Many of the largest and most profitable firms today have been built on the backs of entrepreneurial lawyers who prospered within a live-and-let-live culture that rewarded them handsomely for winning top client business. Those lawyers—often thriving on a sort of maverick persona—served as sole relationship partners for their clients, which typically accounted for a sizeable portion of the firm’s overall revenue. In recent years, though, as client problems have grown increasingly complex and multifaceted, the client service model has evolved from disaggregated, solo gurus to broader, cross-practice teams. Many firms are unprepared for this shift, as senior partners inch toward retirement with no real client succession plan in place.
Clients care deeply about succession planning–whether or not they reveal it directly to their client relationship partner. Clients increasingly demand direct access to the right experts to help solve tough business problems by leveraging insights from across other clients and industries. This form of integrated client service that incorporates multiple generations and a layering of expertise is what has been referred to as smart collaboration. It is instrumental in helping clients achieve a continuity of service, even when the senior partner moves on.
- Ensures continuity. It is common to find that over half of a firm’s revenue is generated from clients whose relationships are managed or controlled by partners who are at least 60 years old. (Have you even analyzed your data this way?) This concentration of the firm’s financial livelihood in the hands of senior partners poses substantial risk to firms if relationships aren’t expanded to other partners and smoothly transitioned to successors.
- Offers superior client service. The major driver for law firms to develop a succession plan is client demand for superior service. Clients expect their firms to be forward-thinking, collaborative and innovative when it comes to tackling their business problems. This level of service requires a pipeline of talented lawyers who understand clients’ specific issues and people—often from multiple perspectives. Establishing and articulating a sound succession plan sends a clear message to clients that the firm is looking to its future, putting the building blocks in place to adapt to changes, meet the needs of clients, transition relationships and continue its legacy.
Creates stickier clients. Beyond better client service, strategic succession management ultimately creates longer-lasting client relationships. Client loyalty is already under considerable strain in the face of greater pressure for operational efficiency and innovation. Senior rainmakers and relationship partners need to develop a pipeline to understand and satisfy the changing demands of next-generation clients. Our research reveals that when clients are served by a single partner, 72% say they’d consider moving their business to a competitor if their relationship partner departed. In contrast, for those served by multiple partners, the proportion of at-risk clients drops to a mere 10%. This finding may strike you as common sense. But when we analyze many firms’ portfolios, we find that a typical law firm has 75% of its client portfolio served by a single partner. Again, have you run the numbers in your firm?- Offers young partners and exceptional talent room to grow. Too many firms are top heavy, with senior partners hoarding work and reluctant to share access to their client relationships. Frustrated millennials and young partners are more likely to leave their firm when they hit an impenetrable glass ceiling. So, by putting a succession plan in place, firms are better able to engage and retain up-and-coming talent by giving them space to grow professionally. Plus,younger people’s expertise, which may be closer to the client’s own customer base.
Challenges to Overcome
- Too big to tackle. Succession planning can be tricky to implement as firms struggle to effectively address client transition. The ancillary issues surrounding succession are significant, overwhelming and (for transitioning partners) emotional. The real obstacle is how to strategically execute since firms often struggle with decision paralysis and inaction.
- Fear, anxiety and identity crisis. Given how much time lawyers spend on their career, their identities are closely tied to their professional success—often with little room or desire to pursue other interests. Consequently, experienced partners fearfully guard their client relationships, which served as a foundation for their professional achievement. Many resist giving away their hard-earned clients, particularly to juniors who, in their minds, expect such opportunities without having to do the hard work of finding and landing new clients. These complicated and sensitive dynamics can wreak havoc at all levels of the firm if not carefully managed.
- Culture and compensation systems. Firm cultures and profits now rely heavily on stars. In many firms, compensation models encourage and reward control over client relationships by top partners on the accounts – while others are not rewarded for nurturing and expanding client relationships. This focus on individual stars at the expense of collaboration results in partners lacking confidence in their firm’s future, affinity to the collective values, or a strong commitment to assuring their firm’s legacy into the next generation.
