With the baby-boomer generation of senior lawyers and partners on their way to retirement, one of the topical issues surfacing in the legal regulatory landscape is effective succession and exit planning.
Law firms that do not have a proactive approach to succession and exit planning of their senior legal practitioners run the risk of not only losing invaluable talent and leadership skills, but also long-term clients.
1. Look at your entitlements
Overlooking superannuation entitlements and retirement planning, failure to protect family wealth in the event of unexpected life-changing events and unscrupulous tax activities over the course of years of legal practice are all ingredients for legal and financial disaster come exit time.
There are a number of key exit-strategy considerations, including:
- Evaluating the logistics of a wind-down program.
- An effective management and leadership plan.
- A robust client-transition strategy.
- All retirement and superannuation entitlements.
- Finalising payment of ownership, partnership and equity agreements.
- Workload transition of departing practitioners.
2. Prepare the next leadership pool
In many ways, senior lawyers, through sheer sweat equity and drive, are integral to building the professional integrity, reputation and ‘brand’ of a law firm’s cultural identity. Those without an effective exit strategy and succession plan risk taking a vital part of that ‘brand’ with them once they leave.
It is therefore imperative that senior lawyers on their way out have sustained a close training relationship with their junior counterparts over the course of their career. This will ensure their legal and leadership skills, talent and professional reputation lives on within the culture of the firm and remains a consistent part of the firm’s professional identity long after they’re gone.
3. Transition the client base
Whether it’s retirement or a shift in careers, any lawyer making an exit needs to think about how to notify their clients and conduct a seamless transition so there is no material adverse effect on the interests of the client. The exiting lawyer must take all necessary steps to protect the client’s interests until an adequate amount of time has elapsed for the client to secure new counsel, whether that’s an internal transition or an external move.
Retaining key clients during a period of transition can make or break the success and reputation of any law firm. Senior practitioners need to carefully map the cross-pollination of these clients to their junior counterparts in order to maintain strong relationships. This takes considerable effort and open, honest communication over a sustained period of time. At the same time, it also involves considerable due diligence, including confidential client information management as well as effective document tracking, billing and record keeping.
4. Align internal policies and processes
One lawyer’s exit does not operate in isolation to the rest of the firm. Rather, an exit strategy and succession plan should be ingrained firmly from the outset within the firm’s internal policies and procedures. This involves evaluating all aspects of the firm and identifying processes and systems that can be improved to ensure the business of the firm remains robust post-exit.
Key exit-strategy decisions may include selling or merging the practice, internal transition policies or evaluating the risk of closing the practice altogether.
Typically, this will also include the consideration of partnership agreements and core documents governing the retirement and withdrawal of a senior lawyer or partner.
5. Long-term exit mapping
Ultimately, an exit strategy needs to be carefully mapped to maintain the cultural and reputational strength of the firm, and protect the best interests of the clients. Consider mapping at least a five-year exit plan prior to the final departure date. A long-term, forward-thinking approach can ensure a successful, seamless transition to the next generation of leadership talent.