Oregon State Bar Bulletin — OCTOBER 2006

Succeeding at Succession
Firms broach the issues of retirement and succession planning
By Cliff Collins

An old cartoon in a law journal sets the scene: A group of aged lawyers is seated around a long conference table, and the oldest, most wrinkled one says, "So it is moved and seconded — mandatory retirement age is now set at 90!"

Lawyers do a fine job of counseling their business clients to plan long-term. Unfortunately, that advice frequently is not self-applied.

Succession planning is "a highly sensitive topic for law firms," says Paul Burton, a Vancouver, Wash., professional development consultant to law firms. "Like any highly personal topic, it gets buried. People don’t want to talk about it."

Thinking about retirement, or handing the reins over to others, can be uncomfortable both for firms and individual attorneys. But not developing a second generation of leadership is a reason some firms don’t survive past their founders, legal consultants say.

Succession planning is one of those management issues that rarely gets attention until a senior partner or rainmaker announces plans to leave or retire, at which point the firm then goes into crisis mode, according to Alan R. Olson, a principal with Altman Weil Inc.

The nation’s demographics — with large numbers of attorneys in their 50s or more — are similar regardless of firm size, but "small firms may have very strong personalities driving" business. Their loss could be serious if succession planning has not been considered, says Burton, a former lawyer and dot-com entrepreneur who heads Vision Mechanix.

"You’re addressing the lifeblood of the firm," he says. "Major clients and their relationship to senior lawyers is pivotal to the long-term vitality of the firm. How are we going to make sure that relationship is going to continue and prosper? It’s sensitive — the ‘when’ question — of asking someone who has practiced for decades, ‘When are you going to quit?’ (And) there’s always the compensation part — how do we compensate the partner in transition? It’s a delicate, personal topic."

A San Francisco firm that dealt with succession recounted that if the firm had one thing to do over, it would have been to pay more attention to compensation for retiring partners. Compensation should be modified to reflect the contributions of the founding partners as they spend less time billing hours and more time helping younger lawyers learn leadership tasks and skills.

Even firms that have broached the financial aspects of retirement planning may avoid an expanded view of succession planning, notes Olson. They may do little in the way of long-term succession planning for management, practices and client service. If a senior partner refers to his or her plans to work actively until retirement, no one wants to volunteer, "But you had better start delegating more in advance of that date."

Burton advises that a proactive approach is far better than a reactive one. Clients are aware that certain lawyers eventually will retire. Smart firms will prepare ahead of time for a broad spectrum of issues associated with senior-level partners’ departure from practice, before that crisis occurs. These issues may include, in addition to the continuation of client service and relationships: practice skills and expertise, firm governance and leadership roles, or functional management roles and experience. Olson adds that building new client relationships or developing new people for management roles sometimes takes many years.

Lawyer recruiter Linda Green Pierce, president of Northwest Legal Search Inc., says some Oregon firms have addressed succession proactively, but "a fair number of firms are relying more on the wish-and-a-promise method than any real planning. Some of their baby boomer partners have promised they will continue to work their X-number of billable hours until they retire. Consequently, those firms may have made no contingency plan for partners who fall into ill health, need to take care of an aging parent or a spouse in ill health, or just simply change their mind on how long they will practice."

The firm Hershner Hunter in Eugene adopted a stages-of-career perspective first described by a partner several years ago at a firm retreat. Those three stages are: learning your trade, building your practice, and the process of transitioning to others, with the goal of leaving the firm stronger than you found it, says K. Patrick Neill, managing partner.

The 60-year-old firm always keeps the long-term in focus, recognizing the need to attract talented young people, he says. Hershner Hunter has a retirement policy in place, with no mandatory numbers but with transition in mind. "We owe it to the firm to give plenty of notice," Neill says.

The firm holds annual meetings of lawyers 55 or older and any others considering retirement in a few years. It just completed the second year of those meetings. Topics include personal transition of clients, of the leadership of the firm, and of practices. "We’ve developed a list. It’s healthy to get us thinking and proactive," he says.

Succession planning involves two levels: internal and external, says Thomas C. Sand, managing partner of Miller Nash. The internal aspect is managing the firm; the external is serving clients. At Miller Nash, the managing partner is elected to serve a four-year term, and Sand, in the sixth year of his second term, says he is constantly trying to identify future leaders, who are given a chance to "serve a role to see if they like doing that sort of thing."

