Our firm is a twenty-five lawyer firm with ten partners. Six of these partners are in their sixties. What should we be doing concerning planning the succession of these partners?
In a larger firm with multiple partners, shareholders, or members, succession and transition involves transitioning client relationships and management roles. Such transitions take time. Many larger firms have five-year phasedown retirements for this reason and require equity owners to properly transition clients and management responsibilities. Some firms tie retirement pay or compensation to completing a successful transition program.
A plan might included the following:
- The Transition Partner becomes a Transition Partner as of the commencement of the phasedown and begins client and management transition at that time and ending on his/her retirement date, at which time he/she retires and withdraws from the partnership. Compensation of the Transitioning Partner is proportionately reduced by the amount of reduction in the Transitioning Partner’s present work schedule.
- Transitioning Partner is responsible for the collection of his/her accounts receivable and billing of his/her Work-in-Process throughout the entire transition phase unless delegated to his/her Co-Responsible Partners.
- Transitioning Partner’s purchase price (payout) is to be calculated immediately prior to the beginning of the transition period and in the same time and in the same manner in accordance with the Firm Partnership Agreement, and will be paid only upon the completion of the transition period.
Some firms are providing economic incentives for the transitioning partner to handoff work to others.
The internal succession/transition plan provides a mechanism for the firm to outline a general timeline for a senior partner’s retirement, a process to effect an orderly transition of clients and management responsibilities, and a vehicle for starting initial discussions.
John W. Olmstead, MBA, Ph.D, CMC