Transitioning Client Relationships
By William G. Johnston
W. Johnston Associates, Inc.
High on the list of things that keep law firm leaders awake at night is the potential loss of revenue due to client departures. While most leaders are well-equipped for their critical role in guiding firm operations and strategic decision making, it seems that far fewer have the tools needed to enact comprehensive client succession programs, particularly for senior partners. Unfortunately, firms often realize too late that the path to successful client succession is fraught with obstacles and, without proper preparation, at risk of falling wildly off track.
This year alone, the ABA projects that roughly 40,000 lawyers nationwide will reach age 60. While turning 60 certainly does not signal the sunset of a lawyer’s career, it is hard to disagree that many these lawyers are closer to retirement than not. Consequently, for the sake of both the firm and the client relationship, firm leaders need to ensure a sound process exists to transition client relationships, ensuring a smooth transfer from one generation to the next. Understandably, this process does not — and cannot — happen overnight. Instead, it requires strategic thought, analysis and focused implementation over a multi-year period.
It is natural to resist change and uncertainty. In the case of succession involving an important client relationship, both the client and the lawyer(s) involved may resist the transition. Given that a client entrusts its law firm not only to serve it well, but to protect its interests, it follows that an orderly transition that protects the client must take priority. Done well, the transition should appear seamless in the client’s eyes. Failure to make this happen can push a client to transition to another firm that offers a “safer,” more stable relationship.
So, how should firms approach succession? For the law firm, there are a handful of primary goals:
- Ensuring client retention as partners phase down/retire or unexpectedly leave the firm, seamlessly moving relationships from one partner to the next;
- Protecting the firm and limiting the ability of competitors to establish relationships during partner transition periods or immediately thereafter;
- Avoiding service gaps or last-minute transitions by identifying early on potential hand-off problems or expertise/training needs;
- Formalizing succession planning as a firm-wide priority (rather than an individual responsibility) and removing the potential stigma of being in “phase-down” mode; and
- Enhancing the professional development of younger partners by raising the level of client exposure and by providing opportunities for younger partners to manage and expand relationships with existing clients.
Analysis and Planning
With the goals in place, firms can move to analysis and planning. Naturally, this requires examining existing relationships, assessing client “teams” and evaluating team members in regards to demographics, experience and expertise.
An important aspect of this stage is carefully identifying and effectively addressing any succession roadblocks. Is a senior partner unwilling to transition or support a younger partner? Are there incompatible personalities between client and chosen successor? Either of these scenarios (and many others) can throw a wrench into the process. The key is to be prepared for them. During this stage, you must assess the ability of younger partners to take on important leadership roles and identify future client team leaders.
When analyzing and planning, focus on:
- Prioritizing relationships to be transitioned based on each client’s importance in helping the firm achieve its strategic goals;
- Distinguishing between clients that can be transitioned easily and those who cannot;
- Evaluating referral sources; and
- Assessing succession within the client (e.g., planned retirement of existing GC) and considering the opportunities to transition the client relationship as the client transitions.
Client Involvement: A Key Aspect
At far too many firms, senior partner phase-down and client transition are done almost in secret. Involving the client in the succession process isn’t taboo. In fact, encouraging client involvement in the choice of successor can be a huge step forward in ensuring a good fit. After all, who better to truly understand the client’s requirements than the client itself?
Take the time to listen to the client’s needs to ensure your firm chooses the appropriate successor. At the same time, help the client understand the benefits of the transition and ensure the client understands that the succession effort is not related to an immediate phase down or desire to offload a client. One big caveat: once the client becomes aware of the firm’s plan and expresses a wish to support said plan, your firm has no choice but to execute.
Enhancing, fostering and building upon the foundation of this agreed-upon collaboration is a crucial step. Whenever possible, require senior partners to attend meetings with appropriate younger colleagues, even if not all time can be billed.
Actions and Initiatives
Most successful client transitions take place over many years, not months or weeks. As a rule, law firms should start the client transition process at least five years ahead of a planned phase-down or retirement, laying the groundwork for the ultimate transition down the line. During this period, and particularly for newer clients that do not have “institutional” connections to the firm, it is important to maximize the number of relationships between firm and client. In other words, develop layered relationships, comprised of senior advisor, successor and support cast for each client.
By following this approach, when the time comes for the senior advisor to step back, the change won’t be an abrupt, disruptive or unexpected one. As such, developing a strong, client-level demographic model with reasonable age/expertise gaps (e.g., senior partner, mid-level, young partner) that may mirror the client structure can be beneficial.
A word of caution regarding senior lawyer efforts to expand the profile of other firm lawyers: the promotion of younger partners to the client must be based on high confidence, rather than false praise. There are many ways to raise the successor’s profile and to make this transition easier:
- Expand the younger partner’s role with the client;
- Develop relationships at the 2nd tier of the firm/client structure (e.g., younger partner/assistant general counsel);
- Encourage younger partners to take an active role in succession, rather than a passive approach just waiting for it to happen;
- Raise the public profile of younger partners, expanding public relations efforts to promote them; and;
- Invest in business development training and coaching for younger partners, as well as identify opportunities for non-legal (board, charitable, etc.) leadership roles and/or transition of senior partner leadership roles to the younger partner.
Senior Partner Planning
Over the years, I have seen firms of all sizes experience the gamut of challenges in dealing with client succession. Some partners take an ownership interest in the process and work tirelessly to help the firm and the client. In other instances, there is inertia or resistance. To help make succession planning a firm “process,” it is helpful to require partners to prepare annually a succession plan. While there is no magic age or level of seniority when partners should first plan, firms need to recognize that this is a multi-year process, so it is best to not wait until the last minute. That said, in every case, it is important for the firm to have some flexibility regarding the succession process, recognizing that each partner – and each partner’s situation – and each client relationship is somewhat unique.
The best annual succession plans:
- Are in writing, detailing specific transition goals for each client relationship; the plans serving as informal “contracts” between the partner and the firm;
- Focus on spreading existing relationships among multiple lawyers to ensure that the firm does not recreate an existing issue (albeit with younger partners);
- Formalize a future role for the senior partner (e.g., business development leader with a younger partner).
- Experience shows that nothing will happen if the senior partner does not buy in to the program or if the partner feels he/she is not being supported by the firm; and
- Empower a firm leader to ensure that the succession plans are implemented.
Transitioning a client relationship is both challenging and time consuming. Succession is a process that requires careful planning, open communication, sensitivity and execution. Over the years, I have seen firms excel at succession planning and others struggle to take even the smallest steps toward handing off a client relationship. The firms that fail often take a passive approach to client transition, hoping against hope that some magic will make it happen. The magic rarely, if ever, works. As a law firm leader, one of your key responsibilities is to ensure smooth, seamless client transitions as partners approach retirement. In the end, taking an active role to protect the client’s interests and the firm’s position can help minimize what keeps you awake at night.
William Johnston is founder and president of W. Johnston Associates, Inc., (www.wjohnstonassociates.com) a law firm management consulting firm. He can be reached at (203) 364-0293.