Best Practice Tips: Client and Management Transition in a Larger Law Firm

Asked and Answered 

By John W. Olmstead, MBA, Ph.D, CMC

Q. I am a member of the executive committee of a 75-attorney firm in Houston, Texas. We are a first-generation firm. Several of our founders are in their 60s and we have recently begun discussing succession planning and how clients and management duties will be transitioned. We would appreciate your thoughts in these areas.

A. In larger firms, clients are more likely to be large, sophisticated clients, possibly Fortune 500 companies, which refer many matters to the firm during the course of a year. Often such clients may be both a blessing and a curse for the firm. A blessing in that their business provides the firm with huge legal fees during the course of a year. A curse in that their business represents a large percent of the firm’s annual fee collections and a significant business risk if the firm were to lose the client. An effective client transition is critical, takes time, and must be well planned.

Successful client transition – moving clients from one generation to the next – is a major challenge for larger firms. Shifting clients is not an individual responsibility but a firm responsibility. To effectively transition clients, the individual lawyer, with clients, must work together with the firm to insure the clients receive quality legal services throughout the transition process. Both the individual lawyer and the firm must be committed to keeping clients in the firm when the senior attorneys retire. Potential obstacles include:

• The firm’s complacency regarding the relationship between the responsible attorney and the client;
• Clients who are uncomfortable with other lawyers in the firm doing their legal work;
• Other lawyers in the firm not being familiar with the client’s business;
• Senior attorneys who do not include younger attorneys in meetings with clients; and
• The point lawyer not identifying the appropriate lawyer successor to the client.

In larger firms, partners may have management responsibilities as well as client responsibilities. A retiring partner may be a managing partner, executive committee chair or member, or serve as a chair or member on other firm committees. Retiring partners will have to transition these responsibilities to other partners in the firm.

Transitioning client relationships and management responsibilities effectively can and, where possible, should take a number of years – preferably five years – typically not less than three years. For this reason, many firms use five-year phase down programs for retiring partners. These plans provide detailed timelines and action steps for transitioning client relationships and management responsibilities.

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John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics and author of The Lawyers Guide to Succession Planning published by the ABA. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.