Law Firm Succession Planning: 6 Steps All Firms Need to Take Now
According to a recent report by ALM Intelligence, at least one-third of all law firms have no succession plan in place for firm leadership or for client team leaders, putting the future of even large firms in peril. If there is no plan in place as the older partners retire, the firm is sure to find itself in trouble.
So why aren’t all law firms giving as much thought to their own future success as they do for their clients’ future wellbeing? According to the same study, many law firms haven’t formulated their plans because they are having a hard time identifying successors. Conversely, younger attorneys cited resistance from senior partners as the reason for the lack of planning. So where in the middle can the millennial attorneys in a firm find common ground with the older partners?
Interestingly, this common ground can come in the way of creating that succession plan together. Input from the future firm leaders (generally millennials), coupled with the years of experience from the senior partners (generally those 55 and older), can be blended together to create a smart succession plan that addresses the needs of multiple generations of firm leaders.
How do you create a succession plan for your firm? Start by taking these 6 important steps.
- Analyze Relationships & Data – Start by laying out a clear picture of client relationships, revenue, and potential threats should the primary partner retire. From there, look at the next generation of firm leaders to begin identifying who will take the reins of those accounts when the primary partner is no longer at the helm. Identify and examine all significant client relationships similarly.
- Determine Your Overarching Goals – Determine the long-term goals of the firm before deciding who will be responsible for seeing that those goals are met. Agree on what is best for the firm before nailing down who the specific people are who will see that the firm’s best interests remain paramount to all else.
- Appoint the Next Leaders – Only after clarifying the firm’s goals should management focus on who should lead the firm to success in the future.
- Appoint the Next Leaders – It can’t be emphasized enough just how important it is to make sure your clients are kept abreast of your plans for their future. Avoiding discussion of succession planning with clients is dangerous, and undermines the integrity of the relationship. Be honest about eventual transition, so there is ample time to confirm that the future partner and the client work well together.
- Create Transition/Compensation Plans – Determine how partners will transition out of the firm from a financial standpoint. Will you use a decreasing compensation plan or other retirement plans to help partners who are transitioning out of the firm?
- Make Succession Planning an Ongoing Priority – Succession planning needs to be a part of every law firm’s business model. After all, the goal is likely to keep the firm thriving for years to come. Eventually the millennials will become the firm’s experienced elders, and will need to be planning their own transition. Creating a plan now, that can be adapted for future years, increases your chances of thriving for generations to come.
For other insights revealed through this report, click here.