According to a recent American Bar Association report, over 65% of law firm partners will retire in the next eight years. Baby boomers, who have dominated law firm management for decades, are retiring, and millennials are taking their place. Is your firm ready for this change?
The legal sector is undergoing significant upheaval, and the greatest protection you can have is a robust succession plan.
Regardless of where you are in your legal career, law firm succession planning is critical to your company’s survival. According to a 2018 Thomson Reuters study, just 37% of legal firms had (or were developing) a detailed succession plan.
It isn’t always easy to imagine a circumstance in which your law firm exit plan would be required. The unexpected can, however, occur at any time. If something happens to you, a succession plan provides you peace of mind and assures that your clients and partners are in a great spot to succeed. You can ensure that your clients won’t be caught off guard regarding their legal needs by planning ahead of time.
However, law succession planning is often not an easy task, and many law firms make mistakes when developing one. When planning for succession at your law firm, don’t leave it to chance – the team here at The Law Practice Exchange are succession planning and law firm M&A experts and can help you make sure your firm is set up for success if or when an attorney exits the practice.
Common Pitfalls to Avoid When Developing a Law Firm Succession Planning
The following are some of the common mistakes we’ve seen law firms make when coming up with a succession plan:
Not Mentoring Upcoming Partners
If you employ young talent, but don’t coach them well to become partners, you’ll be in a predicament. You should be grooming younger partners toward management long before your older partners announce their retirement.
Place them on panels to watch how they behave and respond in different scenarios. Make them a part of the firm’s management, client proposals, client relations, and vision.
This aids junior partners in assuming leadership roles and aids other firm members in seeing them as leaders and feeling more at ease when their leadership status is established.
Not Giving Plenty of Time for Transition
Giving yourself enough time is probably the most crucial thing you could do to ensure a smooth leadership transition. Law firm succession planning should be a continual component of the company culture for large and mid-sized firms, where there may be numerous departing senior partners.
Even in a small firm where just one lawyer is transferring, succession planning should begin at least five years ahead of time. It’s not a procedure that can be started when a senior partner wants to retire in a year. There’s always a need to hunt for lawyer “stars” to strengthen your roster and safeguard your firm’s long-term viability.
Not Valuing A Retiring Senior Partner’s Contribution to the Firm
Senior partners are encouraged to hang onto their rank for as long as feasible by the existing compensation system, which rewards attorneys for billable hours and origination for a legitimate reason. Seeing that your years of hard work have resulted in huge amounts of money for the firm fills you with pride, so it’s no surprise that when it comes to succession planning, the most common concern from senior partners is, “What about my compensation?”
Compensation is a sensitive and frequently contentious discussion. However, one tried-and-true technique to make it go more seamlessly is to compensate older partners for their immense contribution and for their continued teaching of rising partners. There’s no use in creating a succession plan if your firm is not prepared to compensate transitioning senior partners for their contributions.
Not Involving Business Development Teams and Marketers
Whether working in-house or as consultants, legal marketers and business development experts play a critical role in attracting the best candidates. Law talents with leadership capabilities are in demand, so having a recruitment staff that can uncover them and sell them on your firm is priceless.
Once these talents have been employed, they must be trained and coached to become rainmakers, another job for the business development team. Business development is a firm’s lifeline; if lawyers can’t generate business, everything crashes. That’s why your firm’s succession plan should include a vital company growth component and input from experts in the field.
Not Monitoring Your Law Firm’s Progress Enough
A succession plan’s schedule is self-evident: the senior partner will depart their role on a specific date. However, how you prepare for the change in the meanwhile is critical. To ensure that objectives are reached, essential team members should meet regularly.
Stakeholders in your firm should meet every three months, as doing it less often raises the chances of the transfer failing. These panel discussions allow everyone to track their progress and enable top partners to receive public acclaim for their achievements.
Regular meetings keep individuals responsible, as succession planning is about altering people’s behavior, which can be a challenge.
Contact Our Law Firm Succession Planning Team
Planning for the succession of your law firm can be a daunting undertaking that requires a significant amount of time. Setting aside time to organize your firm’s succession plan might be challenging, from ensuring you’re following your state’s requirements to drafting the proper documentation and choosing what to do after retirement.
If you’re having trouble keeping up with your succession planning checklist, start small and continue expanding your strategy. Succession plans are systematic, and failing to have one puts you, your business, and your clients at peril. Because you can never know when a catastrophe may occur, the best policy is to be prepared.
The Law Practice Exchange has the experience and the expertise to help with succession planning for your law firm, whether that’s bringing in a junior attorney and training them to manage the firm, or whether it’s exploring options to sell your law firm in the future. Call us today or fill out our online intake form to take the next step in securing your future.