Succession and succession planning are hot topics in the legal profession. One statistic explains the focus on the topic – only about 30% of law firms make it beyond the first generation.
Why Do So Many Law Firms Fail?
Why do so few law firms make it to the second generation? Consider this progression of logic:
Few goals are realized by happenstance;
The greater the objective, the less likely it will be realized without serious intent;
A written succession plan is a reflection of serious intent;
95% of law firms have no written succession plan;
For a majority of law firms, 25% or more of revenue is generated by or closely associated with lawyers that are 60 or older;
Few firms will survive the loss of 25% of revenue in a short period of time.
If you are a law firm leader, this reality does not surprise you. We regularly visit with managing partners and governing bodies that see the writing on the wall. With the exception of those who choose to bury their in the sand, most agree succession must be addressed. A comprehensive and workable succession plan is essential if a law firm hopes to survive beyond the current generation.
A 3-Step Path to Survival
Start now. As simplistic as this may sound, it may be the singles toughest part of developing a plan. The day-to-day demands of managing a practice make it difficult to step back and consider the future. This reality is one of the biggest reasons many firms find themselves in the current predicament — years of not having time to address relationship continuity and succession. The first step is to be done with hand wringing and more talk.
“To think too long about doing a thing often becomes its undoing” –Eva Young
Engage your colleagues in a series of discussions intended to yield a plan for succession. Inclusion is essential to obtaining the buy-in necessary for a plan to succeed. Conversations with those impacted (clients as well as lawyers) that focus on long-term benefits, continuity of representation for clients, and the value of legacy are critical pieces of the puzzle. Some of these conversations may not be easy; but without them you are reverting to a strategy of hope.
Execute and monitor the plan. Very few plans roll-out exactly as intended but the routine monitoring of performance to the plan provides a means of adjusting as necessary to achieve the objective. Succession is about the future — and any conversation about the future must be on-going. Inside a successful firm, a good plan must be able to evolve.
A successful succession plan doesn’t necessarily mean future leadership comes from within your firm. The plan may include the recruitment of new talent in the areas of leadership, and/or client generation and servicing. It may mean that the core of your firm survives a part of a bigger organization. The real key is that the result your firm ends up with is the result you desire. Without planning the desired result is highly unlikely.
One additional note that many firms miss when it comes to the issue of succession planning—-Succession is likely on the mind of your clients. The issues of experience and continuity are likely being dealt with inside your client’s organization. A thoughtful collaboration between relationship partner, the client and firm leadership is an opportunity to demonstrate that level of client-centeredness all law firms proudly tout.
Our experience is that most firms wait too long and suffer the consequence of fewer or no options. Don’t let that happen to your firm!