Over the past couple of years our firm has conducted over 200 interviews to better understand the challenges facing lawyers and law firms in today’s environment. The most commonly-cited challenges I hear from law firm leaders and individual lawyers are (in no particular order):
- Attracting and retaining talent
- Succession planning, and
- Retirement planning and readiness
At first blush these may seem like four disparate, unrelated issues. However, if you dig deeper you find that these issues are all quite connected. Here’s how: It turns out that retirement planning and readiness have a profound impact on the other three issues. Let’s explore these one at a time:
Rainmaking – Origination is a huge component of what drives firm revenue and in turn partner compensation. As attorneys your wealth is created through year-over-year compensation growth. You aren’t building a business, like some of your corporate clients, that you will eventually sell and experience a large liquidity event to fund your retirement. Your retirement readiness depends on making the most of the rain you’re making now. As I’ve written in the past, it’s not how much you make, it’s how much you keep that really counts. That’s why the concept of RainCatchingTM – creating a system to help you keep more of the rain you make matters so much for lawyers.
Attracting & Retaining Talent – In professional services you’re only as good as your people. Being smart with retirement plan design can help you both attract and retain top talent. For example, I spoke with a managing partner of a mid-sized firm recently whose firm is adopting a cash balance pension plan to help his firm better compete for talent against large firms. Being leading-edge with retirement plan design can help your firm be a more attractive place to work and enable you to win in the war for talent. Just as importantly, retirement readiness can help you retain your top talent. The more well-prepared senior partners are for retirement the more likely they are to retire. This natural rhythm helps create opportunity for your firm’s next generation of talent to progress in their careers and makes it less likely that they will leave to pursue opportunities at a competing firm.
Succession Planning – If your partners are not confident that they can retire and maintain their current lifestyle they will not retire… barring some type of mandatory retirement policy or health challenges. Clearly, this makes executing your firm’s succession plan very difficult by creating a log jam of sorts at the senior levels of the firm. This creates significant flight risk for your next generation of talent who may become frustrated by a lack of opportunity to progress and may choose to join a competitor. Conversely, the more well-prepared your partners are to retire the more likely they are to do so. Of course, some lawyers will continue to practice into their 80s because they simply love the practice of law and can’t imagine doing anything else. However, for most partners who’ve worked hard for the past 30+ years, the idea of experiencing “life after law” is pretty appealing and the more financially secure they feel the more likely they are to take the opportunity to explore the great unknown.
These four critical issues are facing virtually all lawyers and law firms. The better you and your firm address retirement planning and readiness the better you’ll be able to tackle the other three issues. This connectedness is why RainCatchingTM matters for individual lawyers and law firms alike. As you evaluate your own situation, how effectively are you catching the rain you’re making?