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Wednesday, December 12, 2012

Your Firm’s Future Depends on its Succession Plan


Dan Taylor was the managing partner of the fictional 28-attorney firm Milford Taylor & Shapiro (MTS) for more than a decade. He was well-liked and ran the firm profitably, maintaining high client retention rates, operational efficiency and steady growth.

Because Taylor was healthy and still in his 50s, it never occurred to anyone at MTS that the firm should plan how they’d replace him.

Then a heart attack forced Taylor into early retirement. MTS’s biggest rainmaker and its litigation practice group leader—neither of whom had been groomed for firm wide leadership— began a bitter battle for the managing partner role. After MTS’s executive committee chose the litigation group leader, the rainmaker left, taking key clients and prospects with him. Plunging revenues, poor morale and inexperienced leadership sent the firm into a downward spiral. Three years later, MTS went belly up.

This scenario may sound extreme. But it could happen to almost any firm that hasn’t planned for leadership succession.

Excuses, Excuses
To create an effective succession plan, you might first consider the reasons your firm has put it off thus far. Has your current managing partner vowed that they will never retire? Are other partners reluctant to broach the subject for fear they will offend? Does the pool of potential successors lack the required experience and skills? Are you worried that clients will take their business elsewhere if they learn your current leader my soon step down?

Some issues are easier to address than others. Many firms simply haven’t found the time to make a succession plan—they’re too focused on meeting client needs to think about the future. Not addressing it makes the problem grow even larger.

Policies Prevent Conflict
Whether it’s during a weekend retreat or over an extended series of meetings, the first step in succession planning is to develop policies that will enable a gradual transfer of power. This includes establishing an age, such as 62 or 65, when the managing partner is required to begin the multi-year process of transferring power and client work to his or her successor.

Such a policy will help your firm deal with managing partners who are unwilling to retire from the position or reluctant to share “their” clients. To head off potential conflicts, specify that the partner can begin drawing retirement benefits only when your firms’ executive committee or new managing partner determines that the transition has been successfully completed.

Keep in mind that such politics aren’t intended to force partners into retirement, but to get them to start the often-long transition process.

Indeed, it’s important to encourage the retiring partner to remain involved—as advisors, mentors or even a part-time practicing attorney with reduced client workloads. Be sure your succession plan includes details about compensation, benefits and perks.

Grooming The Next Generation
Once formal transition details are worked out, create a training program for managing partner successors. Some lawyers are actual leaders—capable of inspiring confidence and effecting compromise—yet on-the-job training remains essential. Law firms have become complex organizations, and keeping them running and growing takes experience and a variety of personal, intellectual and technical skills.

Once a probable successor is identified, he or she should be included in significant management decisions and financial issues such as those related to budgeting and compensation. And as the managing partner nears retirement, the successor should get to know all major clients can take the lead in meetings with them.

Much of the successor’s education, however, is likely to be informal. Some of the most valuable advise is communicated during casual lunches or social outings.

Make A Choice
Succession planning is not a one-time event. It is a continual strategic process of communicating, training and identifying leadership talent.

If your firm has yet to create a formal success plan, don’t put it off any longer. Leadership succession isn’t a matter of if, but when. The only question is whether the transition will be seamless and successful or fraught with conflict—risking the future of the firm.

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