Law firms are notoriously poor planners when it comes to implementing the crucial leadership and ownership transitions needed to ensure long-term success.
The lack of a transparent continuity plan will cause doubts about the future of the firm to creep into the minds of trusted employees – the most valuable assets in every law firm. If a talented professional has multiple attractive career opportunities, and they begin to question their employer’s vision for the future, then it is human nature to listen when recruiters try to move them towards a new career path.
Without the collegial interaction that occurred before remote working routines became the new normal, it is now more difficult for law firm leaders to dial into the sentiments of their colleagues. This lack of awareness will certainly encourage the types of unplanned and unwanted separations that can weaken and destroy an otherwise healthy business culture.
On top of that, the personal and professional pause that everyone took during the COVID-19 pandemic has effectively masked an inherent weakness in the legal industry. The harsh consequences of an inevitable generational shift are rippling through Colorado law firms, as Baby Boomers continue to exit the legal profession without a pipeline full of talent immediately behind them.
This industry-wide dilemma is coming into focus at the same time law firms throughout the state and across the country report they are overloaded with work due to a post-pandemic surge in client assignments. The fact that most firms are unable to attract and retain the increasingly expensive legal talent that is needed to satisfy their clients’ expectations only exacerbates the problem.
No matter where your career stands, you should be asking your colleagues, “Do we have a long-range continuity plan that will preserve our law firm’s internal and external relationships while we keep grinding away on our personal and professional goals?”
It takes a significant investment of time, money, and energy for attorneys and law firms to build sustainable books of business. But this thoughtful effort – along with good luck – is needed if law firms want to attract and retain loyal professionals who possess the knowledge, integrity, and enterprising spirit that are essential to succeed in this highly competitive and ever-changing business world.
The critical need for law firm succession planning will typically manifest itself through two familiar scenarios:
- Small and Mid-Sized Firms: The surprise departure of a key partner creates a “bet-the-company” moment by exposing a serious deficiency in the firm’s continuity plan, which threatens its financial stability. (For instance, one of the founding partners who produces a large share of the firm’s annual revenue announces that they are leaving, along with other practice group members and support staff.)
- Large Firms: The gradual, unplanned departure of key talent exposes an equally serious deficiency where the compounding effects of multiple separations (voluntary and involuntary) eventually become just as threatening to the firm’s financial stability. (For example, four key equity shareholders leave the firm over three years, taking with them most of their books of business, some but not all their practice group, and none of their support staff – along with all the future rewarding opportunities their established business and community relationships would have provided to the firm for many years to come.)
To avoid the harsh consequences and serious enterprise risks that arise from these or similar scenarios, every law firm leader, practice group chairperson, and attorney should adopt the following blueprint as part of an annual succession plan assessment:
- Consider all options to strengthen your practice while it is still robust and has room to grow.
- Know your strengths and weaknesses (i.e., sell your strengths when serving clients and recruiting talent and mitigate your weaknesses).
- Understand your personal financial liabilities (i.e., know your obligations under the firm’s lease, operating line of credit, and partnership or shareholder agreement).
- Evaluate the applicable ethical guidelines that could impact new practice models.
- Carry out every ownership, leadership, and client transition ethically and professionally.
Remember: When law firms find themselves undercapitalized, overleveraged, poorly managed, and/or otherwise unable to adapt to the new normal, they will certainly struggle to stay afloat if not fail outright.
If you are contemplating a major firm, practice group, or individual career decision, I recommend you start with Designing a Succession Plan for Your Law Practice by Tom Lenfestey and Camille Stell (2021). This step-by-step guide will help individual practitioners and law firms of all sizes achieve their maximum value in preparation for intentional business transitions.