Succession Planning Basics: What You Need to Know and Why You Should Start Now
In many firms, “succession planning” is important, but not urgent. It is human nature to deal with tactical issues and delay any strategic initiatives, but many professionals do not have an end-goal in mind. Many believe that they will “die at their desks.” However, no one can remain in a leadership role forever. Succession planning is a critical component to maintaining and growing the business by retaining current talent and developing future leaders. It is a continuing process and has to become part of the culture.
Have a Goal in Mind
Not unlike other initiatives people undertake in their lives, there should be a goal in mind. When a high school graduate attends a college, they have graduation and then the beginning of a career as a goal. College degrees have goals already in place, intermediate goals to be met prior to graduation. The end goal (the type of career) will determine the degree(s) needed and the end date of graduation. Succession planning is very similar. Start with the end goal, the new leadership organization and when the succession will be completed, then work backwards. If succession is designed to be implemented ten years in the future, it is more palatable for the people retiring. It also provides a timeline for the up-and-coming leaders. Often, because of procrastination or unforeseen events, however, a succession plan may need to be implemented immediately. Though not ideal, immediate succession can be accomplished seamlessly as long as everyone involved trusts and respects one another.
Keep Your Plan Fluid
Let us assume a succession plan is in place and is originally set for ten years in the future. What happens when life gets in the way, as it often does? What if someone in senior leadership needs to retire early or becomes ill and is no longer able to complete his/her duties? What happens when an up-and-coming senior partner decides to leave the firm? To accommodate such issues, a succession plan needs to be reviewed continuously and updated as needed. The plan should be reviewed and audited by all parties. If an emergency arises, the succession plan should be the go-to document to ensure the firm’s continued success. One of the most important requirements for a successful succession plan is to have mutual respect for one another.
Discuss Finances Regularly
A meeting of partners and future or junior partners should be held monthly, where finances are discussed regularly and financial reports should be made available to anyone who desires a copy.
All firm expenses must be reviewed and discussed. This includes partner compensation and benefits, employee compensation, facilities, marketing and business development, along with all other business-related expenses. And yes, for a good succession plan, individuals’ compensations will have to be disclosed. The more transparent the current leadership is, the more prepared the future leadership will be to maintain and grow the business.
Regarding any such discussion with senior and junior partners, it is recommended that everyone sign an agreement not to disclose confidential information to anyone who is not a partner or future partner. The discussion should address current revenue and expenses, the remaining budget for the calendar/fiscal year, and aged accounts receivables. Everyone must understand that the firm’s money should be treated as if it’s their money, because it is.
Profit sharing should be addressed at least twice a year. In today’s world, an employer is a fiduciary and can be sued for insufficient management of any plan. While all employees should be included in an annual discussion, a discussion is necessary on a semi-annual basis with leaders as well.
Seek Lateral Partners
Most firms are continuously seeking lateral partners with a significant book of business. Historically, such candidates overestimate their lateral business. Everyone needs to be involved in any acquisition and due diligence must be taken to ensure that lateral business estimations are accurate. Background checks are recommended since a new lateral partner can have a significant impact on a firm’s culture.
Most firms spend the majority of their revenue on payroll and benefits.To make the most of this investment, it’s important that firms continually invest in the professional development of all employees. The more engaged employees are, the more profitable the firm will be.
A recent study indicated that 70% of employees in the United States are not engaged. This has a direct effect on the firm’s profitability. Always pay at least one dollar over market, so that a good employee will not leave the firm for more equitable compensation elsewhere. The employee population is the responsibility of both senior and junior partners. Human resource professionals play a part in cultivating that population, but it is ultimately the partners who should be held accountable. Employees need continual training (including partners and junior partners) on how to maximize all software applications, how to properly interact with clients, and how to minimize cyber risks. With many employees working remotely, it is even more of a challenge to keep everyone engaged. This requires continual effort. Insisting upon constant training will keep everyone engaged and aligned with the firm’s strategic technological direction. Keeping current technologically is also important for attracting future employees who will be inquiring about the firm’s technical environment.
Emphasize Marketing/Business Development
In the past, marketing and business development has not been considered urgent to law firms. However, in this current environment and going forward, it has become a more pressing issue. How a firm is situated to maintain current clients and attract new clients needs to be properly recognized and developed. A strategic marketing plan should then be implemented accordingly. Marketing efforts are very dependent on technology and will continue to be very much aligned with social media and SEO (search engine optimization). A firm’s image is judged by the images of all its attorneys Therefore, law firms should establish Google Alerts for all their attorneys. Postings about any of their attorneys should be sent to a designated person within the firm. Properly positioning a firm in today’s environment will help the firm to continue into the future.
Consider Alternate Compensation
Historically, attorneys have been compensated and rewarded based on hours recorded. A law firm with a valid succession plan has to consider other efforts in maintaining and growing the business, such as marketing, networking, mentoring, and employee engagement. A firm has to resist the “eat what you kill” environment. It is difficult to implement a succession plan with attorneys working in silos. Everyone has to be on the “same page” and work toward a common goal.
In summary, a long-term plan has to be prepared with the understanding that it will be reviewed frequently by all partners and future partners and be modified as needed. A dynamic law firm that is built on trust and maintains an ethical environment will allow all to prosper.