Law firm Succession and Exit Strategies – Coming to Terms with Aging

By John W. Olmstead, MBA, Ph.D., CMC

Several years ago I was giving a presentation to an ALA (Association of Legal Administrators) Chapter and after the presentation an administrator came up to me and asked, “what kind of financial incentives can we put in place to encourage some of our senior attorneys to retire”? I responded by saying “help them identify some hobbies.” While my comment was partially in jest, many attorneys, especially baby boomers, have invested so much into their careers and law practices they have not had either the desire or time to invest into other areas of interest. Their work has been their life often to the exclusion of family, friends, and other interests and pursuits. These lawyers avoid thinking about aging and retirement like the plague. Often their goal is to work forever which is a common goal expressed to me by senior lawyers. Six out of ten Baby Boom generation lawyers that I am working with on succession engagements tell me that they want to work as long as they possibly can. For some they would like to retire but they need the money and cannot afford to stop working. For others they enjoy their work, love what they do, and simply do not want to retire.

On the flipside, I have Generation X (adults born between 1961 and 1981) lawyers approaching in their forties wanting to begin planning for their succession and retirement. Many of these Generation X lawyers have saved for retirement and are retiring in their fifties. Gen Xers are highly educated, active, balanced, happy, and family oriented. In 2012, the Corporation for National and Community Service ranked Gen X volunteer rates in the U.S. at “29.4% per year, “the highest compared with other generations. This is a generation that values change, a need to combat corruption, dictatorships, abuse, human dignity and individual freedom, the need for stability, love, tolerance, and human rights for all. For Generation X there is more to life than work. This is the generation that believes in work-life balance and that there is more to life than work and career.

Many Baby Boomer lawyers have been so busy living the good life that they have not given any serious thought as to what will happen when the time comes for them to stop working. Coming to terms with aging and retirement can be a difficult time. It requires us to come face to face with our own mortality, which is an uncomfortable subject for all of us. Some senior lawyers have been doing a good job of investing and saving for their retirement through pension, profit sharing, and 401k plans. However, financial preparation is one of the easier components to put in place to ensure a happy retirement.

The Stress of Retirement

In his book, The Retiring Mind, Robert Delamontagne, Ph.D. states “retirement often causes major emotional upheavals on the same level as the death of a love one, loss of a job, or a financial crisis caused by a bad investment. I have come to learn that this emotional distress is often subtle in nature. It doesn’t announce itself with fanfare, but sneaks up and taps you on the shoulder.”(Delamontagne 2010, 3-16).

The more difficult components of retirement include:

Achievement Addiction and Preserving Self-Esteem

Many lawyers, more so than many other professionals, are high achievers that are married and addicted to their law practices. They believe that their self-worth is reduced if they are not accomplishing something important. Psychologists refer to this as “achievement addiction.” In his book, The Psychology of Retirement, Derek Milne advises that surveys in the United States suggest that over sixty percent of retirees “un-retire” and continue to work in some form of paid work, then “re-retire” or semi-retire” later on in their retirement (Milne 2012, 11-05). A major challenge for lawyers that have an achievement-focused personality will be to find ways to replace the sense of achievement that they have experienced from the practice of law after they retire. While playing golf may be a worthwhile recreational activity for those that enjoy it, it will not be enough to fulfil the needs of those with an achievement-focused personality. These individuals will need activities where they can contribute and make a difference and continue to fulfil their self-actualization and self-esteem needs. Activities such as teaching, consulting, volunteer work and community leadership often fulfil these needs.

Identifying Other Interests

Many of us have heard some of the stories of unhappy retirees ranging from poor health, depression, and premature death. Years ago when my mother passed away my father’s boss asked my father what he could do and how he could help. My father told him, “keep me working.” My father’s boss kept my dad working and he worked every day of his life until he passed away at 84. Dad used to tell me that when you enjoy your work and your work is your hobby, it is not work. For some people the best way to retire may be to continue working.

For others, rather than being a time of easing back and retiring into old age or continuing to work in one’s old job or career, it can be a time of personal growth and an opportunity to explore other interests, callings, and vocations. It can be a time of freedom to do what you always wanted to do but could not because you had to earn money and the pressure of work prevented you from pursuing you dreams and interests that were in tune with you values and beliefs. Here is a list of a few areas that you might want to explore:

  1. Teaching courses at a local law school or university
  2. Pro-bono work
  3. Writing
  4. Photography, gardening, travel, or other hobbies
  5. Serving as a director on a profit or non-profit board
  6. Counseling
  7. Volunteering

Planning Your Retirement

One way to begin to visualize getting older, your mortality, and retirement is to think about the amount of time that you have left on this earth. If you are sixty-five you may live to be eighty. Thus, you have fifteen years left and this is your planning horizon. Retirement planning is deciding on how to use this time. It is about the process of deciding what you will do in your retirement and putting a plan into practice. As the amount of time left to you decreases, its value increases to the point where it will be more valuable to monetary assets.  It will be more valuable that a new house, a new car, a new boat, or a chest full of cash. Time enjoying life, being with your family, and spiritual renewal will become more important than earning money. The greatest change when you retire is how you will use your time.

