Question: 

I am one of eight partners in a fourteen lawyer insurance defense firm located in Indianapolis, Indiana. Besides the partners there are six associates working in the firm all of which are newbies. The partners ages are 70, 68, 65, 62, 60, 58, 54, and 51 respectively. We have several partners at retirement age and we are looking for ideas on succession planning and how to encourage retiring partners to properly transition clients. We have had partners retire in the past and we did a poor job of client transition and the firm lost clients as a result. We appreciate any thoughts that you might share with us.

Response: 

There needs to be a process established for retiring partners with specific agreed to activities on the part of the retiring partner with firm management. Steps should be taken to allow and assist other designated partners (transition partners) within the firm to develop a direct relationship and have responsibility for managing these clients. Such a process should include:

  1. Notification by retiring partners of intended retirement date – three to five years before actual retirement. At this time client transition should begin.
  2. Identify clients that will be transitioned and to whom. Specify specific transitioning tasks that are to be performed by the retiring partner and transition partner, or partners and timelines.
  3. Consider assigning Co-Responsible Attorneys to each client matter that will be transitioned. Have the attorney to which the clients are to be transitioned begin approving client invoices for services performed.
  4. Ongoing follow-up and evaluation on at least an annual basis by firm management as to the status and level of success of agreed to client transition activities.

Don’t Forget the Money – Financial Incentives To Transition Clients 
Generally, the compensation of those partners who are transitioning towards retirement will be determined in the same manner as compensation for all other partners, taking into account partner origination collections, client liaison collections, matter origination collections and working attorney collections, together with other factors that the managing partner and members of the management/compensation committee may consider relevant. However, with respect to the retiring partner, the managing partner and members of the management/compensation committee will pay particular attention to the former’s performance of the transitioning duties assigned. If it is determined that the retiring partner is satisfactorily performing the transitioning activities, the retiring partner will continue to receive full credit for those fee collections from clients being transitioned, in the various categories considered by the managing partner and members of the management/compensation committee in setting compensation. However if it is determined that the retiring partner is not satisfactorily performing the transitioning activities, or if the fees generated from these clients increase or decline, those factors will also be considered by the managing partner and the management/compensation committee in setting the retiring partner’s compensation, and the compensation may be increased or reduced appropriately.

Consider Dual Credit for Client Collections
In order to provide incentive to those partners to whom clients are being transitioned, and to insure that those attorneys are fairly compensated for their efforts in transitioning and maintaining these client relationships, the partners designated to be the transitioning partners for the client to be transitioned will also receive credit under the categories as may be applicable, for the fees generated by these clients during the transition period, provided that the managing partner and the members of the management/compensation committee determines that the transitioning partners are making satisfactory efforts to  accomplish the transitioning of clients.

Assignment of credit to the transitioning partner should not reduce the amount of credit allocated to the retiring partner, unless the retiring partner is not satisfactorily performing the agreed to transition activities.

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John W. Olmstead, MBA, Ph.D, CMC

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