Law firms, just like any other business, must make preparations and plan ahead for succession.
Thorough and proactive succession planning is critical to ensuring the long-term sustainability of any law firm. Succession planning – particularly with the age profile of the sector rising and the potential lack of suitable successors – is now a key legal sector focus.
Simon Bladen, Legal Partner at Hawsons, answers some of the most pertinent questions and provides advice on managing succession in the legal sector.
Is the importance of succession planning recognised by law firms?
“Yes and no; it depends really. During the recent economic downturn a lot of law firms rightly focussed on short-term decision making, ensuring the immediate financial viability of the firm. That, regrettably but understandably, has seen succession planning in law firms put on hold. Over the next five or so years many law firms will be transitioning to the next generation, which means succession must be recognised and planned for.”
Why should succession be a key focus now?
“There are a number of reasons why succession planning is becoming a very real concern.”
“Firstly, the age profile of the legal sector is increasing and many partners are today of an age when they begin thinking about retirement. It is not uncommon for law firms to have almost half of their partners approaching retirement age. When these individuals do leave a firm, they leave large shoes to fill.”
“Secondly, the legal sector has moved on in terms of its employment status. Ten, twenty or thirty years ago it was often assumed that the next generation would work their way through the ranks to partner level; staying at the firm for most of, if not all, of their career. With a greater emphasis on work-life-balance and regional financial and social disparities, top candidates / employees can now move between firms much more than they could have, or even would have, in the past. That means there must be a greater focus on succession planning.”
What should firms consider when thinking about succession?
“For a succession plan to be viable and safeguard the future of the law firm, firms and their partners must first have to buy into it. Planning an effective succession plan is a complex and detailed process, but failure to do so risks the long-term success and reputation of the firm. Financially and strategically, the importance of key employees cannot be overlooked.
Here are some of the key things firms should considering when succession planning:
- Identify key positions, competencies and employees within the firm.
- Engage with partners approaching retirement to create a succession plan.
- Manage the phased handover of existing clients and ease new partners into client relationships.
- Review current remuneration strategies and incentives, for the partner leaving and partner joining.
- Create a programme of appropriate strategies to retain and bring new talent through the firm.
- Communicate with all stakeholders throughout the succession process.
What are some of the potential barriers to succession planning?
“We published an article earlier in the year about the potential barriers to succession planning in the legal sector. The lack of suitable successors, the failure to raise the subject of retirement and ensuring client retention were the three key barriers to managing successful succession we looked at. Those barriers are still relevant now.”
Any other advice for managing succession in the legal sector?
“Look at the process through the eyes of your clients. Clients enjoy stability and value the relationship that has developed over a number of years. Succession means change, and clients may not always accept change.”
“Law firms need to consider their clients at every stage of succession planning – When should clients be informed? How should clients be informed? How will client relationships be handed over? There are lots of things to consider to help safeguard the client relationship following succession.”
More from our legal sector experts
You can find all of our latest legal sector news and newsletters here.
If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.
Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.