The term succession planning is very broad, encompassing all of the planning and work that takes a busy lawyer to the next stage(s) of his or her career. It is not the equivalent of retirement, although that can be one result of careful planning. Planning is the key word. Lawyers engage in planning throughout their years of education and into the practice of law. Planning for the later years of a career and into the next stages of life is just a natural extension.
We sometimes hear lawyers say that they will never retire. There are probably a number of reasons for that attitude. Legal practice can be rewarding and fulfilling, so it is difficult to think about giving it up, even as a lawyer gets older. Some lawyers have not provided financially for a period of not earning an income from law practice. In addition, many lawyers find the loss of status when they are no longer in practice difficult to accept. Others just do not know what they would do in retirement. But an increasing number of lawyers have decided that transitioning to a different status, method of practicing or lifestyle can be a rewarding stage in their lives. And law firms have begun to embrace the concept of succession planning as an efficient management technique that ensures that older lawyers will be able to continue to practice at a reduced pace, if they choose, while providing an opportunity for younger lawyers to succeed to their practices and ensuring that both the younger lawyers and the clients remain with the firm.
Some law firms have a mandatory retirement age at which lawyers must stop practicing. This rule has the advantage of certainty, but it fails to account for differences among lawyers and their areas of practice. The greater number of firms continue to rely on ad hoc arrangements and procedures. Most of them know that this is not a businesslike way of operating their firms, but because of resistance or inertia, they have delayed adopting a program of succession planning. But there are advantages to both lawyers and law firms in adopting a succession planning program. An effective succession planning program begins with the understanding that it does not mean that everyone is treated the same. What it does mean is that everyone is consulted about his or her plans and intentions, and that a succession plan is developed that benefits both the lawyer and the firm.
More specifically, an effective succession planning program could contain the following elements:
Meet with all lawyers at age 62 to determine what plans and expectations they have. If the response is that the lawyer wants to be carried out, it should be made clear that the plan must consider the needs of the firm and the younger lawyers as well as the older lawyer. The same point may be made to the firm: it is important to recognize the contributions of the lawyer to the firm’s success. More to the point, planning for succession should not be merely turning over your clients to others and having a greatly reduced income until retirement. That might be the final result, but only after a period of adjustment. It is important to be businesslike, but equally important to be fair and empathetic.
The lawyer will be asked if he/she has thought about or made any plans for the balance of his/her working life at the firm. If the answer is a peremptory no, it should be stressed that this process is important to both the lawyer and the firm.
It will be made clear that each situation is different and that because an arrangement has been made with one or more lawyers, that does not mean it will apply to all lawyers. Lawyers will be treated equitably but not equally.
The lawyer will be asked to prepare a plan to include younger lawyers in work for the lawyer’s clients. It will be made clear to all that the younger lawyers are not displacing the older lawyer, but rather meeting client contacts and learning the kind of work that is being done. The plan need not be one that takes effect immediately. It might be that a beginning of the succession process would not occur until, for example, age 65.
It is important that the lawyer understand that he/she is not being pushed out. There is a danger that the older lawyer will decide to look elsewhere and try to make a deal with another firm that will not move the lawyer toward succession. Many of us know situations where that has happened: a lawyer is concerned about being “put out to pasture” prematurely and goes elsewhere.
This process certainly includes the matter of compensation, as well as continuing regard and respect for the lawyer. Many lawyers feel that the clients are “theirs” and that they should have control over them as long as they wish. They might also feel that if their clients are to be transitioned eventually, the lawyer should be “paid” for them. The pushback from the law firm will be that the younger lawyers have to be paid, too, but there is surely room for compromise and for a finessed solution rather than a brusquely offered one. If the older lawyer works less and would otherwise have a reduced level of compensation from the firm, a compensation arrangement could include an element of “buying” the lawyer’s clients and creating a longer glide path for the lawyer’s compensation. It might also be possible to include other compensation elements, such as a continuing but declining percentage of the fees generated by the clients. A stream of compensation payments after retirement might also be considered, but care must be taken not to burden the firm with a long-running stream of post-retirement payments to avoid a financial burden that could threaten the firm’s future.
