build their own relationships with the client, and giving them responsibility for writing and calling the client directly with updates will allow the client to get to know the younger lawyers and learn about their expertise and experience. Client confidence also can be built by giving credit to younger lawyers when they do good work, deferring to them in meetings, talking about their good results for other clients, mentioning their important outside activities, and so forth. After client confidence has been built, gradually giving a younger lawyer more and more responsibility for the client’s work and the client relationship can allow a seamless transition. But the process takes time, anywhere from three to 10 years by some estimates.
Involving a client in the transition planning process may be the single most important thing that a firm can do to increase the likelihood of retaining that client through the transition process. Clients may be the first to focus on the fact that “their lawyer” is now a “senior” lawyer or that the lawyer’s health is declining. Clients may be thinking (or even worrying) about the succession question before a firm ever considers the issue; they may identify and even hire a new lawyer before “their lawyer” is ready to pass the torch. Seeking client input in the transition planning process can give clients the comfort of knowing that the firm is planning and preparing for the client’s future needs.
Candid conversations with long-term clients early on in the transition planning process will go a long way toward avoiding problems down the road. What the firm envisions going forward, who should be in charge of the client’s work, the time frame for phasing out the current primary lawyer, and related issues should be discussed. The client may provide invaluable feedback about your plans. You may find, for example, that a client has little or no confidence in the successor who you propose. If you implement a transition plan without knowing about the client’s lack of confidence in the successor, there is little chance of transitioning the business. If you know of their concerns, you have the opportunity to correct the situation by either finding another successor or building the client’s confidence in the one who you propose.
Obviously, that kind of candid conversation is not appropriate with all clients. When the business involves clients with whom a lawyer has weaker ties, or who have had no contact with other lawyers in the firm, baby steps may be required. Test the waters by getting permission for a younger lawyer to handle a smaller matter, or one aspect of a larger matter, and if it goes well, progress from there. Regardless, once the transition plan is implemented, periodic feedback from the client should be sought to assess how things are going. Ask clients directly whether they have any concerns and whether they are satisfied with their new primary contact and make adjustments if necessary.
Coming Soon – The Challenges of Succession Planning, Part III: Retaining the Middle, the Right Skills, Identifying and Developing Future Leaders, and Disaster 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.