How it is changing the landscape for professional service firms?
We are in the midst of the greatest change to impact professional service firms for a generation, quite literally. The Baby Boomer Generation, today (2019) aged from 59 to 74, are leaving, or have already left, their firms. In this article we want to look at the impact of that change and how we see some firms coping with these changes much better than others. Getting this right is incredibly valuable to all involved – the clients who want continuity of service, the departing partners who usually want to continue to work in some way, and for all the remaining partners, and everyone working in the firm, who want to take it on to ever-greater success.
Fumbling this change will have deep, and long-lasting consequences for all. Helping get this right has become the fastest growing area of our Consulting Work, and we have seen both best practice and disaster in equal measure. In this article we want to explore the issues from each viewpoint, to explore the different needs and show some of the answers that work in the real world. The key stakeholders are the partner, the client, the firm and the partner’s family. Getting this right means addressing each of these individually.
The partner who is leaving
These partners will typically have given 30 plus years of service, often to one firm. An interesting exercise for these partners is to ask them to describe their law firm on the day they joined. How big was it, where were the offices, what did a working day look like? Then ask them to paint a picture of the firm today. If you look at the difference, you can say – they did that! The difference between joining day, and how the firm looks today is the impact of their work. That’s some difference.
“I would wake up each morning with a mixture of elation and fear. Elation at no more time sheets, billing or long meetings. Fear at what on earth was I going to do with the rest of my life.” Retiring Partner
They also have spent very long hours engaged in working for their firm, to varying degrees at the expense of family life and other interests, and the thought of going from an intense, highly pressured, intellectually challenging, collegiate atmosphere, to watching daytime tv at home is not one that appeals. In fact, there is good research evidence that “ceasing to work” is bad for their health. The vast majority of partners with whom we have worked want to be actively engaged and challenged although with some reduction in the pressure, and usually to also reduce the number of hours that they work each week. There is often talk of “working three days a week initially” or of “having a portfolio of interests” that occupy them on a part time basis. For many, the ability to earn some money, and so delay any need to tap into savings or pension funds is also an attraction.
Here’s the big secret – starting this process two to three years before departure day makes multiple options available – in fact most partners are very pleasantly surprised by the variety of different paths that open up. But as time passes, the options start to narrow dramatically. In the worst case, partners put off having any conversation with the firm until the last possible moment, and then face a dilemma between stopping work altogether, or trying to take some of their clients to a competitor firm with the hope of some sort of part time contract. What a way to end the career that you spent, building up a successful firm! What we all want is for the partner to find rewarding second careers (often going through several different stages, as they ease off paid work and embrace other activities) for them to reflect on a successful career and go into the wider community speaking well of their firm, as an ambassador for it. Given just a little time and planning this is absolutely achievable and produces positive results for both the partner and the firm.
“After putting the firm and my clients first, for 30 years or more, I was now being asked to put myself first. This felt quite unnatural. But I needed to understand what would make me happy, what would make me the person that my family wanted to spend more time with.”
In addition, it is possible to use psychometric tests and inventories (we favour Career Anchors from Edgar Schein) to uncover the key benefits that each individual partner has most enjoyed through their career (often the elements that they don’t want to lose in any future roles) as well as those parts they won’t miss at all. This is really important – partners need to understand what they really value – is it security, or a chance to be entrepreneurial; is it about enjoying the challenge of solving difficult problems, or working closely in a team. Understanding what motivates them becomes important because now, often for the very first time, they have real choices – choices that may have been sacrificed for many years. There is a sense of freedom, but also of uncertainty. It is a move from highly structured, institutionalised environment, into ……..what?
Spending time exploring the different options, and working with a personal coach, makes a real difference here. There will be times when it is valuable to share thoughts with a group of partners who are also going through the same transition. And there is also huge value in meeting one to one with a coach who can focus entirely on the partner themselves. We generally see group sessions that bookend a six-month period of personal coaching as ideal. This seems to provide the right balance.
Imagine working for twenty years or more with a trusted advisor, who then tells you that she is leaving her firm to pursue other interests. How do you feel? This is pretty bad news. Whoever is going to replace her as your advisor, is hardly going to have the same degree of client intimacy, to know your history, how you like things done. In fact, in a recent survey, clients said that they were just as likely to look at switching to an existing alternate firm, as they were to accept the successor that was offered to them. Why? Because there was another partner in that firm that they knew well. That’s a potentially huge issue for the firm. It’s a rare partner who survived into their 50s in a modern professional services firm without having a pretty loyal client following. And law firms tend to assume that it is up to the partner to arrange a smooth transition. That could be a mistake. A successful transition often requires a long lead time (one to two years) and some very open and honest conversations between client and the firm.
It’s a good time to have an independent partner become involved to understand exactly what the client wants and offer different alternatives. In one recent example, the Client Partner (a contentious lawyer) had done all the right things. He had carefully groomed a successor, a younger partner, with what looked like all the right skills. But when the client was offered this person, they said “No way”. Their company had just embarked on an ambitious acquisition programme and she wanted an experienced M&A Partner to support her through, what for her was, the uncharted M&A territory looming over the next few years. Firms just need to add up the total income of clients led by “soon to be retired” partners, to see how important it is that they get this right. A simple exercise but one that is too often neglected in our experience.
Another issue, and this has been particularly flagged up in the USA (with their somewhat later retirement dates) is that as much as 25% of a firm’s financial capital is about to leave over the next few years, and that will need to be replaced. In some cases, and given the historically low rates of return, partners have moved some of their capital into loans to the firm at a rate of interest that works for both. At a time when firms are being pushed to invest heavily in technology and artificial intelligence firms need to plan carefully to avoid a capital gap from retiring partners.
