Without careful attention to transition planning or succession planning in law firms, the investment and hard work lawyers have put into their firms could end up benefiting their competitors. In the presentation, we give you 10 key steps to develop an effective transition plan.
2. Determine
future
capacity
needs of the
firm
Consider
successors
based on
experience &
skill
Introduce
replacement
lawyers into a client
account at least 3
years before a
partner’s retirement
Give incentives
to encourage
retiring partner
cooperation
1. Prepare work-life timelines for all attorneys who
are within 10 years of retirement age.
3. 2.Be strategic with hiring and training staff.
Determine staff needs and skill sets
Determine in-house
capability & recruiting needs
Develop training plan
Evaluate existing staff against
necessary criteria
Define critical roles
4. 3. Focus on attorney development.
1
2
3
45
6
7
8
Client Service
Fundamentals
Personal
Development
Marketing
Competence
Recruiting
Basic Law Firm
Economics
Leverage and
Supervision
Skill Development
Professional and
Peer Recognition
5. 4. Develop an efficient recruiting process.
WITH DATA, FIRM IS
ABLE TO PRESENT A
TRANSPARENT,
ECONOMIC OFFER
TO LATERAL
Opportunity Costs
and benefits
Compensation,
Equity Slotting
Profit per hour
Impact on cash flow
and current year
earning
FIRM DATA
LATERAL ACCEPTS
THE OFFER TO JOIN
THE FIRM
TOP LATERAL HAS
MULTIPLE
OPPORTUNITIES
FIRM OFFER
6. 5.Ensure attorney compensation is market
competitive.
GOALS
• Maintain
competitiveness
• Compensate based on
the market
METHOD
• Data-driven compensation
to reconcile perceived and
actual value of a lawyer’s
economic contributions
• Timekeeper Profitability
analysis
BENEFITS
• Attract high impact
laterals
• Ensure partners practice
profitably
• Incent senior partner
transitions
• Reward high profit
timekeepers
• Recognize contributions
• Incent the behaviors
needed to implement a
strategic plan.
7. 6. The keys to setting transition compensation include:
• an objective process oriented approach;
• setting expectations early in the process,
• a model to ensure consistency.
Remove economic disincentives of senior partner retirement
Be objective with buyout pay decisions.
8. 7.
Be disciplined in policy development and
implementation.
Associate Progression
Partnership Admission
Origination Sharing
Retirement Age
Transition Period
Incentives and
Compensation
Transition Period
Marketing Costs
Lease and Debt
Guarantee
Post Retirement
Compensation
Equity interests
Buyout policy
Return of capital
contingent case policy
9. 8. Understand the costs associated with
transition planning.
Purpose
•Understanding transition
plan costs and
adequately preparing for
contingencies will add
credibility to a firm’s
practice transition
process.
•A credible process that is
repeatable is a
competitive advantage.
Elements
•Cash flow, debt and equity over
the transition period
•Effect of transition comp on
earnings for the firm and for
assuming partners
•Profitability of transitioned work
•Effect of multiple transitions
occurring simultaneously
•Scenario planning at various
levels of transitioned work
•Exit costs in the event of a failed
implementation
Tools
•Identify capital
investments and capital
needs
•Create cash flow model
•Revenue and expense
models
•Debt incurred and debt
repayment
•Impact on partner
earnings during the
payback period
10. 9. Know the firm's actual value.
Value of the platform
• Going concern value
• Firm’s intellectual property, systems, processes, procedures,
and trained staff, reputation, surviving panel counsel
appointments, and any unique distinctions, client relationships
Value of Transitioned Business
Client/matter profitability
Book Value of Equity
Fixed capital contributions and the undistributed earnings
(income less draws and payments on behalf of partners) of the
members.
11. 10.
Continuously build the firm's going concern
value.
Going Concern Value
Platform
Technology
• Client case management and engagement software
• Automated Forms
• Integrated Document Management
• Web Development
• CRM Software
• Marketing Automation Software
• Requires modernizing the firm’s business processes to
the point that they become a platform
• Value that extends beyond any one client relationship
• Institutionalizing many of the current administrative
processes is necessary