Succession Strategy — Introduction and Part One — Mindset and Politics

Lawyer succession is fast becoming a critical component of every smart law firm and legal service provider’s business strategy.

My three-part series examines Succession Strategy in terms of culture, planning, and techniques as well as Alumni Programs that help retain ties and nurture goodwill with all former law firm colleagues.

A treasured lawyer-friend who is also a legacy client remarked that succession is “a complex but critical issue.” She is right, which is why each of the 12 topics within this series is impactful.

Publishing this series in three parts over the span of a month should enable time and space for you to reflect and formulate your own thoughts, and consider how each topic may apply to you and/or your situation.

My series will conclude by examining why and how to combine Succession Strategy and Alumni Programs to enable creation and realization of maximum long-term value.

Series Schedule and Contents

The series will be published biweekly starting today with this Introduction and Part One.

The full series will cover:

Succession Strategy: Part One — Mindset and Politics — June 2, 2024

• It’s not how you start, it’s how you finish
• Prepare for a wave of retiring partners
• Smooth succession is reliant on culture
• Clients of the firm versus clients of the individual

Succession Strategy: Part Two — Planning and Transition — June 16, 2024

• Succession plans must be transparent
• Voice of the client is key to smooth succession
• Embedding, secondments, cohort laddering, and cross-service teams
• Coming to terms with succession

Succession Strategy: Part Three — Alumni Programs Onward — June 30, 2024

• Alumni programs keep talent engaged and connected
• Alumni programs are a winning business strategy  
• A strong network is the backbone of a robust alumni program
• Conclusion and putting it all together

As a long-time student and participant in the global legal services market, I will be keen to learn your thoughts and experiences with respect to Succession Strategy and hope you’ll enjoy joining me on this journey.

Succession Strategy — Part One — Mindset and Politics

It’s Not How Your Start, It’s How Your Finish

While succession can be the ultimate exit strategy, it does not necessarily signal a dramatic end. In the best circumstances, and with care and consideration, it enables an expected and non-turbulent handoff.

A smooth succession is the pinnacle of client service because it cements client retention and ensures stability for all parties concerned.

Like so many other changes in life, succession is reliant upon three key factors: forethought, planning, and grace. A graceful succession is preferrable to clinging like a barnacle to what was. Barnacle-like behavior can happen when someone prevents change to protect themselves due to being fearful of what change may bring.

Look at the word “Succession.” What do you see? Success. That’s what succession is all about.

However, succession pertaining to aging demographics is an increasing cause for concern.

According to the 2023 American Bar Association’s Profile of the Legal Profession, nearly 14 percent of all lawyers in the U.S. are 65 years of age or older. That is in stark contrast to about 7 percent of all U.S. workers being 65 or older.

In 2021, the American and Canadian Bar Association’s said that 30 percent to 40 percent of lawyers in private practice were beginning to retire or consider phasing down. Findings also indicate that most law firms have actively practicing lawyers in their late 60s and 70s, many of whom are rainmakers, and that partners aged 60 or older control at least one-half of firm revenue in 63 percent of law firms,

And, according to American Lawyer publications, most lawyers retire at the age of 65 with 40 percent of law firms having requirements for lawyers to retire before they are 70 years old.

But here is the most worrisome number: Only 17 percent of law firms have formal succession programs.

Prepare for a Wave of Retiring Partners

Throughout the next decade, succession in the legal services industry will be impacted by the retirement of senior law firm partners who are members of a hard-charging demographic bubble as well as a bumper crop of young partners and senior associates seeking new or different work styles.

In the executive ranks populated primarily by individuals in their 60s or older, there has already been a marked change in the c-suites of many major Canadian law firms. In a wave that began in 2015, blue chip law firms such as Osler, Hoskin & Harcourt, Stikeman Elliott, Torys, McMillan, Blake, Cassels and Graydon, Bennett Jones, Borden Ladner Gervais, Norton Rose Fulbright Canada and Gowling WLG to name only a handful began changing out their top-ranking, long time senior executives and have new chairs, CEOs or managing partners. U.S.-based law firms, including Reed Smith, Goodwin Proctor, Holland & Knight, WilmerHale, Cooley, Fried Frank, and Troutman Pepper to name another handful, announced in 2023 that their chairs, CEOs or managing partners will step down or plan to early in 2024.

As Baby Boomer lawyers born between 1946 and 1964 shift out – willingly or not – their replacements, Generation X born between 1965 and 1980, and Millennials born between 1981 and 1996, will be expected to service clients conditioned to high expectations for speed and results.

