Whether you are a lawyer who is considering retirement options or a law firm that is concerned about the future of the firm as senior partners age, creating a transition plan can help ensure that firm continues to thrive.
This brief overview is designed to help start the discussion in your law firm and includes the following components:
What is Transition Planning
Timeline of Transition Planning
5 Years from Retirement
3 Years from Retirement
12-24 Months from Retirement
How to Ensure a Smooth Transition
In our experience, transition plans are best implemented using a deliberate process and time line.
1 - What is Transition Planning?
Transition planning refers to the preparations involved when a senior partner with unique skills and client relationships approaches retirement, and when done correctly, preserves a firm's reputation and longevity.
It’s also an excellent way to reward attorneys who are deserving of an opportunity to lead. If it’s time for your law firm to change hands, you’ll want to make sure you have a solid transition plan in place.
When it comes to transition planning, preparation is priority one. We recommend a process oriented approach with specific actions and timelines.
For more information about recommended process in approach, please see our many blog posts on this subject or contact us for a more detailed outline of the elements in transition planning.
2 - Timeline of Transition Planning
Ideally, we recommend that law firms begin the planning process five years before an anticipated retirement date, although many of our clients cut it closer.
Starting the process five years before an actual retirement provides a real margin for error. A good process will also include benchmarks at three years, two years and one year from retirement.
Plan how you will handle these milestones now, and you can increase the likelihood of a successful handoff.
A - Transitioning: 5 Years from Retirement
At five years from retirement, it is time to create a projected retirement timeline and type of retirement (phase out to walk away).
Other items to consider at the 5-year mark include:
- Do we have younger lawyers capable of retaining clients?
- Do we have the right compensation plan to motivate the next generation of leaders?
- Are we competitive enough to withstand the loss of a major producer?
- Do we have the leadership and management talent in place?
- Have we done a good job building value in the infrastructure of the firm?
- Is there brand value?
Transitioning partners will likely have questions about when to tell your clients about their retirement plans, as well as operational concerns about bringing in new partners and motivating others to increase their commitment.
Be sure to think about whether your law firm is competitive enough to sustain a difficult period should one arise during a transition. Honestly evaluating the risks associated with a transition is best done early in the process.
B - Transitioning: 3 Years from Retirement
At this point, agreement on a formal retirement timeline and approach occurs, and the transition plan begins to implement.
Some of the important priorities will now include:
- Readying future leadership;
- Increasing profitability to enable a smoother transition;
- Consideration of competitive factors;
- Consider if merging a part of the plan;
- The role of laterals in the plan;
- Transitioning partner compensation; and
- Remaining partners’ compensation approach.
At three years from significant retirements, a firm needs the financial, leadership and operational wherewithal to implement the plan.
C - Transitioning: 12 AND 24 Months from Retirement
At the 24-month mark, the transition plan is continuing, or the alternate plan is activated.
Consider these factors:
- Are any post transition issues indicated?
- Is a new leadership team emerging?
- Is a merger beginning to look more attractive?
- Have any competitive threats emerged?
You’ll also want to conduct an audit of your law firm transition plan and see if your approach is working. If it’s not, make immediate adjustments or begin formulating a different plan. You’ll know it’s time to resort to "Plan B" if you notice that your new leadership team seems unenthused or unsure about any of the material elements of the plan.
You’ll also want to consider things such as the appropriate time to begin relinquishing more authority, how best to detach from reassigned clients, and the role transitioning partners in any element of the plan.
At two years from retirement, it is crucial that your firm is on the right track. If something isn’t working for any reason, it’s necessary to quickly rework the process.
All the same factors are true at the one year mark, but at this stage, the firm begins to take real risks and there is virtually no margin for error. If you have done a good job to this point, the probability of a successful transition is enhanced.
3 - How to Ensure a Smooth Transition
Besides planning, there are a few things you can do to make the transition process as smooth as possible. Always keep the lines of communication open. Incoming partners will likely have plenty of questions before taking full responsibility. Accessibility of transitioning partners is essential to the confidence of the future leadership.
Be sure you don’t forget about clients. Have a specific plan for handing over clients to the next in line. Clients can form close bonds with their lawyers, especially after years of counsel, and can be distrustful of someone new taking over their work. Do everything you can to minimize that concern and take steps well in advance to familiarize your client with their new counsel.
Keep in mind that the first few transitions your firm experiences may not go perfectly. Some involve parties that are stubborn, and unexpected issues can arise. Expect some friction and remain calm and flexible if it becomes necessary to alter your approach.
4 - Final Thoughts
With proper planning, transitioning partners does not have to be a complicated process. We have had good results using a detailed process and specific timeline.
When done correctly, transition planning allows your firm to retain its best attorneys and attract potential laterals who see an opportunity to participate in the firm's future. Clients also benefit from proactive transition planning, which affords them a stable long term solution for their legal needs.