I am the firm administrator for a twenty-five attorney firm in Baltimore, Maryland. We have fourteen partners and nine are in their sixties. We have no succession or transition plans in place for senior partners. Every time I bring up the topic there is a resistance to even discuss the topic. I would appreciate any help that you can provide.
A decade ago, only the more proactive, well-managed law firms had in place programs and provisions for senior partner succession and transition. A majority of firms simply had not addressed or even given serious thought to the eventual retirement and exit of their senior partners. However, in the last five years, I have seen a lot of interest in succession, transition, and exit planning. The avalanche of baby boomers reaching retirement age has fueled this interest. Firms from the largest to the smallest are getting proactive and actively addressing succession and transition of senior partners. Some are putting in place formal programs, while others are at least addressing succession and transition informally using ad hoc approaches.
A recent Altman Weil Transition Survey gives us a glimpse of what other law firms are doing. Here are a few highlights from their survey concerning responding law firms.
Many other law firms are finding it a major challenge to get senior attorneys to talk and share their plans concerning retirement. In many cases the families of senior attorneys are having the same challenges. Coming to terms with aging is a difficult topic. In the case of law firms, often senior attorneys simply don’t know their future plans themselves, need the income, fear that others shareholders/partners will steal their clients, or the firm simply does not have a mechanism in place that mandates transition planning. Some firms are implementing mandatory retirement and others are putting in place financial incentives to motivate early transition of clients. Client loss is the most significant concern.
Keep at it and don’t give up but it may take a series of baby steps. Educate your partners on the risks of “doing nothing”. Provide them with articles and other resources and keep the topic on the agenda.
John W. Olmstead, MBA, Ph.D, CMC
I am a member of a three member management committee of a 16 lawyer firm located in Akron, Ohio. We have 10 partners and 6 associates. Several of our partners are in their 50s and 60s. Recently, we have had discussions with a couple of potential merger partners and laterals and in all cases they have backed out advising us that they were uncomfortable with our balance sheet. What can we do to better position ourselves. We desperately need to bring in new talent with books of business?
First there are the obvious balance sheet items – bank debt, large tapped out credit lines, equipment leases and other liabilities. Then there are the items that are not recorded on the balance sheet – namely unfunded partner retirement buyouts and long term real estate leases. These are often major deal breakers in mergers and scare away laterals. If you have bank and other debt on the balance sheet work at cleaning it up. More importantly if you have unfunded partner buyouts begin either rethinking the desirability of these programs or begin funding this liability now with a goal of the liability being totally funded over the next five to seven years. Then shift to a retirement program that is totally funded. Unfunded partner retirement programs are becoming a thing of the past.
John W. Olmstead, MBA, Ph.D, CMC