How is your firm planning to deal with its future?
For many firms, coming to terms with aging and retirement, and identifying transition candidates, can be a difficult process. But, this is essential for all firms, small and large, because the failure to plan and develop a timeline for transitioning can have major repercussions including losing clients, losing talented associates or potential leadership, instability within the firm, among others.
Because most firms do not have a succession plan in place, here are a few tips and considerations:
1.A succession strategy and plan should be incorporated into every strategic plan and partnership, operating or shareholder agreement. It is never too early to start thinking about succession planning.
2.If any sole-owner firm, or when any partner in a multi-owner firm, is age 50 or older, it is important that the firm get started on developing a succession plan.
3.Remember, the succession plan and transition will take time. Solo practitioners will have a significant challenge because there is no obvious person to whom the practice will transition. Thus, the practitioner may need to hire and groom an associate who could buy the firm or become a partner and eventually buy the partner’s interest.
4.A succession plan should start no less than five years from the retirement or exit date of the owner/partner. For some, less time is sufficient. Think through your circumstances, talk with your partners, develop a plan that works for you and your situation, and then take action.
5.“Write down the plan and timeline because what is written down, what is measured, what is calendared, is what gets done. Effective management of the succession planning process takes discipline and accountability. Once it is written down it is in the form of a “project plan” with due dates, start dates, tasks and action items, required resources and names of those responsible for different tasks and action items. Unless attorneys approach their retirement like a case or project and develop a succession/transition/exit plan with calendared timelines, the project will likely experience fits and starts, timeline drift and the needed momentum may not materialize”.
 Olmstead, J. Are You Prepared for Your Exit? Your ABA Newsletter. Apr. 2017.
Succession Planning: Allowing everyone a productive and secure place in the firm.
In 2006, the Oregon Attorney Assistance Program conducted one of the first retirement surveys of lawyers by a bar-related organization. Ten years later, in June of this past year, they invited about 6,000 of their members age 50 and over to again fill out a similar survey.
In the current retirement survey, bar members 60 to 69 years of age represented over half (53 percent) of survey participants. In addition, 50 percent of the respondents are planning to retire from legal practice in the next five years. We are looking at a paradigm shift with a departure of these Baby Boomers and the anticipated loss of their experience and expertise.
The trend revealed by the Oregon survey reflects the entire nation. Some 10,000 Americans turn 65 years old every day. Law firms throughout the country are scrambling to manage their aging workforce and what it means for the future of their firms.
Aging is no longer just about people 65 and older. As people are living longer, living better and maintaining a more balanced and vital lifestyle, this impacts the career expectations of attorneys at all points along the career trajectory.
Traditionally, aging has been a personal matter, rarely discussed outside one’s immediate family. But in a law firm setting, anxious younger partners may be the first to bring up succession planning as the area of concern. The pressing data from the Oregon retirement study indicates that succession planning for our aging lawyer population is too critical to be ignored and will not get any easier if left unattended.
Historically, retirement was seen as a single event – withdrawal from the workforce into leisure, relaxation and a slide toward the end of life. Accordingly, lawyers often had two options available to them when it came to retirement: continue working full time or close the door and walk away. Law firms today can add new options by creating new lines of services, modifying traditional retirement policies and using new mobile technologies to better preserve the experience and value of their aging workforce and meet the demands of a rapidly changing marketplace.
Firms are likely to find that developing more flexible and accommodating work options will derive valuable client and firm service from those approaching traditional retirement as well as younger attorneys who don’t fit or want to fit inside the traditional partnership model. Almost two-thirds of the 2016 participants in the Oregon retirement study reported that they expected to continue working full or part time at age 65.
Retirement in the traditional sense may not always be an option. For others, work can be an enriching experience that may not need to end at an arbitrary age of 65 or even 70. Then there are those who find themselves sandwiched between generations, playing multiple roles by caring for both young children and elderly parent, realizing that retirement may have to be delayed. They have to continue working longer than they anticipated.
The devil is in the details with succession plans. Listed below are a few for your firm to consider:
1.Today’s new retirement model must be seen as more of a journey than a destination, and law firms will need to take more of an active role in helping their partners transition to and from this new “retirement.” All partners should be involved in the conversations regarding the firms’ succession plans once a person reaches his or her 50th birthday. This new approach to a more flexible retirement should be introduced well before the more traditional retirement age, and it should last well into counsel’s mid-to-late 70’s. Too many mid-career professionals are left to deal – in silence – with illness of family members, caregiving responsibilities for aging parents and adult children, or just dealing with the impact of daily stress on law practice families. As lawyers begin thinking of themselves as life designers, they will begin to realize that they can actually influence the future that is possible for them. The participation of their partners in that process as it pertains to the firm can be both effective for the firm and reassuring for the yet-to-transition partner.
2.As mentioned earlier, aging of the firm’s workforce is no longer the exclusive domain of just those partners approaching their 65th birthday. By taking more of a “system and design thinking” perspective in addressing the increasingly complex problems related to law firm succession planning, firms should be able to create more of a shared vision, a common ground, where all participants are able to work through the current situation and make decisions based on what is good for the firm as well as each individual. Make sure you include voices of younger partners because they may have a very different perspective of what the firm should be doing to continue as their practices grow.
3.Law firms need to begin thinking of their senior lawyers as potential opportunities – a growing market for experienced part-time professionals who can provide both mentoring and client contacts – instead of as unaffordable financial burdens. Senior counsel should be perceived as a pool of potential “contract” partners who are interested in staying productive.
4.Law firms need to come up with more creative ways of investing in long-term growth. Many firms already contribute to partner retirement plans. You may also want to examine how executive bonus plans, possibly funded with whole life insurance, can be used to provide tax-advantaged supplemental retirement income for all partners. Firms can cushion an early (or timely) retirement choice through third-party payers, which are not firm-dependent, such as insurance coverage for retirement benefits.
5.Change in law firm culture as older becomes the “new normal.” With the sheer number of Baby Boomers that is disrupting the traditional demographic shape of law firms and society, older is becoming the new normal. Law firms will have to figure out how to balance billable hour requirements with mentoring responsibilities while also helping senior lawyers enter this new life stage.
Law firms will need to support initiatives that promote a sense of purpose and a positive self-image. Senior counsel can then feel confident about navigating life transitions as integral parts of the law firm while younger partners see hope for their future careers and confidence that the firm will support them throughout their entire career.
The business of a law firm is dynamic, with continuing up-and-out succession planning pressure. The failure to plan can cause a toxic stagnation as junior attorneys depart for firms that offer greater opportunities for growth. With a thoughtful succession plan and creative financial planning, however, more senior partners can feel secure enough to serve as effective transition partners who help the firm continue to grow and thrive.
Article written by Stephen P. Gallagher, published in Law Practice Management (May 2017). Stephen is the founder of LeadershipCoach, an executive coaching consultancy primarily handling transition or succession planning for individual lawyers, law firm planning teams and bar associations.