by Laine McKenzie, Manager, Legal People
Succession planning can be summarised as a “process for identifying and developing internal people, with the potential, to fill key leadership positions within a company”. Generally what we see though, within the legal profession, is far too many law firms only recognising the need to do this when Partners are about to retire.
Law firms fail to spend enough time on succession planning
In recent years there has been much talk about succession planning, however, many law firms and sole practitioners still haven’t recognised the importance of implementing strategies required to ensure their business successfully continues.
As highlighted in the recent ALPMA Survey Report, “Hot Issues in HR for the Australian Legal Industry in 2013”, succession planning was ranked second last in the amount of anticipated time that HR/people management will be spent on this, even though it was noted that succession planning is a huge issue for smaller law firms.
As many sole practitioners and small law firms get on with the “day to day” business and challenges of running a practice, succession planning is often put on the “back burner” or simply forgotten about.
With the oldest baby boomers now approaching 65 and more than likely preparing for their retirement, it is essential for succession planning to be addressed and implemented as there will soon be a significant number of senior practitioners leaving the profession.
Succession planning failure leads to firm sale or merger
What we find is that many senior practitioners think about succession planning only when they commence their own retirement plans. However, when they look internally for suitable practitioners to take their place they are often faced with a situation where they don’t have anyone they believe now ready to take over the reins and successfully drive the business.
In “leaving it all too late” for implementing any succession planning strategies, we have seen an increasing number of small firms either merging with or selling to larger firms; Partnerships completely dissolving; or the engagement of external Business Advisors to “fix it all”. Key considerations in any of these scenarios are the financial impact/consequences and the cultural suitability/fit of these firms.
In looking at business structuring, with the view to merging, it is essential that law firms attract senior lawyers to maintain the values of the business, both culturally and financial. This is an ever increasingly and complex issue as all businesses are now made of different generations, all of which have different expectations in regard to work-life balance, career aspirations and financial rewards.
3 steps to ensure a smooth transition to retirement
- Commence succession planning early on
- Identify and develop strong leadership from within the firm
- Attract and retain the right people to take over driving the business.
Succession planning is an ongoing process that should be high on management’s “to do list” being regularly reviewed/actioned at all management meetings. We would recommend that a minimum five year succession planning strategy is implemented and regularly reviewed by law firms’; then communicated to key staff to ensure a successful outcome, for all, when it is time to hand over the reins.
Legal People are a Victorian State Partner for ALPMA's National HR Workshops, coming up in Melbourne on 21 March. The HR Workshop is a highly interactive one day forum where you will learn how to effectively address the key HR challenges facing your firm, get your “tricky” HR questions answered by experts and share experiences and best practice with your peers. Register now.
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