Altman Weil’s 2015 Law Firms in Transition report recently came out and as usual it offers interesting and valuable information about the law firm industry as well as the perceptions and attitudes of law firm leaders. One fact noted by AW in its report is that in 2015 much of the industry is enjoying a recovery from the Great Recession.
The report is not all happy talk; however, as challenges faced by firms were noted, including the looming need for many firms to do more about client and practice succession planning. AW’s study of surveyed firms observes “only 31% of firms have a formal succession planning process in place,” and goes on to conclude that “the economic impact of this failure to plan for succession is imminent.” Among the more notable data points from AW supporting its conclusion is that in a large number of surveyed firms partners older than 60 years control at least a quarter of their firm’s total revenues. In some firms surveyed, the percentage controlled by the aging Boomer is even greater.
The combination of today’s happier times at law firms and succession plan shortfalls is an unfortunate mixture, indeed, an insidious brew. As I wrote recently in Five Important Objectives For Law Firms Dealing with the Generational Challenge in Succession Planning, the generational challenges faced by law firms executing on succession plans are both subtle and significant.
The Boomer, having built a practice and reputation through hustle and hard work, may naturally be disinclined to gift it to someone else. Generation X lawyers, tending to be less loyal than earlier generations, may present risks to a plan of succession. Their comfort in moving laterally between firms may temper enthusiasm towards entrusting relationships. And the Millennial, not always motivated to jump onto the partnership track, can be even less suited for a role in succession. To varying degrees, the “Boomer with the book” may find it hard to relate to the up and coming lawyers and thus hesitate on the issue of succession. Leadership may feel likewise.
These varied interests and motivations of the different generations can be hard to harness towards long-term goals like succession. And it is especially the case when the long-term goal of succession is trumpeted at a time when things are good and most individual partners are focused on their own personal agenda.
For the individual partner, “making hay while the sun shines” is a compelling motivator that subordinates thoughts related to the survivability of the firm as an institution. The “now” mentality also views with suspicion any firm program that contemplates change, like a succession plan would. If times are good, all three generations may ask, why rock the boat?
In today’s law firm environment, in which a recovery from the Great Recession is being widely enjoyed, what are the 69% of surveyed law firms, the ones currently without a formal succession plan, to do? Although the dilemma is common today, not all firms meeting this profile will address the problem in a timely and sound way. If AW is correct, those that don’t fill the succession vacuum will feel an economic impact-and soon.
In part two of this post, I’ll examine some steps that law firm leaders should pursue today to prepare a succession plan for tomorrow.