Law firms have reported succession planning as a key challenge in numerous reports. Like estate lawyers without a will and builders living in half-finished homes, many lawyers advise their own clients on succession planning for their businesses and yet seem unable to put these plans into practice for their own firms. What steps can you take to ensure you have a pipeline set up?
Running a busy legal practice means we’re often caught up in day-to-day business challenges and forget to plan successfully for the future, resulting in a firm sale or merger.
And with the oldest baby boomers reaching 65 and preparing for retirement, there will soon be a significant departure of senior practitioners and large transfers of wealth, which highlights the importance of an effective law firm succession strategy to ensure the value of your business is in good hands.
What practical action can sole practitioners and firms take to avoid a haphazard approach to succession planning?
If you fail to plan, you plan to fail
To ensure a seamless transition, Laine McKenzie, manager at Legal People, recommends businesses take the following steps in law firm succession planning:
- Commence succession planning early on.
- Identify and develop strong leadership from within the firm.
- Attract and retain the right people to take over driving the business.
A simple three-step plan can provide the foundation for a solid succession strategy and save current business owners serious headaches when they eventually decide to hand over the reins.
O captain, my captain: Leadership and talent
What’s the use of a successful business if there’s no one to take the baton when the current leaders bow out of the race?
Essential to business planning and strategy is the ability to recognise and retain talented lawyers, foster leadership among those who are ready to carry on the culture and values of the firm, and be prepared to move with the times.
McKenzie notes that that this is a complex issue, with the nucleus of businesses now being made up of different generations with different expectations regarding career aspirations, work–life balance and financial rewards. As long as you identify and understand different personalities and leadership styles, and assess how each individual will be incorporated into your business, you will be well placed to establish a legal practice with longevity.
Till death do us part
Death and disability are obvious considerations, and yet they appear to be an overlooked aspect of succession planning in many firms.
Rick Mapperson, former managing director at Rick Mapperson and Associates, recommends that owners practice the ‘what if’ scenario and plan contingencies in order to deal with various crises or threats.
Another advocate of the ‘be prepared’ approach, Yvette Pietsch, managing principal at Crowe Horwath, says that choosing the right partnership structure and understanding the partnership agreements is one of the fundamental areas that law firms should address.
Examine your partnership agreement and ensure that it deals effectively with obstacles, tragic or unexpected life events and partner movement. If you are bringing someone new into the equation, think about how well they will adjust to the current dynamic, how you will overcome challenges along the way and what kind of training they need to undertake to come on board. You may even wish to discuss whether incorporation is preferable to the partnership model.
The worst thing you can do is not plan at all – succession planning and long-term success go hand in hand.