Navigating law practice succession, while a fearsome death knell to attorneys, is tremendously gratifying to marketers. We get to start with something good and figure out how to make it great. Whether we’re talking about family firms or a small firm of any sort, transitions are rife with complexities, sometimes with respect to expertise, but often due to a failure to plan early and well.
Such was the case with Father & Son LLC (F&S). F&S was at a crossroads after Father was diagnosed with a serious illness. While treatable, the diagnosis told Father it was time to scale back on firm management and time for his middle-aged Son to ramp up. At the time, Father originated 75 percent of the business of the seven-lawyer firm, which came to him mostly through his established reputation and repeat clients. Over the prior two years, Father’s hours were 30 percent higher than Son’s and he originated 180 percent more in business. Son had zero hours attributable to business development.
At first glance, the numbers concerned me, pointing to a deficit that seemed insurmountable. There was one positive thing going for F&S: Father believed in Son’s capabilities and Son wanted to make Father happy. But let’s be honest: “Happy” and “capable” are great in theory, but practically they’re better suited for Mad Libs. Law firm success demands so much more than adjectives. Without the hunger and ability to work…well, I’ve heard Starbucks has terrific employee benefits.
In New York state, there are more than 25,000 firms with fewer than 10 lawyers. While there is no data on the percentage of small firms that pass to a second generation, common sense tells us that a rare breed summits that mountain. Large firms are structured around strategic business development and built to transition. Smaller firms have a different leverage model. With fewer associates, senior statesmen roll up their sleeves, do most of the work and keep more of the profits. Further, attorneys often choose small firms precisely because they want work-life balance. They don’t want tiered bonuses and billable hour targets. 1,800 what???
Then, of course, there’s the dad dilemma. When Father brings Son into prospective client meetings, Son looks like he’s prepping for his Bar Mitzvah. It doesn’t matter that Son, who tied his own Windsor knot thank you very much, is in his 40s, a father himself, with 20 years in practice. All eyes and all presumptions of expertise are on Father.
Worse, in family firm transitions, maybe sons and daughters don’t have the goods and it’s luck, not skill, that created the fortunate position. Perhaps Son has passion, but no confidence. Maybe he’s brilliant but kind of lazy. It’s possible that Daughter is smart and hardworking but clients don’t like her personality. Or her voice or pedigree. To make partners like Father ready to pass the mantle, the nextgen lawyers must be dynamic listeners with a polished first impression, honed skills and a solid plan of attack … on top of the other must haves.
Like love. Son can’t just love Father and seek to please him. Son has to love the work, feeling madly passionate about the actual documents on Father’s desk. The particular area of advocacy has to fuel Son’s engine because we only thrive when we do what we love. This can get tricky in family firms like F&S. Son sauntered into leadership at a firm that Father worked his entire adult life to build. There’s no doubt that it’s a blessing of the highest order to leapfrog to managing principal and inherit a successful firm. But that good fortune will quickly wane when things get hard. And in this business things always get hard. Father and Son—and perhaps their extended family—need honest conversations long before Son even enters law school. Upon graduating, Son should work at other firms to learn the trade from another master, understand professional benchmarks and expectations and see what he needs and what he loves free of the complexities of being the bossman’s kid.
As parents, we work hard to give our kids everything, but hate it when they act like spoiled brats who can’t use a toaster oven. The same holds true at work. Father built a firm with tireless commitment. He changed light bulbs, answered phones, made copies, paid the bills and sharpened pencils. He mortgaged to the hilt to underwrite the firm’s launch. He worked evenings and weekends and he never stopped working because he knew that to build something from nothing you need to give everything. Hunger, toughness and discipline … that’s the recipe for grit, and grit is hard to come by when a throne is gifted and not earned. Son knew he’d inherit the business one day regardless of his performance, so while he talked like an owner, he acted like an employee. Father should insist that Son work twice as hard as everyone else, teaching him the pride of hard work. Let Son do the filing. Expect him to work weekends. When he develops callouses that thicken and protect the skin, he also will protect the firm, its employees, its future … and he will honor its legacy.
Teach a Son to Fish
With more than 40 years’ experience, Father was a skilled business developer. A recognized leader in the Bar, his contacts were deep and his manner assured. If Father met with a prospective client, by meeting’s end, he’d have a signed engagement letter. However, Father rarely took Son to client meetings, dinners with referral sources or bar functions. While Father grew up in a legal marketplace with fewer competitors, he nonetheless worked at marketing the practice in a quiet, consistent fashion. Son didn’t see the hustle. Believing that juicy matters would rain down from the heavens, he stayed at his desk, worked the same hours as the receptionist and never ventured out to network within a referral community. He didn’t write articles, he didn’t speak at conferences, he wasn’t a media resource, he didn’t participate in charitable or civic organizations and he didn’t assume active roles in Bar committees. Son needed professional support to develop a practice development plan and Father needed to make it mandatory. To support the plan, Father needed to take Son to every meeting, not to transition clients, rather to provide Son with an opportunity to observe and mirror. Father also needed to tell Son to dress for the job. It’s lawyering, not a run to Costco.
The Numbers Game
While the second generation may enjoy access to an open kimono, what really matters is how to understand and manage the information inside. It may be wise to retain a law firm financial consultant—there are many that tailor support to suit a small firm’s budget and an outsider can help manage emotions—to help prospective leaders fully grasp law firm finances. A host of big picture questions arise in transitions, including: What does the firm need to maintain status quo? How long must the elder hang around and at what capacity? Are there ways to maximize efficiency and reduce expenses to cushion a short-term dip in profits?
On a more practical level, financial mechanics are complex, requiring far more than close attention to billing and collections. The next generation must manage the numbers to ensure lasting profitability. Are existing fee structures (whether hourly, contingency, flat fee or hybrid) competitive with the market and in the clients’ best interests? A strong leader needs to review timekeeper productivity, write-offs, realization rates and carefully monitor receivables. This is an excellent time to review major expenses such as rent, compensation and benefits, technology investments and insurance costs. The key banking relationship is important to transition. Having a close relationship with the firm’s banker and access to an established credit line is crucial, particularly for contingency-based firms that carry costs for extended periods.
A few years back, a firm asked for a client transition plan six weeks before the senior partner retired. Six weeks. Lawyers, you trade in trust and trust cannot be built in six weeks even when the transition is from Father to Son. Succession requires that the nextgens establish name and credibility long before the reins change hands. Part of this can be accomplished by a gradual relationship transition to the next partner, but even more can be accomplished by casting a broad net through systematic business development efforts. Emerging leaders need to develop relationships with their peer group referral sources and mine relationships with opinion leaders, including media, which perhaps their elders never had to develop. Social media marketing wasn’t a thing for Father, but might be a game-changer for Son. By way of example, in a “retail” practice where a firm markets to individuals rather than corporates, a robust focus on digital marketing tools such as SEO and SEM campaigns might generate a significant return on a relatively small investment.
While generational transitions in business are complex, there is tremendous opportunity to launch from the platform of a well-constructed practice. Today’s legal landscape has changed from the market of the founders, but the available tools and network of experts has evolved too. A smooth and successful transition is in sight for those who plan early and thoughtfully so the mantle is passed to lawyers worthy of the inheritance.
A principal with Martini Consulting LLC, Joy E. Martini is a veteran business development professional who provides marketing guidance to law firms across the United States.