The point of the succession planning between the firm and the lawyer will be to create a path toward working less and eventually retiring. As stated above, the timing and path might vary widely between lawyers. Some lawyers might want to continue practicing in some form much later than others. Some might want to adopt a different plan for later years, such as being a “business-getter” or ambassador for the firm. But many will look forward to the retirement years, which, given the advances in medicine, might extend for many years. Even after retirement, the carefully conceived succession plan should include a role of some kind for the retired lawyer.
Succession plans for those working in law firms will undoubtedly take many forms. The most important aspect of any plan is to have a plan, one that is conveyed to the older and younger lawyers. A carefully constructed plan will provide a strong incentive for lawyers to remain with the firm. Having such a plan makes good business sense for law firms. The key is that it must also take into account the contributions that older lawyers have made and might continue to make.
It is usually the case that arrangements of various kinds are less formal in small firms and for sole practitioners, as compared to larger firms. For sole practitioners, the lawyer is making his/her own arrangements. For many solos, this means practicing, either full-time or on a reduced basis, well into the lawyer’s sixties or seventies. But every lawyer eventually puts down his/her pen/cell phone/computer. For some sole practitioners, that will be in the form of a “vertical” retirement, in that the lawyer walks out the front door and ends the practice years. For others, unfortunately, it might be a “horizontal” retirement. But, in any case, the lawyer must plan for the eventual end of the practice years and must, as a matter of ethical practice, have a plan in place to assist clients to move to a new practitioner.
A sole practitioner needs to consider what to do if he/she is unable to continue practicing law, because of an accident or even death, and also what to do if he/she wishes to cut back or retire. Some lawyers deal with the first issue by means of the letter left behind the desk technique. The letter tells what to do, who to call, etc., if the lawyer is temporarily or permanently unable to come into the office. Essentially, the letter will say to contact another lawyer named, who will assist in whatever needs to be done. A lawyer’s secretary or paralegal cannot continue the practice if the lawyer has died or is otherwise unable to return to work. Another lawyer must be found to supervise the winding-down of the practice.
A carefully planned succession strategy for a sole practitioner could include two elements:
The practitioner could contact another sole practitioner and they could arrange to be available to take over each other’s practices. There would need to be a compensation arrangement based on the portion of the practice that is transitioned. A proposed letter should be prepared to send to clients, telling them of the change and inviting them to contact the other lawyer.
Alternatively, the older lawyer could bring a younger lawyer into the practice, with the intention of passing the practice on, eventually. This technique might be difficult for two reasons: is there enough work to accommodate two lawyers? And will the younger lawyer, having met the clients, decide to set up his own practice with those clients? The key to success in this type of succession planning is to select the right younger colleague, one who will contribute to growing the practice and will remain loyal to the older lawyer.
Too many older sole practitioners fail to make such plans, in part because there is no firm pushing them to do so. However, state bar associations have begun urging practitioners to make such plans and offering assistance in developing them as a matter of ethical practice.
In smaller law firms, there is usually less formal management, combining elements of larger law firm management and a collection of solo practices. There should be at least some level of discussion as to what happens as lawyers get older or if they cannot continue to practice. It is often the case that, in a smaller firm, lawyers control their own practices to a greater extent than in larger firms, so the possibility of moving to another firm would be more likely. However, a succession plan can benefit both the older lawyer and the remaining lawyers in the smaller firm, provided there is a detailed review of its potential benefits and a compensation arrangement that is fair to all.
Succession planning is good business planning. It can help to preserve and strengthen legal practices, and it can help older lawyers to plan for a later life/transition/retirement that can be a rewarding and fulfilling result of many years of professional practice.
