I recently came across the story of an 80-year-old lawyer who held on too long running his firm and wouldn’t retire.
He was still mentally sharp and physically fit. He could still handle his workload, and the firm was running smoothly.
On any given day, his age wasn’t an issue.
But the consequences of his decision to stay have the potential to ripple through the firm, leaving a generation of potential leaders without growth options.
I don’t know the circumstances at this firm, but I’ve seen it before, where partners in their sixties never made it to leadership positions.
And beneath them?
Beneath them are partners in their forties who also couldn’t step into leadership roles, autonomy, and bigger equity percentages. Without the leadership bench, the firm is in a weak position when the aging leadership does leave, and those mid-level lawyers have a powerful incentive to leave.
This is the generational divide in law firm succession planning…and it’s not due to a lack of talent but rather an unwillingness to pass the torch.
If people see that there is no opportunity for them to grow, they will leave the firm. This can cause a massive drain on capabilities and resources and call the very future of the firm into question.
Let’s explore why this happens, what firms can do about it, and what it means for you, the up-and-coming lawyer stuck on the wrong side of the generation divide.
Why Some Partners Don’t Leave
The need for leadership succession seems obvious. So why do some partners resist?
From what I’ve seen, there are three main reasons.
Some people are eager to retire and spend time with their spouse or grandchildren, take a trip around the world, attend culinary school, or just work on their golf swing.
But many of the lawyers who have spent years in single-minded pursuit of being a rainmaker partner have simply never thought about what their retirement might be like.
They have no outside hobbies or interests. They may even have strained or fractured personal relationships from spending so much time stuck on “the apology tour.” So when they think about going from being an influential, rainmaking partner to retiring, they can’t imagine anything they’d want to do or anyone they’d want to spend time with. So they just stick with it.
A lot of lawyers took heavy hits to their retirement accounts during the Great Recession. This was followed by years when equity partners were making so much money that it seemed crazy to retire because they were making up for what they lost.
As a result, some partners live a big lifestyle with very big expenses. They have kids in expensive schools, a spouse who stopped working, vacation homes, and so on.
If they haven’t done a lot of financial planning, they can find themselves at retirement age without enough money to keep up their lifestyle.
This mentality goes all the way up and down the food chain.
Equity partners worked hard to get where they are. Now that they’re finally making good money, they want to keep it. They may not work as hard or bring in as many clients anymore. They may spend more and more time at lunch or on the golf course. But they built the firm, and they feel they’ve earned the right to enjoy it.
Meanwhile, partners in their sixties have been waiting around and waiting around for that guy in his eighties to finally step aside…they figure they may as well wait a little longer.
And then you have the 40-year-old partners, who have a nice book of business and are killing themselves to be able to get all their work done and do business development without the long-term upside.
Growing firms that want to survive the generational transition need to do one big thing:
Create a plan and communicate it.
So, how are firms solving this problem and building their plan?
With some exceptions, mandatory retirement policies are generally prohibited under the Age Discrimination in Employment Act (ADEA).
That said, firms may opt for mandatory de-equitization, where partners gradually transition out of equity status while retaining a role in the firm. This process provides continuity without pushing partners into full retirement.
It’s important to establish this policy from Day One; otherwise, it can lead to some very uncomfortable conversations down the line.
Some firms require partners to create their own retirement plans, including how to transfer a book of business and origination credit.
For example, I recently spoke to a very successful rainmaker from an AmLaw 100 firm that asked partners to decide ahead of time when they were going to retire and develop a plan for how they would help transition their clients and responsibilities to the next generation. This approach motivates retiring partners to mentor their successors and facilitates a smooth transition.
Firms may also offer retirement and financial planning coaching to partners from the early stages of their careers, helping them envision and prepare for life beyond law.
For smaller firms, a buy-sell agreement can be a serious lifesaver. Imagine you have three partners who were all law school buddies and started a firm together. Two of them want to retire, and the other one won’t leave. If they don’t have a buy-sell agreement, they might have to dissolve the firm.
At larger firms, key man insurance policies can provide financial support and ensure the firm remains stable during transitions.
Whatever size your firm may be, the key to good succession planning is to get started early.
If you’re at the top and thinking about retirement when you suddenly realize there’s nobody who can take your place, I’ve got bad news: It’s probably already too late.
What does this mean for you?
If you’re a lawyer at a firm without a succession or retirement plan, it may be time to raise the issue. Without one, the firm’s future and your opportunities within it may be at risk.
When it comes to the generational divide, if you are one of those partners in your 40s and 50s with a book of business and limited future opportunities, you do have options. Bring it up to your firm, but if they can’t resolve the issue, maybe it’s time to make a move.
If you find yourself contemplating a move due to the absence of a succession plan in your current firm, we’re here to help you navigate the path to your next opportunity. Let’s schedule a call.