Those of us who came up the ranks a generation or more ago were taught that all problems, large and small, are solved by developing new business. A court just ruled against you? A new matter eases the pain. A big client just went under? Bringing in a new one takes the sting right off. How to make more money? Get new clients and matters in the door.
Historically, the assumption that business development cures all ills applied equally to the problem of succession.
Every law firm must replace the revenue brought in by senior partners by the time they retire. In the past, many firms accomplished this solely by generating new work without doing much to retain their retiring partners’ clients. This succession strategy worked as long as the rainmakers coming up the ladder were roughly equal in number to those retiring from practice.
This is no longer the case.
The current generation of retiring partners — all Baby Boomers — is more numerous than the one next in line. They control a disproportionate share of client relationships, capital, and influence at their firms. Most law firms would love to retain retiring partners’ clients, reducing the pressure to bring in new ones to replace the revenue exiting partners produce now. However, it can be hard to motivate retiring partners to do the considerable nonbillable work required to transition their clients to younger partners — especially if it means taking a cut in pay.
Many law firms do not protect their retiring partners’ compensation while they do this nonbillable work. Why? At most firms, it would require changes to their compensation systems, and few managing partners relish the prospect of pushing this idea through the inevitable political roadblocks.
Firms invest more in business development than any other strategy for driving growth.
In a dispute over whether to invest firm capital in paying retiring partners to transition clients to successors or to invest in developing new business, new client development initiatives usually carry the day. This is because law firm compensation systems are built to reward the upticks in revenue earned from new clients. Generally, these systems are not designed to pay retiring partners to help younger partners retain their client relationships.
So, it is not surprising that firms invest more in business development than any other strategy for driving growth. It is how they backfill the losses of revenue that happen when partners retire without migrating their practices to others. For these firms, putting big money into developing new business is their succession plan.
So where are these investment dollars being spent?
Traditionally, they went to hiring laterals, brand-building opportunities like conference sponsorships, media campaigns to build thought leadership, and entertainment events to foster new client relationships and maintain existing ones. Some firms also invest in in-house academies for teaching business development skills, often led by internal marketing personnel. Increasingly, firms are investing in one-on-one or small group coaching on the soft skills of networking, lead generation, and client development, using outside consultants.
The most effective coaching programs aim to enhance business generation at all levels of a firm, from junior associates learning how to begin professional relationships, to older partners who want to expand already successful practices. Consultants who coach associates and younger partners often are former marketing professionals from larger law firms.
The best coaches are highly successful former law partners.
But to make coaching worth the time of a proven rainmaker, the coach must be someone a seasoned veteran can relate to and recognize as a peer. The best coaches are highly successful former law partners who built big practices before retiring, and now remain productive by helping great producers get even better. It is easy for a firm to justify an investment in coaching at this level. Typically, even an incremental increase in an established partner’s practice is a large number.
If the revenue now brought in by senior partners is not replaced by the time they retire, their firms will inevitably contract. The antidote to this problem is a combination of business development initiatives calculated not only to replace this revenue but to multiply it. Business development coaches who built big practices before retiring are an interesting and unique addition to the pool of consultants serving law firms. For a firm that uses revenue growth as its succession plan, these coaches are an essential investment in a sustainable future once the Baby Boom generation retires.
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A former senior partner with Am Law 100 firm Barnes & Thornburg, David Wood retired after a 38-year career as a trial lawyer representing large corporate clients. In his final two years of practice, he spent hundreds of hours migrating his $6 million book of business to younger partners. He now works as a business development and succession consultant to law firms, training and coaching lawyers at all levels to do what he did: Build productive, sticky client relationships that stay with the firm when senior partners retire. He can be reached at David.Wood@davidwoodconsulting.com.
