Return to Office; Succession Planning; Pandemic & “Early” Retirements
Remote work flexibility is an attractive recruiting chip across industries; a mid-year survey of more than 4,500 companies found that those that embraced hybrid policies added head count at almost twice the rate of those that required full in-person attendance (Flexibility Is a Talent Attractor, But It Comes With Its Own Challenges (“Flexibility”), Jesse Yount, 9/5/23, American Lawyer).
But what if law firms are not trying to increase headcount? Utilization is at an all-time low (Law Firms Are Still Grasping for the ‘Other Side’ of Uncertainty, Andrew Maloney, 8/21/23, American Lawyer, citing Wells Fargo Private Bank Legal Specialty Group’s six-month survey). Attrition is low as well, and when it does occur firms often are not backfilling (see utilization point above). Accordingly, many firms are pivoting from utilizing flexible work policies as a recruitment tool to ensuring compliance with existing RTO policy. And several top firms recently began requiring 4 days in the office, potentially upping the return to office ante for the legal industry, which had largely coalesced around 3 days a week (Flexibility). According to survey data, compliance with RTO policies of 2-3 days in office has been low (The Flight to Quality and Workplace Experience, Anthony Davies, 9/22/23, American Lawyer, citing Forrest Solutions Survey of AmLaw 200 firms, which found that 94% of firm attorneys were not consistently complying with their firm’s RTO policy). As a result, some firms are tying bonus, class year progression, and even job security to in-office attendance.
But a focus on compliance begs the question of whether in-office attendance is an effective proxy for commitment and contribution to the firm and whether rigid compliance policies will attract and retain the best lawyers. It may be a mistake to use office attendance to “weed out” associates in an effort to right-size headcount. It would likely be better to conduct rigorous evaluations and cut the attorneys who fall short than to sacrifice effective contributors on the altar of in-office adherence.
Mandatory Succession Planning?
There is a movement among bar associations to encourage lawyers and firms to plan for client transitions due to retirement or incapacity (Bar Groups Mull Succession Planning Rules Amid Law Firm Closures, Alaina Lancaster, 9/21/23, American Lawyer). California’s State Bar Standing Committee on Professional Responsibility and Conduct recently issued a proposed formal opinion addressing a lawyer’s ethical obligations to engage in succession planning. The proposed opinion advises that the duties to clients of competence and diligence obligate lawyers to take affirmative steps to plan for an interruption or cessation of practice, voluntary or otherwise (Proposed Formal Opinion Interim No. 20-0002 (Succession Planning), State Bar of California). Additionally, the Pennsylvania Disciplinary Board is reportedly mulling whether to issue a rule mandating succession planning.
Whether or not state bars impose requirements, there is ample reason for law firms to consider succession planning. According a recent survey, over 1/3 of law firm respondents reported that at least 31% of firm-wide revenue was generated by partners expected to retire over the next 10 years (Successful Succession: Maximizing Leadership and Client Transition (“Succession Webinar”), Law.com Pro Webinar, March 16, 2023; one-third of survey respondents have 51 to 150 attorneys, one-fifth have 151 to 400 attorneys, and one-third have 400+ attorneys).
Despite the risk to revenue, today’s firms lack the levers that encouraged the transition of client relationships in decades past. Pensions have fallen out of vogue and so have mandatory retirement ages. According to the Law.com Pro survey, 75% of firms surveyed had no mandatory retirement age (Succession Webinar). In an era of high lawyer mobility, partners reaching firm-imposed retirements can move their practice across the street.
Consultants recommend that firms incent the transition of clients, so that there is a cultural expectation of succession planning within the firm and that more senior partners are rewarded for doing so (Did the Pandemic Derail Client-Level Succession Efforts “Succession Efforts”, Amanda O’Brien, 8/29/23, American Lawyer). Incentives could include:
“double paying” the retiring partner and the successor during the transition period;
offering “fixed” compensation to the retiring partner during the transition period that is not tied to hours;
or offering a share of profits retained post-retirement to retiring partner.
Pandemic & “Early” Retirements
Unlike the Great Recession, which directly impacted retirement savings and caused many partners continue to work past the point they may have Intended, the pandemic seems to have hastened retirements, or at least departures from BigLaw. In 2022, lateral partner departures from the AmLaw 200 out-distanced lateral partner hires, by 5,243 to 3,633; and ALM’s Executive Editor Gina Passarella notes that retirements and sabbaticals were a significant contributor to that departure number (Keynote Address, Gina Passarella, March 2023, NALSC Annual Conference).
