WE ALL TEND
to think of marketing as a way to generate new business, and it is; yet while it is true that getting new business and growing your practice is an important goal of marketing, it is just as important, if not more so, to retain the business you already have.
Providing your clients with excellent service and finding ways to add value on a day-to-day basis certainly helps to ensure that existing clients will remain loyal to your firm. However, change is inevitable, and there will undoubtedly be times when your firm will have to work through the kinds of internal change and upheaval that may threaten relationships with existing clients.
Short of an out-and-out disaster such as the collapse of a firm or a mass exodus of partners, this type of situation most often occurs when senior members of the firm responsible for key client relationships leave the practice. If the departure is unexpected and abrupt, there is little that a firm can do in advance to smoothly and effectively transition existing clients to new lawyers in the firm. In general, though, there is full knowledge of the upcoming departure well in advance of the event: for example, when senior partners are nearing retirement.
Although some lawyers look forward to retiring and are willing to relinquish control of their practice and their clients, it very often happens that senior partners don’t want to leave the firm and/or practice, and as they approach retirement they will do everything possible to maintain and even tighten their hold on their clients. When this occurs, the firm is faced with a significant problem.
This column takes a look at an issue that all firms are aware of, but one that is seldom discussed: the cost to the firm of clients and revenue that are lost through ineffective management of practice succession.
Although it is universally recognized by law firm leaders and management that proactively managing client relationships when partners leave is critically important to the maintenance of the firm’s client base, succession planning is, unfortunately, something with which most firms continue to struggle.
Partners who don’t want to retire will understandably be inclined to hold on to anything that they believe will better their chances of a continuing career and income. This means they will want to hold on to the relationships they have with clients they have historically managed and been responsible for.
The formulas and criteria that most firms use to determine partner compensation are in large part responsible for proprietary behaviours.
It is a simple matter of operant conditioning: people engage in behaviours that they get rewarded for. When partners’ compensation is tied to the clients they are responsible for and the work that they retain a tight control over, it is not surprising that they will become and remain highly territorial, even as they approach retirement age.
The more tightly a partner controls relationships and the more effective that partner is at excluding other firm members from those relationships, the higher that partner’s compensation, and the more indispensable he or she becomes to the firm. This increases the likelihood that the firm will be willing to keep him or her on past any otherwise mandatory retirement age.
It stands to reason thatt, if law firm compensation systems recognize and reward behaviours that run counter to effective succession management, firms must modify their policies and practices and start to reward more productive behaviours in order to better manage client transitioning.
Firms should therefore consider ways in which they can reward more desirable behaviours in partners. For example, firms may explore how partners can be financially compensated for transitioning work (rather than for holding on to work), and ways in which compensation for their work with particular clients might extend beyond the point in time at which responsibility for the client is passed along to someone else in the firm.
It is time that firms take a closer look at what lies behind a longstanding problem that is only becoming worse as mandatory retirement from law firms is on the rise and the mandatory retirement age drops, and as law firms deal with an expanding demographic of near-retirement-age partners.
Donna Wannop, LLB, MBA, is a practice development coach (www.donnawannop.com) who has worked exclusively with the legal profession for over 20 years. Reach her at email@example.com.