How do you treat partners that are leaving the firm, and how do they feel treated? One of the first things you notice when working with departing partners is their wide range of personal views on leaving. Some partners would, quite literally, be happy never to leave, but would like to stay with the firm (perhaps on a reduced hours basis) for as long as they are well enough to work. These partners feel the separation deeply, there is a real sense of loss, not unlike a divorce or a bereavement. So much of their personal identity, who they are, is intimately bound up with the firm they joined, that leaving feels pretty bad. Firms need to be sensitive to this if the process of leaving is going to work well. It requires sensitivity even in just raising the idea of separation. These partners can often bury their heads in the sand, failing to plan until the last minute – but then what options will they have? We have seen firms set up zero hours contracts for such partners, and use them as contract lawyers as needs arise – often to handle tasks that other partners are too busy to take on. If that is not an option, then supporting these partners as they explore other avenues, becomes vitally important.
“I want my former partners to be out in the community, acting as ambassadors for the firm. I want them to say, “I had a great career there and they helped me to settle into new roles”. In many cases past partners have continued to make introductions for the firm and to send us work. I will be joining them soon enough!” City Managing Partner
Other partners will have a huge sense of freedom at the idea of closing the door on this part of their career and being able to embark on other projects. They often have other interests that they now feel they will have the time to pursue, a family that they want to spend more time with, or a desire to do voluntary work and give something back. In these cases, it should be very achievable to allow a rebalancing period over the last year or two as commitment to the firm winds down and the ability to increase other interests grows. They typically swap some remuneration for getting back some hours. This is the simplest group to address.
Most partners fall in the middle ground, recognising that the end of their time at the firm is approaching, and facing the future with a mixture of apprehension and excitement. It is here that a well-run Transitions Programme can have such a dramatic impact. It is hugely in the interests of the firm to be able to show that it cares for its partners. Pragmatic Managing Partners realise that the way departing partners are treated is keenly observed by the rest of the partnership. The remaining partners want to know that it is not just a matter of when partners reach a certain age that they simply retire and are left to their own devices. This has become ever more important with typical exit ages (in London) being mid to late 50s when those partners have the potential for 10 – 15 years or more of involvement in the business and social community of an area. We believe it is important that partners who feel that they had a great career, then moved onto second careers of one type or another, are able to show those that come behind them that there are good years ahead.
This culturally enhancing approach has great benefits for a firm – we have been told that helping partners to transition literally saves millions of pounds as compared to forced exits. It also supports the transition of client responsibilities to younger partners and allows the firm to change the annual objectives of the departing partner to ease up on chargeable hours and focus instead on achieving a smooth changeover.
The partner’s family
What would be the impact of a married partner arriving home after 35 years at the office and expecting their spouse to simply adjust to a new 24 / 7 relationship? We know. Divorce rates peak after retirement. Unstructured and unplanned, simply arriving home and expecting the rest of the family to fit around you, tends not to work well. The excessive hours typically worked by partners, means that the rest of the family have had to design their lives around a large degree of absence. They have become very good at coping without you. We heard horror stories of largely idle partners embarking on major house renovation projects just so that they had something to do.
“35 years ago, he bigamously married that Firm – so if he thinks he is coming home to have lunch with me every day he has another think coming. I am not retiring even if he is!” Managing Partner’s wife.
The family needs to prepare for the change as well. Some firms invite partners and their life partners to transition workshops. Other firms take a more low key approach where the departing partners are counselled to share the materials they are getting from their “Transition Sessions” with their life partners. Still others extend the offer of coaching to include the partner’s significant other.
In our work we tend to worry when we see partners who try to “go it alone”. We know that an absence of support networks is a major contributor to depression and related conditions in later life. We firmly believe that the partners need to have detailed and practical conversations with their life partners and family not just about where to live and what to do and how to manage the finances in their new “state” – but also to agree how their relationship will work.
The good news is that many firms have put in place formal schemes to help partners to go through the transition away from the firm and into other roles. Those that haven’t tend to say that they have it on their Agenda. It offers benefits all round – it helps the firm create an improved culture, retain more clients and has the opportunity for generating new work, while signalling to younger partner that they care. The partners involved can look forward to different work, more leisure time and an ability to support themselves and their family without needing to use savings or start their pension. Clients can be a central part of the whole process and are often a very valuable source of introductions to new opportunities for the partner. And the partner’s family experiences less disruption and a sense of renewal.
The next challenge for the law firm, now led by Generation X partners, is how they will change the strategic direction of their firms and work with an almost entirely Millennial associate group and an alumni group made up of Baby Boomers. But these are topics for another article.
Mike Mister is a former Global Director of Executive Development at at Global Professional Services Firm EY who joined Møller Institute in 2014 with a focus on leadership development and career transitions. He created the Harvard Business School Case study on Mentoring – “Ellen Harvey” (HBS 516-047) with Professor Das Naryanadas, Professor Ashish Nanda and Nicholas Haas. He co-authored the book “How to Lead Smart People” published in March 2019. Mike.Mister@MollerInstitute.com
Kevin Doolan joined Møller Institute from global law firm Eversheds where he was a partner and Head of Client Relationships. He has a focus on the pricing of professional services having written the Financial Times Guide to Mastering Services Pricing, published by Pearson, and with Professor George Triantis at Stanford Law School created the Harvard Law School Case Study on Pricing (HLS 13-17) and with Dr. Lisa Rohrer created the Harvard Case Study on Business Development skills for professionals (HLS 15-12). He consults widely into professional service firms in Europe and North America, and is Guest Faculty at Harvard Law School and an Associate at Møller Institute. Kevin.Doolan@MollerInstitute.com
Together they run partner transition and leadership programmes for major professional service firms.