Last week The Wall Street Journal’s Jennifer Smith wrote about the new reality for law firms as they try to adjust to change in the legal profession. In her Law Firms, Market Pressure and Change: How Soon is Now?, Ms. Smith quotes from an Altman Weil Inc. survey from law firm leaders:
“Firm leaders also agree on the consequences of the shifting marketplace, although with less unanimity. Most expect to see smaller annual billing rate increases, fewer equity partners, more part-time and contract lawyers, reduced leverage, and slower growth in profits per partner. Despite this daunting self-assessment, law firms are proceeding without an apparent sense of urgency. Most firms are making some adjustments, and some are testing new strategies, but there is certainly not a groundswell of change.”
In an unrelated news story from a day earlier (Law Firm Succession: Bingham McCutchen Chair to Hand Over Duties), Ms. Smith reported that Bingham McCutchen’s chairman was stepping down after 20 years. Although Bingham McCutcheon’s performance has lagged in recent years and departures have been noted, the law firm termed the change at the top as the “next step” of its succession plan.
On the same day as Ms. Smith’s Bingham McCutchen report, The American Lawyer published an article entitled Your Boomer Partners are Retiring. Is Your Firm Ready? Matt Greenslade’s article reviewed the aging population of partners among the AmLaw 200 law firms. The Boomer Partners article is chock full of information about the generational make-up of AmLaw 200 law firms as well as the need among those firms to deal with the critical issue of succession planning. Mr. Greenslade asks a number of provocative questions that lead to the ultimate question—Is Your Firm Ready?
Last week’s articles all point to one of the major challenges facing law firms today: succession in this new age for law firms. As these writings indicate, however, succession is not a matter of simply picking the younger version of the current leader and anointing him or her. Today, any law firm and its new leader must additionally possess the vision and experience to deal with the changing legal industry, a requirement not so important in the past.
The Altman Weil survey cited by Jennifer Smith says that “seismic” changes have occurred since the financial crisis. Finding solutions to these “seismic” changes will become the task of any of today’s successors seeking to preserve his or her firm for the future. Matt Greenslade’s census review underscores the challenge, especially because AmLaw 200 law firms must deal with partner ranks that are getting on in years.
Today’s succession planning for law firms will be particularly challenging. Not only will new and untested leadership face the typical tests of any new leader, but new leadership will be thrust into an emerging legal market that his or her predecessor either did not face or recognize, did not solve or simply left for successor management’s handling. Law firms and their leaders addressing the next generation will deal with a myriad of issues, including competing in the new age, transitioning senior lawyers, shrinking demand, unfunded pension plans and the changing faces of loyalty.
In next week’s blog, we will review these issues in depth.