Law firms planning for succession cannot rest easy even when the “next-in-line” process is settled or the next leader selected. No doubt thinking about these things is vitally important for a law firm hoping to weather transition. But it is just part of the task of succession planning.
One area of succession planning given short shrift at too many law firms is appropriately addressing transition of its partners reaching retirement age. As was recently reported in an American Lawyer article by Matt Greenslade, Boomers are marching towards retirement. Successive waves of older generations will wash ashore, so dealing with the issue requires more than short-term planning. If done right the firm’s culture is strengthened. Done poorly and the adverse consequences can be long lasting.
At a minimum, planning for the aging partner ranks must touch on the following:
Mandatory Retirement. If mandatory retirement, a policy at almost 50% of the nation’s large law firms, is your firm’s policy, planning for each year’s retirements must be a long-term exercise. Because retirement is 100% predictable when mandatory, there is no excuse for not planning and modeling years in advance the law firm’s alternatives.
Transitioning Relationships. Whatever the precipitating factors behind retirement, the firm is best served by institutionalizing the soon to depart partner’s client, civic and leadership relationships. Advance planning with financial rewards attributable to retaining the relationship in the firm should be considered.
Payment Obligations. Many firms, especially larger ones, have post-retirement non-qualified plans or benefits that commence upon a partner’s departure. Far too frequently; these obligations are funded out of cash flow. In smaller firms, the firm or its partners may face an obligation to buy the retiring partner’s equity. Regardless of how these obligations arise, in this time of shrinkage at law firms there is no excuse to not model the long-term impact of successive years of retirement. Because projections can be scarier than anticipated, early planning/modeling is important in order to address any adverse impact.
Dignity. Preparing the partner and the firm for the date of retirement is more than planning a gold watch ceremony. Advance counseling/training with the soon to be retired partner will prepare him for a new phase, may uncover issues about which the firm should know, will smooth the transition for everyone and will strengthen your firm’s culture. Bumbling the retirement of a partner is observed by your up and coming generation. Handled harshly or without the right degree of sensitivity can drive your young talent away instead of cementing them to the firm.
Never Saying Good-bye. Seldom does it hurt to stay in touch with a retired partner. The fact that they no longer occupy an office does not mean that their wealth of knowledge cannot be accessed when needed. Whether reaching out in this way creates a financial obligation is for a different discussion, but it is a universal truth that everyone appreciates being wanted. And including retired partners on an occasional invitation list is helpful on multiple levels. So do it.
Retirement of partners is inevitable, and more common every year. It presents financial, cultural and relationship challenges that are a part of succession planning. How have you dealt with mounting retirements at your firm?