Firms are filled with people so passionate about their profession that their sense of self is founded in their careers. So the last thing they want to think about is leaving their profession. Yet unless they give their eventual departure some strategic thought, they could be orchestrating a disastrous crescendo to their own career.
Many professional services firms (such as law firms) are unique in the business world in terms of their ownership. They usually aren’t publically owned (although that’s now possible in some parts of the world). Unless the firm is based on a sole practitioner, the firm doesn’t tend to be owned by a single individual or corporation. Most professional service firms are partnerships: comprised of the very people who generate the firm’s revenue and manage the organization. This makes the business management sense and productivity of partners extremely important to a firm. Partners – particularly senior partners – offer wisdom and experience in terms of their profession but also in terms of firm management and mentoring. They usually have carefully developed and powerful client and referral source relationships. And their billing rates are likely the highest in the firm.
But all partners eventually leave a firm. Their departure could be due to retirement, health reasons or even to join another firm. When a company employee leaves an organization it’s understood that there may be some productivity loss for a period of time. But loss of a partner can have much longer- term and far more devastating results. Firms are well-served by considering these challenges in advance and ensuring that to the degree possible, there are succession strategies in place for future departures.
Prepare for Predictable Departures:
The most predictable departure should be retirement, but too often retirement becomes an emergency client management process. It is not a safe or appropriate business practice for a partner to be able to declare they will retire in six months, nor should a succession plan take place in under a year. Yet too often, I’ve seen significant partners declare intent to leave a firm in such a short period of time. Often, this declaration does not come with a succession strategy. Instead, the departing lawyer continues to work as normal until their departure date, and then the firm is left to pick up the pieces with the clients thereafter.
Professional service firms should require that partners identify a desire to retire at least three years prior to that date, and preferably five years prior. This time period is needed for two reasons: 1. To ramp up expertise within the firm, particularly for smaller firms where resource re-allocation can be more difficult; and 2. To provide sufficient time for clients to be introduced to, experience and eventually learn to trust the lawyer taking over the client relationship. Once a retirement date has been set, firms should work with that partner on a detailed succession strategy. Start by identifying all key clients of that professional, and their files. Next, determine who will assist with each client and on each file as appropriate. Work should then be gently and increasingly allocated to the incoming lawyer over time. This helps the incoming lawyer to gain familiarity with the file and client, while helping the client to get exposure to and learn to trust the new lawyer. Eventually, the amount of time spent with the client should reverse so that the incoming professional is spending more time and doing more of the work for the client than the departing professional.
Obviously, as part of the succession strategy there should be a compensation agreement in place for the last two years of the departing professional’s career to ensure that they are not penalized for safe and smooth transfer of their work.
Preparation for Unpredictable Departures: The safest way to prepare for an unpredictable departure is to operate as if anyone in the firm could leave at any time. Departure doesn’t need to be the result of a defection to another firm. I have seen sudden partner departures due to their own illness but also due to illness or death of a family member, or serious trouble with a child. It is distasteful but prudent to consider than anyone could be “hit by a bus” at any time. And the best way to prepare for this is to ensure the firm and its clients are not overly dependent on any one lawyer at any point in time.
Most firms insist that clients are clients of a firm, but act like clients are clients of a particular professional. This is a high-risk practice. To protect both the client and the firm, the relationship between a firm and an important client should never be limited to a single practitioner. This is easier said than done, as senior partners may be dealing with clients on certain issues due to their extraordinary expertise. That said, firms must still aim to expand exposure to different professionals. Develop and uphold policies around client file management (including documentation as well as interaction). Conduct occasional client audits or less formal feedback mechanisms to ensure the firm is aware of any issues with the client’s relationship with the firm.
If a partner does leave the firm – either temporarily or permanently – for any reason, immediately meet with their support team (assistant, paralegal, associates) to develop a status report on all clients and active files, and develop a strategy for protecting that work.
A Message to Sole Practitioners: You also need a succession strategy. Begin by determining how long you wish to work, and for how hard. It is unrealistic to think you can work until your deathbed, and unfair to any clients who are relying on you to consistently deliver high quality legal advice. Similarly, as we age we are at increasing risk for health related issues which may slow us down or stop us from working altogether for large periods of time. Be realistic about what you can and can’t do at certain ages. Declare a retirement date, or at least a semi-retirement date. Develop a work back schedule to determine how best to scale back your work accordingly. Depending on your practice, this might mean that you will not take on any new clients or new work a year or more prior to that date. Think well in advance about whom will take over your files and ensure there is a sufficient ramp up process to do so safely.
If your intent is to transfer or sell your practice rather than shut it down, consider when and how you will find whoever will be replacing you. Understand that advising your clients of transfer of their files to the professional taking over your practice does not guarantee the clients will stay with that person: you will both need a client relationship transfer plan in place, and plenty of time to activate it.
Regardless of the size of your firm or practice, your succession plan is not complete until you have consider threats to that plan, and have a back-up in mind to ensure you never leave your clients in the lurch. This might suggest that you find your replacement much earlier than intended, and oversee as much as a two-year (or more) transfer process. This ensures that in the event of an emergency, your clients can be taken care of – at least in the short term.
Professionals spend years building up their businesses, building and maintaining the trust of their clients and referral sources and establishing a strong name in their professional communities. Yet too many allow unplanned events near or at their retirement to jeopardize their good name and reputation. Most of us would like to leave a legacy of excellence behind us. Take steps to ensure that is, indeed, what you will leave behind you.