Succession Strategy: Do You Have a Plan?aderantuser
Associate lawyers today face an unclear or undesirable path to partnership, so it isn’t surprising that most firms lack an effective plan to ensure leadership succession. The typical advancement scenario involves high attrition, lengthening years to partnership, and then hiring outside the firm for laterals to fill leadership roles. The success of this approach remains in much debate.
A recent post in the ABA’s Legal Rebels indicated that the industry’s average attrition rates for associates is about 20% per year, with 8-10 year tracks to partnership. And this system persists despite the fact it costs firms a fortune in lost recruitment and training costs. For example, a firm with 300 associates could lose 60 of them in any given year. That firm could also potentially lose $15-$18 million of revenue. Those numbers would then translate to roughly $80,000-$120,000 of income lost per year, per partner.
In a piece titled Why Your Law Firm Needs A Partner Succession Plan, Lateral Link wrote that “Traditionally, high-powered partners would mentor younger partners or associates whom they would transfer the bulk of their business over to when they retired. This practice is little more than a relic as Biglaw practice has become more competitive and lateral moves have increased. Law firms now rely almost exclusively on three separate practices as a form of succession: promotion to partner, promotion of partners, and lateral hirings… Instead of building, most buy since it is seen as a more certain bet.”
Although mandatory retirement policies could potentially open the path for internal advancement, they have not been applied consistently at firms. During the 1980s many believed that if mandatory retirement were applied to the legal industry it would clear the path for new leaders. The result has been less emphatic, however. As noted in the recent post Practicing Law in the Era of Mandatory Retirement, while more than half of large law firms now have a mandatory retirement age, it’s not always strictly enforced. And while some firms require that a lawyer retire by a certain age (usually around 70), others will reduce the retiring partner’s equity over several years.
One important result of these growing obstacles to partnership has been the proliferation of non-partner track positions at many firms. Younger lawyers, particularly those more interested in work-life balance than their predecessors, now don’t always face an “up or out” choice. As a recent piece in Forbes argued, when firms can’t offer realistic partnership prospects their recruiting power diminishes. In response, firms have created various “permanent” attorney positions, including Senior Associate, Special Counsel, Junior Partner, Non-Equity Partner, Of Counsel, and so forth. According to Forbes, “These have allowed firms to hold onto really good, but not partner-good, talent, while dismissing those that are unprofitable.”
Firms cannot afford a succession plan that doesn’t work. With baby boomers now reaching retirement age, this is an issue that should be on your next partner’s meeting agenda.