One of the biggest issues facing law firms today is succession planning. The notion of how to ensure that the next generation of partners will continue to make the firm viable and profitable resonates with firms of all sizes. Is it enough to just hire good lawyers, train them, elevate them to partner status, and then hope that you can really "pass the torch" of your client base to them?
In speaking with various Managing Partners over the years, I have learned that the “passing of the torch” does not occur as easily and smoothly as one would hope. The truth is that clients still hire lawyers, not necessarily law firms. As such, it is difficult to get your client base to transfer to a senior associate/junior partner, especially if you have not substantially involved that lawyer with your client base over the years. The days of expecting client loyalty are gone – lawyers have to work incredibly hard to keep their clients happy, and part of that process includes building a team around you that your clients trust. If your clients remain solely reliant on you, then you can bet that torch will not be passed when you decide to retire or reduce your work hours. The clients will go on their way and find another law firm, leaving your firm without that expected, and relied-upon revenue. That is why it is imperative that you think about succession well in advance of retirement and have your firm get serious about it now.
Is My Firm Serious About Succession?
- Succession should be as important to a mid-level associate as it is to a Managing Partner because it affects the firm’s future and your career significantly. So, ask yourself; is your law firm serious about succession:
- Has your firm openly addressed the issue of succession planning?
- Is there a real, concerted effort to have senior associates/junior partners involved in client pitches and client management?
- Are there incentives in place to encourage senior associates/junior partners to originate business?
- Are there incentives in place to attract lateral partners that show the firm’s commitment to succession?
Naming The Issue
When I speak with a Managing Partner who uses the actual word “succession”, I am immediately encouraged. When he/she starts talking about how to build succession or openly admits the firm’s obstacles in doing so, I am impressed. Just putting a name to the concept of ensuring a firm’s longevity is ahead of the curve. Even if the firm is not seeing the results yet, the first step is to acknowledge that your senior partners cannot be the only ones to keep the lights on at the firm. At some point, they will move on and the firm needs to figure out how it will endure. If you have not heard the word succession at your firm, think about injecting it into the conversation. It’s a great starting point.
Involving The Up-And-Comers
Every Managing Partner tells me that they want to see more dynamic, impressive “up-and-comers”! They know that the future of their firms is in the hands of those coming up the ranks right now. Surprisingly, however, is the fact that many of those anointed “up-and-comers” tell me they are frustrated, stifled, and disincentivized. Some of them do not even know that they are valued by the senior partners and looked at as potential successors. I attribute that to the lack of team concept that runs rampant in law firms.
Consider this – there are many companies that encourage and even require their CEOs, General Counsels and other high-level executives to pinpoint, specifically, their successors. Companies want to know who will fill your shoes if you decide to leave or retire because the company needs to know that the business will keep churning, even if it loses one of its key people. Also, this exercise serves to make the up-and-comers feel more invested and engaged in the company, knowing that there is a long runway of growth and advancement for them. Oddly enough, this concept is not as pronounced in law firms. The idea of a senior, rain-making partner pinpointing a specific junior partner to be his/her successor seems almost outlandish, largely because we don’t focus enough on the team aspect of running the business of a law firm. There is so much focus on building one’s individual book of business that the idea of how to grow, expand, and ensure its longevity gets lost! A company focuses on its overall profits and knows that it cannot rely on one or two key people. Law firms need to shift their thinking in the same way. When that shift is made, it can help keep those up-and-comers from leaving and make them more invested in working hard to increase the firm’s profits and longevity.
At a minimum, the up-and-comers need significant client contact. They need to be introduced to key clients, early and often in their career, so that the torch can be passed. This also shows the up-and-comers how to attract and keep clients happy because they will have a front row seat in the process.
Putting Real Incentives In Place
Incentives are powerful. When they are clearly defined and consistently enforced, they can be the reason why a successful partner stays at his/her current firm (instead of jumping ship as he/she is often courted to do); they can also be the reason that a sought-after lateral partner picks your firm ultimately.
In terms of succession planning, incentives are geared toward giving that senior associate/junior partner a reason to originate business and a reason to work hard for that senior partner, so that the torch may be passed. Just recently, I spoke with a senior associate who is routinely originating over $100K worth of commercial litigation work for his firm. He is receiving a decent base salary, and a small bonus that is tied to the hours he bills. He is receiving absolutely no financial incentive/reward for his originations. Yes, he should focus on building his book because it is ultimately the only safety a lawyer has in this job market. In reality, though, he is at a crossroads where he is deciding whether to put his effort into billing more hours (and thereby increasing his salary) or spending his time on networking/marketing to build a book. As the sole provider for his young family, he chooses the former because more billable hours = more money = making the mortgage payment! He wants to be a rain-maker one day, but his current firm is actually discouraging it with its current financial model. Fast forward a few years, and that firm will likely wonder why he is not originating work and why he has become more of a “worker bee”. The firm will not view him as an integral part of its succession plan, but he could have been if given the incentives earlier on in his career.
The firms that are taking succession seriously are providing financial incentives to any lawyer at any level who is originating business – even business that the lawyer does not handle him/herself, but rather delegates to another lawyer in the firm with the necessary expertise. Ironically, the actual dollar amount is less important than the fact that the incentive exists. In other words, young, up-and-coming lawyers are motivated to do more and seek out clients when they know those efforts will be rewarded financially in some measure. It sends the message that the firm is serious about succession – serious about wanting young lawyers to grow and develop their practices, and that the firm is supportive of those efforts. It is more of that team mentality and less of that archaic "do only the work I give you" mantra.
Further, the firms that are taking succession seriously are talking about the illustrious equity component of partnership. Of course, it is easy to discuss equity when you are courting an established partner with a $5M practice. I am talking about discussing equity with the up-and-comers who are just starting to really hit their stride. The firms that are serious about succession are talking about equity with home-grown talent and potential lateral hires, and explaining that equity will be available at some point if things go well. Some firms have even charted out how and when equity will be part of the deal, provided that the partner is successful. Hiding the conversation about equity and telling laterals that equity will be discussed “at a later point” that never seems to come is not working anymore. No one is asking for promised equity but rather the chance to become equity partner at some defined point in time, if they hit specific benchmarks.
Not all incentives are monetary. Indeed, one of my mid-sized law firm clients specifically stated that they have a plan for ultimately transferring leadership of the firm from the name partners to the younger generation over the next 5-7 years. They are building a plan for how and when those younger partners will have more of a voice about firm leadership and decisions. Will your firm let the up-and-comers have a say in their own bill rates? Are they allowed to think outside of the box in terms of marketing initiatives and bill rate flexibility? Are they involved in lateral partner hiring?
Being serious about succession takes time and consistent effort. Understanding why your firm is not growing or cultivating the next generation of talent is critical. Many of the firms with whom I work have sought the services of a growth strategist/consultant to help them identify a clear plan for succession. Getting serious about succession not only helps elevate your internal talent – it also helps your firm attract, and keep, those lateral up-and-comers that you want. In placing young partners, I am constantly getting questions about the future of a firm and the firm’s plan for growth and sustainability. Lawyers are looking ahead at the next ten years of their career, not just at the offer on the table. If your firm is serious about succession, I want to know that so I can differentiate your firm and convey details about your vision to those great lateral partners that will be instrumental to your succession plan. If your firm is not yet serious about succession, the time is now to start the conversation.