Sand also asks senior partners to designate a backup, someone "they see transitioning the client to over time ... someone the client likes and trusts."

Miller Nash also has two department heads and about a dozen practice-group leaders. "We ask those to identify their future leaders," such as who will head the tax practice 10 years from now, says Sand, who adds that persuading lawyers even to think two years ahead is an accomplishment, because they stay so focused on serving clients.

"Most lawyers don’t think far ahead," he says. "We tend to be problem-solvers. We got into the business to help other people, so we neglect ourselves sometimes."

Harrang Long Gary Rudnick, a 40-member firm founded in the mid-1950s and now with offices in Eugene, Salem and Portland, is revising and updating its business and strategic plans this year, says vice president Sharon J. Rudnick. Most of its 22 shareholders are in their later 40s or 50s, and recognize that "it’s time to start planning for transition to a third generation," she says. "For us, we’re approaching it as a business matter: how to create an infrastructure to support the next generation."

Kell, Alterman & Runstein’s 10 partners range in age from 37 to 67, which "gives us the opportunity to pass the baton," says Joan Cavanagh, administrator of the 76-year-old Portland firm. The senior partners have all been with the firm for 35 to 40 years, she explains. "There is a lot of loyalty. They came up through the firm. The senior partners are very committed to maintain the integrity of the firm." They meet often, and two partners oversee governance.

Schwabe, Williamson & Wyatt does not have a specific succession plan, nor does it have a set tenure for the position of managing partner, says managing partner Mark A. Long. But the firm employs a governing structure that has attracted interest among a number of large firms nationally since its adoption three years ago, he says.

Long’s predecessor served seven years as managing partner, seeing the position go from part time to more than full time. Neither Long nor David F. Bartz Jr., who serves as president, wanted to give up their individual practices entirely. So they proposed a co-leadership role, where each would have separate responsibilities with "a lot of overlap," Long says, but could still maintain part-time practices. Each serves a three-year term.

"It requires good chemistry," says Long, who has focused more on external matters related to the firm. He says he and Bartz have different styles but complement one another well and have the ability to communicate, which Long calls essential.

The model has been well-received. "We’ve canvassed our partners," he says. "They like what we’re doing, but we’re worried about the future, passing the torch. We’re making it a priority to plan."

Nationally, more and more large firms are spending time and money on leadership training for their junior partners to prepare them to become tomorrow’s leaders, observes Green Pierce. "Larger firms seem to have more of this next-generation population in place and are training them to take on the responsibility and future of the firm," she says.

They also in some cases are seeking experienced new people solely with that function in mind. In her business, the demand by firms for lateral partners who will bring with them a portfolio of clients has remained strong for the past decade, but Green Pierce has seen a shift: More firms now are seeking "talent hires."

"There is a great deal of focus on the softer skill sets: mentoring, training ability, marketing acumen and leadership qualities. The key change is that firms are requiring little or no client base to follow along. In certain instances, we’re being asked to keep the search low-key in the community, as the person they are seeking will be an heir apparent to someone who plans to retire soon."

So Northwest Legal Search is seeing more call for talented junior partners with 10 to 15 years of experience, she says. "We expect that talent pool to be in high demand, especially if firms have not been able to put their succession act together."

Consultants advise firms regardless of size to give serious thought to establishing a broad, formal approach to succession planning. According to Altman Weil’s Olson, one or more lawyers should receive active, high-level mentoring in anticipation of a particular partner’s retirement. A senior lawyer who is a strong practice manager may continue to contribute to the firm during a phase-out, or after retirement in an of-counsel capacity. Or senior attorneys who are adept at training may be able to do that in a reduced role.

Having a formal plan in place can ensure the firm’s continued success as people leave, and also may help reduce the tension of having to broach the subject — what Burton calls the "when" question — with aging partners.

"People should be considering these issues," counsels Burton. "It’s really important to the long-term vitality of the firm to have this institutionalized. It’s just good business to plan for the future."

Cliff Collins is a Portland-area freelance writer and a frequent contributor to the Bulletin.

© 2006 Cliff Collins

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