Retirement planning begins with taking the time to think about how you will use you time. If you live fifteen years beyond your retirement your will have 28,800 hours that will have to be filled with retirement activities. (five days a week, eight hours a day, 48 weeks, for fifteen years)  Start by creating an interest activity list, a time plan, and then DECIDE, PLAN, and ACT.

Options include:

  1. Continue working in your present situation;
  2. Continue to work for compensation but in another occupation; or
  3. Retire and pursue recreational and other retirement activities without compensation.

Two Short Stories – Two Lawyers That Wanted to Work Forever

The first story occurred five years ago. I was engaged to referee a dispute between the founding father of a sixteen-attorney firm and the other partners. Five years earlier the founding partner and the other partners agreed on five-year phasedown program for the sixty-five year old founding partner. Each year he would reduce his work schedule and his draw would be reduced in proportion to the reduced work schedule. He would transition his client and management responsibilities to other partners in the firm. The founding partner and other partners signed an agreement that was not mentioned or discussed again for five years.

Near the end of the fifth year at the annual partner’s meeting the partners asked the founding partner what his plans were after he left the firm at the end of the year. The founding partner was shell shocked, taken back, and in denial. He had simply not thought about the matter again since the document was signed five years ago. He filed his copy and got busy with day-to-day life. His response to his partners, I am not leaving. His partner’s response, that was our agreement and we expect you to withdraw from the firm by the end of the year. The founding partner’s response, then I will blow up the firm, start a new firm, and take a majority of the clients with me. The founding partner and the partners were at an impasse and I was engaged to help.

For three months, since the parties were not speaking with each other, I conducted shuttle diplomacy and conducted separate meetings with the founding partner and the other partners. During one of my early meetings with the founding partner he stated, “I built this firm, I love coming into the office, this firm has been my life, and I don’t have anywhere to go.” I quickly realized that the founding partner was not a candidate for full retirement. He received his energy and self-esteem from his law practice and his role in the firm and in the community. For years, the founding partner had not provided legal services to clients. His primarily roles had been that of managing partner and he was the firm’s primary rainmaker and innovator.

After numerous meetings with the founding partner and the other partners the following agreement was reached:

  1. His partnership interest was purchased in accordance with the initial agreement;
  2. His managing partner duties were transitioned to another partner in the firm;
  3. The role of Director of Business Development was created for the founding partner who would serve an Of Counsel capacity with compensation to be based upon a minimal salary supplemented with a commission for new business originated; and
  4. Specific performance expectations and accountabilities for the founding partner were outlined.

At the end of the day, the issues were resolved and an accommodation was made for a partner that did not want to retire. While he is no longer a partner he still has a role, is still contributing, and has preserved his self-esteem.

The second story occurred two years ago. The senior partner is now seventy-five and has numerous health issues. He is partially blind in both eyes, experiences memory loss, has difficulty walking without a cane, and falls asleep at his desk for most of the afternoon. He has lost several clients and others have complained about his client service and requested other attorneys be assigned to their matters.  A year ago, the senior partner’s wife passed away. They had no children. The senior partner has no other family, no outside interests – the firm is his life and he considers it his home. The other partners have asked the senior partner about his retirement plans and he remains evasive and keeping pushing out the timeline. His partners do not have the heart to push him out so the cycle of poor lawyer morale, poor productivity, financial underperformance, and client dissatisfaction continues. This lawyer wants to continue to work forever whether he should or not.

The lesson to be learned is to acknowledge and embrace aging rather than denying that you are getting older. Retirement years can be one of the most fulfilling periods of your life!

John W. Olmstead, MBA, Ph.D., CMC, is a Certified Management Consultant and the president of Olmstead & Associates, Legal Management Consultants, based in St. Louis, Missouri. The firm helps law and other professional service firms improve the operations and management of their practices and the lives of their practitioners. The firm, founded in 1984 serves clients across the Globe assisting them with implementing change and improving operational and financial performance, management, leadership, client development and marketing.

John’s assignments have covered the spectrum of management issues. However, in recent years most of his time has been focused on engagements helping firms in areas:

John is the author of a recently published book, The Lawyers Guide of Succession Planning: A Project Management Approach for Successful Transitions and Exits, http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=235511823&term=the%20lawyers%20guide%20to%20succession%20planning, Published by the American Bar Association, John is also the Editor-in-Chief of “The Lawyers Competitive Edge: The Journal of Law Office Economics and Management,” published by Thomson Reuters. He is currently serving as Past Chair, Illinois State Bar Association Standing Committee on Law Office Management and Economics and as a member of the Legal Marketing Association (LMA) Research Committee. John may be contacted via e-mail at

jolmstead@olmsteadassoc.com.  Additional articles and information is available at the firm’s web site:

www.olmsteadassoc.com and blog http://blog.olmsteadassoc.com

© Olmstead & Associates, 2016. All rights reserved.

Bibliography  

Delamontagne, Robert P., 2010. The Retiring Mind: How to Make the Psychological Transition to Retirement. Kindle edition.

Mayes, Roger, 2012. The Art of Successful Retirement. Kindle edition.

Mecke, Viola, 2013. Aging Wisely. Facing Emotional Challenges From 50 to 85+ Years. Kindle edition.

Milne, Derek, 2013. The Psychology of Retirement. Malden, Massachusetts: Wiley-Blackwell. Kindle Edition.

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