Best Practice Tips: Law Firm Succession Planning – Getting the Conversation Started
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. Our firm is a 17-attorney business law firm in Chicago. Our clients consist of mid-size companies and a few Fortune 500 companies. There are eight partners and nine associates in the firm. Four of the eight partners are in their early 60s and the other four partners are in their 40s and 50s. The four senior partners are the founders of the firm. Consequently, we have not had to deal with succession of partners until now. While we realize that we need to be thinking about succession planning, we have not made much headway. The senior partners are reluctant to discuss their retirement plans and timelines. We would appreciate your thoughts and suggestions.
A. Client transition, management transition, and talent replacement are the major succession planning issues for law firms. Such transitions take time, especially with clients such as yours, and law firms cannot wait until a senior partner comes forward, announces his intentions, and gives his required notice. Law firms should begin having conversations with senior attorneys and begin transition planning five years prior to a partner’s actual retirement. Having these conversations can be difficult. Senior attorneys may not know their plans themselves and may not have even discussed this topic, even with their families. In some cases, there can be trust issues at the firm and in other situations the firm’s compensation system may be a barrier. Law firm management must force the issue by institutionalizing a transition program and requiring conversation and discussion at a certain age. Some firms have mandatory retirement, and others have a five-year phase-down requirement with a formal client and management transition program. Personally, I prefer the phase-down requirement with a tailored transition plan over the phase-down period. I suggest that transition plans be tailored for each retiring partner, and reflect partner, firm, and client perspectives. Use compensation to reward successful client transitions.
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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.