This is the same class of clients who – already well-aware of the hollowing out of private practice legal talent that began before and accelerated during the pandemic and is now somewhat unstable due to burnout and life-work re-evaluation – have been compensating by adding to their in-house legal departments over the last few years. These clients will also continue to be proactive in sending outbound work elsewhere and getting it done by other means.

Contracts are part-and-parcel of legal services. Yet it is amazing how many law firms do not include exit clauses when negotiating legal talent entry agreements.

Smart law firms are crystal-clear on how a lawyer will enter and exit a firm. An explicit clause pertaining to retirement and succession – when it will happen, why, and how – helps everyone involved to understand boundaries, timing, and expectations. While this is an excellent strategy for lateral hires, it also provides a guide for a law firm’s organic talent roster who are on a partnership track and acts as a reminder that there is a process in place for those who will eventually step back from active practice.

Smooth Succession is Reliant on Culture

“Culture eats strategy for breakfast” is a well-known and well-worn quote from famed management consultant Peter Drucker. It means that no matter how clear and concise your strategy, it will fail if the culture does not or will not support it. In other words, culture trumps strategy every time.

Culture is about people; in particular, their behaviours and beliefs. So, this is where we will start the core features of this discussion.

Succession in its most robust form is reliant on a culture that institutes, supports, and embraces it. Consistent and successful succession outcomes are the hallmarks of a law firm culture built upon these qualities.

A law firm with a robust succession culture is attractive to both its client base and talent roster because this cultural trait aids in retaining and engaging top talent due to valuing and instituting progression. Whether that progression pertains to “up or out” mechanics is immaterial because succession-bound leadership talent will prevail. This is because a culture of succession signals that a firm rewards talent primarily on merit rather than tenure or longevity, and that change management is recognized as a key feature of the firm’s DNA.

Succession, flexibility, and change management have become critical factors for law firms wanting to rank head-and-shoulders above their competition as a destination for top-tier talent at all levels and of all disciplines.

There was a time when a lawyer joined a firm as a student, graduated to becoming an associate, and if they had the “right stuff” and could afford to finance an investment of capital, would be added to the partnership ranks. And this is where they would stay until, in the best situations, they stepped back from practice and retired gracefully or, in the worst circumstances, died at their desk and went out on a board.

Retiring gracefully has always happened and still does, as does dying at one’s desk. However, in the last 10 years, another phenomenon has been on the rise: lawyers, many of them at the partner level, changing firms.

Clients of the Firm vs. Clients of the Individual

Are clients “Clients of the Firm” or “Clients of the Individual”? The difference enables varying degrees of ease and success of succession.

A culture based on “Clients of the Firm” will have an easier time and greater success when transitioning clients prior to the departure of a lawyer. That is because a shared-clients culture and the corporate structure that accompanies it enables more than one lawyer – ideally a partner – to be tied to and provide legal services to a client.

In a large firm, the ideal number of partners tied to a key or institutional client is seven. Obviously, the number of partners to clients is scalable depending on the size of the firm and the depth and breadth of a client’s needs. Regardless of scale, connecting partners to a key client is not difficult to accomplish particularly if the client is business oriented.

Not only do numerous ties to a key client help retain that client, but this technique also protects and may help to retain the firm’s relationship with that client if or when any one partner who works with that client leaves the firm.

Clients that are “Clients of the Individual” are more at risk since there is a perception – which is often not reality – that an individual lawyer with a handsome book of business will take clients with him or her upon their departure to join another firm. In some cases, the lawyer with the handsome book of business and client roster will believe and state this sentiment (usually loudly), but reality and its results often have the opposite effect.

In this instance, the firm is smart to proactively and speedily address the issue pertaining to a lawyer’s departure with his or her clients to ascertain how these clients may react and, if need be, provide incentives to stay tied to the firm. Most often, a client will choose to remain with the firm rather than deal with the upheaval and harangue of following a lawyer to a new law firm and transferring their business elsewhere.

This very effective client retention strategy is another reason why – in addition to being attractive to new recruits and those advancing within the firm – a “Clients of the Firm” culture trumps “Clients of the Individual.”

[This is the first in a three-part series on Succession Strategy. Succession Strategy: Part Two — Planning and Transition will appear here on June 16, 2024, and Succession Strategy: Part Three — Alumni Programs Onward will appear here on June 30, 2024. The full chapter on Succession: Transition Strategies for Lawyers, Law Firms, and Clients appears in the book, Talent in the Legal Profession: How to Attract, Retain and Engage Top Talent published April 2024 by Globe Law and Business.]